Recoupment Efforts Threaten Federal Research: Encouraged by Congress to Patent Inventions, Academic Researchers Now Face a Drive by Government to Recover Royalty Income

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In recent years, members of Congress and health advocates have proposed legislative "recoupment measures" that would inappropriately and unfairly place the onus for the pricing and affordability of therapeutic drugs and biologics on academic and other nonprofit research institutions by imposing levies on their royalty income streams. There are at least three compelling reasons why such efforts are problematic and should be opposed. First, these proposals rest on the unfounded assumption of a causal relationship between industry pricing policies and academic institutions' receipt of royalty streams from successful licensing and commercialization of intellectual property derived from federally funded research. Second, such proposals imply that current federal science policy neither seeks nor achieves a satisfactory "return on investment" in the form of widespread public health benefits, thereby contradicting the most compelling arguments for public funding of scientific research. Third, there is no reason to believe that once implemented, such approaches, now directed at certain "blockbuster" drugs whose origins may be traced, often circuitously, to National Institutes of Health (NIH)-funded research, would not be applied more broadly to other commercial products, both within and outside biomedicine, that yield patent income to research institutions.

Proposals to use federal research funding and patent law to leverage drug pricing go back more than a decade. More recently, in December 2000, Congress attached report language to appropriations legislation funding NIH, noting that: "The conferees have been made aware of the public interest in securing an appropriate return on the NIH investment in basic research. The conferees are also aware of the mounting concern over the cost to patients of therapeutic drugs." Congress instructed NIH to list all Food and Drug Administration (FDA)-approved drugs with annual sales exceeding $500 million that were developed with NIH support. It further directed NIH to prepare a plan to ensure that "taxpayer's interests" are protected.

According to NIH's report, released the following year, 47 FDA-approved therapeutic drugs under patent generated U.S. sales of more than $500 million annually, but only four of them were determined to have been derived directly from patents generated by NIH-funded research. Although NIH-funded research in the past two decades has generated thousands of patents held by universities and other nonprofit institutions, and some of this research might have contributed to the science behind the development of many of these 47 drugs, NIH complied with the language of the directive as required and confined its report to a reaffirmation of the principles supporting technology transfer and a commitment to improve its systems for the (mandated) reporting of new inventions by research awardees. Of course, additional "eligible" drugs might appear at any time, especially in response to the scientific efflorescence stimulated by the doubling of the NIH budget over the past five years.

The conference language reflected a compromise to an amendment introduced by Sen. Ron Wyden (D-Oreg.) and proposals by the late Senator Paul Wellstone and Rep. Bernie Sanders (I-Vt.) relating to "reasonable pricing" of pharmaceuticals. Senator Wyden's amendment, which was tabled, required, "as a condition of receiving a grant or contract from the National Institutes of Health," assurance from an academic institution or other entity to transfer to the NIH director a percentage of funds made available from licenses or sales of a broad range of pharmaceuticals. The amendment would have applied to "any pharmaceutical, pharmaceutical compound, or drug delivery mechanism (including biologics and vaccines) approved by the Food and Drug Administration" that used results from a research award and met the $500 million threshold. It was rationalized as a "payback" of the original NIH investment. …