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How Biopharma Companies Use NIH and Vice Versa

Posted 22 April 2019 | By Zachary Brennan 

How Biopharma Companies Use NIH and Vice Versa

An argument has been brewing on Capitol Hill and elsewhere that boils down to the theory that US taxpayers are fronting billions of dollars’ worth of public research that translates into early-stage products that are later sold to companies, go on to win FDA approval and then reap millions or billions in sales, although the government never sees a dime of those earnings.

With the help of a new Congressional Research Service (CRS) report published Friday and some other materials, here's a break down on what’s happening.

1. Do taxpayers pay for billions in research?

Yes. In FY 2018, the National Institutes of Health (NIH) had a budget of more than $34 billion to support more than 300,000 scientists and research personnel working at over 2,500 institutions across the US and abroad. And from FY 1998 to FY 2003, Congress doubled the NIH budget. The total NIH appropriation for FY 2019 is $39 billion.

2. Does NIH research translate into early-stage products?

Sometimes. And here’s where the quantification of NIH’s work gets tricky.

As the CRS report notes, over 50% of NIH funding supports basic research, meaning, “NIH funded research is, to a greater extent, indirectly involved—by generating scientific knowledge and innovations that aid in pharmaceutical development. For example, important basic advances in research, such as recombinant DNA, can lead to the development of whole new classes of drugs.”

But drugs with a patent held by NIH or NIH-funded researchers represent a small portion of all approved drugs by the US Food and Drug Administration (FDA). A Health Affairs study from 2011 found that 9% of the new drugs approved by FDA from 1988 to 2005 were based on a patent held by either a government agency or a nongovernmental institution that had received government support.

Another study from the New England Medical Journal in 2011 found that of the 1,541 drugs approved by FDA from 1990 through 2007, 143, or 9.3%, resulted from work conducted in public sector research institutions, including all universities, research hospitals, nonprofit research institutes and federal laboratories in the US.

But when the direct and indirect impact of NIH funding is considered, the results show a larger NIH impact. For instance, a PNAS study from 2018 found that NIH was “directly or indirectly associated with every one of 210 NMEs [new molecular entities] approved from 2010-2016.”

Similarly, 2018 study determined that NIH investments in a particular research area increase subsequent private sector patenting in that area—a $10 million increase in NIH funding for a research area results in 2.7 additional patents.

But as NIH’s Steven Ferguson noted in the Journal of Commercial Biotechnology in 2012, it’s not as if NIH can take these early-stage products to market. And as with biopharma companies, the number of failures continues to heavily outnumber the approvals. Ferguson said: “Because many, if not most of the technologies developed at the NIH and FDA, are early stage biomedical technologies, the time and development risks to develop a commercial product are high.” 

3. Does NIH make money from its early-stage products?

Yes. From 1988 to 2004, NIH entered into almost 2,500 license agreements and generated more than $500 million in royalty revenues. More recently, royalties have amounted to more than $100 million per year.

NIH’s Office of Technology Transfer FY 2014 annual report explains how royalties collected on product sales, primarily drugs and biologics, accounted for 84% of the $138 million in royalties collected in 2014. And the three best-selling products utilizing technology licensed from NIH that year were Janssen’s Prezista, a novel protease inhibitor for the treatment of HIV-1 in patients who are non-responsive to existing antiretroviral therapies, Merck’s Gardasil, a vaccine to protect against cervical cancer, and AstraZeneca’s Synagis, a monoclonal antibody for the treatment of Respiratory Syncytial Virus (RSV) in infants.

4. What else is coming?

Other questions are mounting now, including whether the royalties that NIH and other government agencies reap from its early-stage products are adequate, and whether NIH should be able to step in and lower the price of a product that it helped to develop.

Late last month, some questioned why the CDC is not reaping profits from patents it has on a licensed HIV drug brought to market by Gilead. Gilead, however, contends that the patents are invalid.

More recently, the National Institute of Standards and Technology (NIST) is looking into the idea of clarifying that the government cannot unilaterally set prices for certain pharmaceuticals. The issue at hand concerns whether certain regulations (never used by NIH) under the Bayh-Dole Act, should be altered so the government cannot control the price of some pharmaceuticals it helped to develop. Several groups, including Doctors Without Borders, are pushing back on those NIST changes.

CRS Report on NIH

Categories: Regulatory News

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