WASHINGTON, D.C. H It came as quite a shock to NationalInstitutes of Health (NIH) chief Bernadine Healy last weekwhen Representative Ron Wyden (D-Or.) informed her of a$300 million dollar deal that Sandoz Pharmaceuticals Corp. hadmade with NIH-funded Scripps Research Institute, probablythe largest independent, non-profit biomedical research centerin the U.S.

Healy had been ignorant that any such large-scale agreementsexisted between pharmaceutical manufacturers and researchinstitutions. Wyden has asked the NIH to find out how manysimilar agreements exist between companies and privatelaboratories that may receive substantial funding from the NIH,said Jenning.In fact, Healy has ordered a review of the agreement betweenScripps and Sandoz, but as for other major grantees, "NIH mayask [them] for information as to what similar arrangementsthey may have with pharmaceutical companies," was allspokesman Don Ralbovsky would say.

Sandoz PharmaceuticalHwhose parent organization Sandoz Ltd.is based in Basel, SwitzerlandHhad agreed to provide Scrippswith $300 million over ten years, in return for first right ofrefusal to develop any drugs that arise from the research,beginning in 1997.

At issue: should drug companies be allowed to charge highprices when the government has supported much of theresearch? Scripps, of La Jolla, Calif., has been receiving overthree-quarters of its current operating budgetHabout $90millionHthrough federal grants, primarily from NIH.

"They [government officials] are curious about any kind ofcontracts we have had with industry," said William Beers,senior vice president of Scripps. "They are also interested inwhat discoveries here have led to products." He said the biggestproduct was purified Factor VIII, the clotting protein forpeople with hemophilia. He anticipates that Leustatin, atreatment for hairy cell leukemia which may prove useful fortreating other leukemias, could become big as well.

From Scripps' point of view, the agreement offers several bigbenefits. "We can get expensive equipment, such as NMR[nuclear magnetic resonance] spectrometers, that we couldscarcely afford with government funding," says Beers. "Also weuse these funds for recruitment. During the early years whenthey don't have grants, young researchers are able to get ajump start on their careers." Finally, he says, the money comeswithout strings as to where it should be applied, which will bea great boon to basic research.

The drug industry is one of the most profitable sectors of theeconomy, a fact that has aggravated the widespread belief thatdrugs cost too much. Last December, the NIH director held ameeting of her advisory committee to discuss solutions to the[perceived] problem of drug pricing.

"Our concern is that the pricing of any commercialdevelopments should reflect the public dollars that have goneinto development," says Steve Jenning, staff director of theSubcommittee on Regulation, Business Opportunities and SmallBusiness, chaired by Wyden.

The ominous portent: "Our legal people are looking into it [howNIH might control or influence drug prices]," says spokesmanTom Flavin.

At the Association of Biotechnology Companies, Bill Small isgenuinely worried about drug pricing politics. "I think therewill be a serious attempt this year to examine drug pricing,both on Capitol Hill and by the administration."

He adds that, "When the government gets into the business ofregulating drug prices, we are not going to have an R&Dindustry, period."

-- David C. Holzman Special to BioWorld

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