Drug pricing was the topic before the advisory committee tothe director of the National Institutes of Health on Wednesday,and the big questions was, given the crucial role that NIH playsin drug development, is the public subsidizing the industry.And if so, should citizens be reimbursed through lower drugprices, or should NIH or the federal government receiveroyalties?

And finally, what role, if any, should NIH play in determining"reasonable pricing"?

The public is angry, said John Coster of the Senate SpecialCommittee on Aging. The committee has received more letterson this issue than any other, Coster said. Older Americans pay64 percent of the cost of their drugs out of pocket, he added.

Meanwhile, drug companies soak consumers, Coster said. "Wespent at least $22 million to develop Foscarnet (a drug to treatretinal deterioration in AIDS patients), while patients paid$21,000 annually for the drug.

Most participants agreed that drugs cost too much, and thestatement "there is no free market" in pharmaceuticals wasrepeated more than once.

But Gerald Mossinghoff, president of the PharmaceuticalManufacturers Association, said the percentage of grossnational product spent on pharmaceuticals has remained nearlyconstant since 1960 -- roughly 0.5 percent.

"We could shoot ourselves in the foot," warned Robert Dresing,president and chief executive officer of the Cystic FibrosisFoundation, "and five years from now be saying, 'Whathappened to the drug industry in this country,' and look backto say we made a very big mistake sending signals thatdampened enthusiasm for private enterprise that is so sorelyneeded to complement what we do in the government."

When the committee addressed the issue of royalties, SanfordMiller of the Health Science Center at the University of Texascautioned: "Congress is addicted to the use of monies to offsetbudgets. That's certainly bad public policy and bad for NIH."

William Kelley, dean of the School of Medicine at the Universityof Pennsylvania, stated that depending on royalties could leaveNIH high and dry when patents expired. "When profits becomea major goal of science, we are in serious, serious trouble," hesaid.

Ora Strickland, professor of nursing at Emory University,suggested that royalties could go to general government funds,which is the source of NIH's funding, rather than to NIH itself.

A consensus emerged from the committee that NIH shouldavoid getting involved in setting prices because the issue ismuch too complex for a scientific institution to manage withoutdiverting the NIH from its mandate.

Economist Judith Wagner of the congressional Office ofTechnology Assessment (OTA) explained the difficulties oftrying to obtain accurate research and development costs fromdrug companies. She and a team that included accountingprofessor Robert Kaplan of the Harvard Business School wereallowed to freely examine the records of Genzyme Corp. ofCambridge, Mass. But it took the accounting professor to figureout that a $20 million payment by Genzyme to its R&D limitedpartnership included $10 million that the company had alreadyaccounted for as R&D, Wagner said. "We saw that as more thandouble accounting," she said.

"It was imperative to have someone with us who knew enoughto say that this is a crock, to ask the tough questions," Wagnersaid.

"This debate is extraordinarily important to us," said NIH ChiefBernadine Healy, "and we have tried to define it as how toreturn (these investments) to society."

Healy directed NIH to develop an interim policy statement andtold BioWorld that she expects that NIH will play a well-circumscribed role, but one that is yet to be defined.

-- David C. Holzman Special to BioWorld

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