WASHINGTON, D.C -- National Institutes of Health DirectorBernadine Healy painted a scary picture for young companiesas she described the implications of the agreement between theScripps Research Institute and Sandoz Pharmaceuticals Corp. ata congressional hearing on Thursday.

Scripps last year signed away the option for first rights to thefruits of research conducted at the largely NIH-supportedinstitute over 10 years in exchange for $300 million.

"This document could lead to our major research universitiesbeing locked up by a handful of companies, many of themforeign," Healy said. "And it would squeeze out small business."

Ernest Beutler, chairman of Scripps' department of molecularand experimental medicine, denied most of Healy's assertionsabout the contract.

The institute reluctantly submitted a copy of the 100-pagecontract just three days before the hearing; Healy hadrequested the contract more than two months ago.

She said that under the agreement, biotechnology companyscientists would be barred from Scripps' campus in La Jolla,Calif. Furthermore, renewal of 40 agreements that Scrippsscientists have with small businesses would be subject toSandoz's approval, she said.

One clause of the contract, Healy said, could sendmanufacturing of drugs developed at Scripps -- for drugs thatwould have been developed in large part with NIH funds --overseas, in violation of the Bayh-Dole Act. NIH grantees arerequired to find manufacturing partners in the U.S. unless noneexist, Healy said. But Sandoz had substituted the clause "wherecommercially feasible," along with language indicating thatScripps would help Sandoz obtain waivers, she said.

Another clause, she added, "says Sandoz can assume theresearch of a Scripps scientist ... and move it to any of Sandoz'sown facilities ... and the Scripps scientist cannot seekalternative funding to continue the research." In addition,Healy said, "Sandoz can ask Scripps to pursue research which isconsistent with the strategic objectives of the company."

"My concern," said Rep. Ron Wyden, D-Ore., is "these monopolypractices reduce competition and raise prices. Do you thinktheoretically that's an additional concern?"

"That could be the final derivative," Healy responded.

Scripps' Beutler, however said, "The only research projects(Sandoz is) allowed to take away are ones they have funded,"and that would occur when they were ready for commercialdevelopment. Individual projects at Scripps can be supportedby funds from more than one source, he said, and the issue ofwhat could happen under such a scenario was never fullyclarified.

When Beutler said he was unaware of Scripps' agreement tohelp Sandoz obtain waivers of the requirement formanufacturing in the U.S., Wyden suggested that the scientistwas out of his depth testifying about the contract.

Beutler ultimately alluded to a provision of the agreement thathe said should assuage the committee's fears. It stated thatSandoz "acknowledges that its rights and obligations ... may besubject to Scripps' obligations to, and the rights of, the UnitedStates government, if any, which arise or result from Scripps'receipt of research support from the United Statesgovernment."

Following the hearing, Scripps general counsel, DouglasBingham, denied Healy's claim that Scripps would be off limitsto outside company scientists. It was not true, he said, that"someone could not come in for a day."

Several witnesses, including Healy and Jim Wells, associatedirector, energy and science issues, resources, community andeconomic development division, of the General AccountingOffice, had testified that they expected to see more examples ofthe kinds of problems created by the Scripps-Sandozagreement, with increasing ties between research institutionsand industry.

NIH and the National Science Foundation are consideringstrengthening guidelines for grant recipients to controlpotential conflicts of interest, Wells testified. "Requiring thatinvestigators ... disclose certain types of outside interests aspart of the grant award process is an essential first step ... toreduce the problem," he said.

Committee staffer Steve Jenning told BioWorld that Wyden "isconsidering legislation," but he was unaware of the details. Healso alluded to a statement by Healy that a little sunshine onsuch contracts could go a long way to prevent abuses.

-- David C. Holzman Washington Bureau

(c) 1997 American Health Consultants. All rights reserved.