Yves here. This post is a devastating critique of the US regime for licensing government-funded intellectual property in the pharmaceutical arena. It shows that it amounts to a drug company enrichment scheme.
I must confess that due to being very much behind today I have not read a paper KLG links late in his post which discusses NIH versus private sector spending on what wound up being “new drug approvals”. I am highly confident the facts are worse than this paper suggests. One of my good friends was a biomedical engineer who then got a law degree. Her first job was at the NIH. She wrote the first Federal language of any sort on the licensing of intellectual property and was very proud of the fact that 20+ year later, 80% of her language was still in the licenses.
She later worked in the legal department of one of the the big drug companies and eventually wound up at an intellectual property boutique that specialized in FDA work. Many of her partners were former FDA commissioners.
She pointed out that as of then (later 2000s) about 88% of so-called new drug applications were actually for minor reformulations to extend patent life (think a pill you take every 8 hours now reworked to be a one-a-day version). Due to the state of Google I can’t get any current findings.
So the “new drug approvals” are overwhelmingly NOT for bona fide new drugs, but drug-company profiteering. And that also explains why, as the linked paper shows, they spend so little on this “research”.
By KLG, who has held research and academic positions in three US medical schools since 1995 and is currently Professor of Biochemistry and Associate Dean. He has performed and directed research on protein structure, function, and evolution; cell adhesion and motility; the mechanism of viral fusion proteins; and assembly of the vertebrate heart. He has served on national review panels of both public and private funding agencies, and his research and that of his students has been funded by the American Heart Association, American Cancer Society, and National Institutes of Health.
The Patent and Trademark Law Amendments Act was passed by Congress in late 1980 and signed into law by our first neoliberal President, Jimmy Carter, on 12 December 1980, the last day of the lame duck session of Congress after the election of Ronald Reagan five weeks earlier. This legislation is commonly known as the Bayh-Dole Act of 1980, having been sponsored by Senators Birch Bayh of Indiana and Robert Dole of Kansas. Much has been written in the last 40 years about this law, which can be described as reversing “decades of government policy by allowing scientists, universities, and small businesses to patent and profit from discoveries they made through federally funded research.”
Naturally, the business press was agog with enthusiasm. The Economist called Bayh-Dole “inspired,” and likely to “reverse America’s precipitous slide into industrial irrelevance.” Although this law is now often thought to have been intended to remove the “shackles” holding back American science, this was not the original justification. The Oil Crisis of 1973 due to the embargo by OPEC following the Yom Kippur War of October 1973 demonstrated that the economy was in dire straits . The Bayh-Dole Act was passed to rescue American industry from its doldrums. This it did not do, but it did transform biomedical research. And while it is not ever valid to generalize from one’s own necessarily limited experience, I was an interested party at the beginning of the Bayh-Dole Era, and I have spent my professional working life observing the changes from “before” Bayh-Dole to “after” Bayh-Dole.
Perhaps these changes were inevitable. Whether they have been good for biomedical science remains a question . My initial reaction to the passage of Bayh-Dole, which fell on deaf ears, was something to the effect of, “Great! This means we (meaning all of us) will pay for everything at least twice: First when the research is funded by NIH, and second when Big Pharma and Big Medicine take advantage of patents based on a foundation they did not build.” For those who want to dig deeper in the biomedical literature, the link to “Bayh-Dole” in the PubMed database is here. The legal analyses (paywall) are interesting, but beyond our scope for now.
The basic question about the Bayh-Dole Act of 1980 is this: Has it been good for science, particularly biomedical science? That, of course, depends on the meaning of “good.” Two recent papers address this: “Which is more important, NIH or the Private (Corporate) Sector?” in the progress of biomedical science.
Let us begin with The Relative Contributions of NIH and Private Sector Funding to the Approval of New Biopharmaceuticals (Schulthess et al., 2023, open access). This paper does not address all of biomedical science, which would be impossible, but it does cover what most people think of when they consider the topic, i.e., the products of Big Pharma and Big Medicine that are used to treat disease. This is especially relevant during the continuing pandemic. The Objectives of this study were to determine the relative significance of public (NIH) and corporate funding for obtaining authorization to use a biopharmaceutical on patients. The Methods examined research projects linked to 23,230 NIH grants awarded in the year 2000 (23 years ago). These were audited to account for patents that led to clinical development and potential FDA approval. 8,126 patents led to 41 possible therapies that were tested in clinical trials that led to 18 FDA approvals:
- 23,320 grants 8,126 patents 41 potential therapeutics 18 FDA approvals.
The Results showed that NIH funding for the 18 FDA-approved therapies totaled $0.670 billion and corporate funding totaled $44.3 billion. And to quote exactly: “A logistic regression relating the levels of public and corporate funding to the probability of FDA approval indicates a positive and significant relationship between corporate sector funding and the likelihood of FDA approval (p ≤ 0.0004). The relationship between corporate funding and the likelihood of FDA approval is found to be negative and not statistically significant.” Take-home message:
- 18 approved therapies: For every $1.00 from NIH, corporate funding totaled $66.12.
The Conclusion of this paper is that “the development of basic discoveries requires substantial additional investments, partnerships, and the shouldering of financial risk by the private sector if therapies are to materialize as FDA-approved medicine.” Of particular interest to this research group is the following: “Our finding of a potentially negative relationship between public funding and the likelihood that a therapy receives FDA approval requires additional study.”
This represents a lot of work. Their tables and figures are impressive enough, and their results demonstrate that in the United States public funding is not the primary engine responsible for the emergence of new and innovative therapies. More importantly, “this issue is directly relevant to current regulatory debates…over Federal March-in Rights, the right for the US Government to reclaim IP that was funded by the public and licensed to a private firm, if the Federal agency determines that such action is necessary to alleviate health or safety needs which are not reasonably satisfied (their capitalization).” I suppose this is true. But it should also be noted that the federal government has been exceedingly reluctant to use its “march-in rights” to “claw back” anything since Bayh-Dole became law. As of 2015this had been considered four times and each time the “government” folded. Attempts to use a version of march-in rights during COVID-19 were unsuccessful due to militant exercise of intellectual property rights by the usual suspects, as shown by Alexander Zaitchik in Owning the Sun (reviewed earlier this year here).
The statistical significance of their data is impressive, on the surface. Their logistic regression in Table 4 (p ≤ 0.0004)shows that the more money a company spends, the higher the likelihood that a biopharmaceutical will make it to market . Yes. And a logistic regression also shows that the more a medical student studies, the more likely s/he is to do well on an exam (e.g., cardiology) given by the National Board of Medical Examiners.
What about the finding that the more NIH money spent, the less likely that an approved therapy will result? This result is said to be consistent with a different study of the San Diego area, which is home to the University of California, San Diego (UCSD), the Salk Institute for Biological Studies, the Scripps Research Institute, and a host of other similar high-powered research organizations . During the time covered, Greater San Diego received $3.2 billion in NIH grants. Yes, this is a lot of money, but it was spread over 10 years among many different institutions. This supporting paper uses data for firms with an Initial Public Offering (IPO) between 1990 and 2000, a very long time ago in the world of Biotech. It “analyzes how the probability of ‘success’ for these firms depend on various firm’s characteristics…(with)…the probability of success (being) positively influenced by the number of employees and the IPO amount.” Yes, the bigger the company and the more money it has, it is more likely to be successful, all other things being equal.
Finally, in the words of Schulthess et al. 2023 (reformatted and very lightly edited):
- While each sector (public and corporate) makes important contributions, the findings of this study refute the false maxim that the public sector is solely responsible for all new innovations. This conclusion is consistent with the findings published in peer-reviewed scientific journals over the past several decades.
- Yet, many policymakers, journalists, and academicians continue to espouse the position that questions, or even denies, the role of the private sector in the discovery and development of innovative therapies.
- Such continued skepticism in the context of recent health policy debates around such issues as March-in Rights are a distraction for patients and their families desperately looking for curative therapies.
- It is hoped that this study’s objective examination of private versus public sector contributions to biopharmaceutical research and innovation will serve to better inform both current and future policy debates.
The first point reveals the primary motivation and expectation of this research. Absolutely no one believes that the public sector is solely responsible for all new innovations. Second, while questions are warranted, primarily about the foundations of the work of Big Pharma and Big Medicine, no one denies the role of the corporate sector in the discovery and development of innovative therapies. Third, this is a distraction for very few, but could it be that Big Pharma is hearing footsteps regarding march-in rights that have not yet been used to any significant extent? Fourth, regarding objectivity, these days the second thing (or the first) to read after the abstract in a peer-reviewed scientific paper is the acknowledgments/funding section. I have no doubt that the data in this paper have been collected and analyzed objectively, in research that “was supported by funding from the Pharmaceutical Research and Manufacturers of America (PhRMA), Amgen Inc., The Biotechnology Innovation Organization (BIO), GlaxoSmithKline, Novartis International AG, Sanofi S.A., and Pfizer Inc.”
So, is there any way to tease apart the relative contributions of public and corporate support for advances in biomedical science? Objectively, Schulthess et al. (2023) shows that for the cases studied corporate funding dwarfs public funding for novel biopharmaceuticals. This is not completely unexpected, but it also depends on how research funding is applied. Another recent paper addresses this from a different perspective: NIH funding for patents that contribute to market exclusivity of drugs approved 2010-2019 and the public interest protections of Bayh-Dole (Ledley and Galkina Cleary, 2023). Schulthess et al. (2023) considered individual grants in a single year (2000, or more than one scientific generation ago). Ledley and Galkina Cleary (2023) considers publications, which are likely to be a better target than grants. Publications are certainly more visible and they frequently, as they should, go beyond the specific aims of the grants that funded them.
NIH funded basic or applied research related to all 356 drugs approved during the 10 years beginning in 2010. 313 (88%) of these drugs were covered by at least one patent. The literature included 350,000 publications supported by 341,000 thousand grant years and $164 billion in NIH project year costs (17% applied/83% basic). This research produced 22,360 patents and 119 of these were cited as protecting 34 of 313 drugs. These patents came from 769 project years at a cost of $950M. Overall, only 1.5% of total NIH funding for applied research and 0.38% of funding for basic research were associated with patents.
On the surface this “shows that very little of NIH funding for research that contributes to patents that provide market exclusivity and are subject…to the Bayh-Dole Act that promote the public interest in practical applications of the research, reasonable, use and pricing, and a return on this public sector investment. This suggests that the Bayh-Dole Act is limited in its ability to protect the public interest in the pharmaceutical innovations driven by NIH-funded research.” Or it could be taken to mean that the corporate sector does essentially all the hard work of producing drugs and other interventions that prevent, treat, or cure disease, which is the preferred conclusion of Schulthess et al. (2023).
Previous studies have shown that 55% of the 1,453 drugs approved through 2014 were first synthesized in academic institutions. From 1965-1992, 76% of drugs with the greatest impact on medical practice were supported by public funding, 54% of “the basic science milestones for the ‘most transformative’ drugs from 1992 -2016 were achieved in the public sector.” Overall, this publicly supported research has increased the efficiency of drug development. Still, there is a disparity between the “demonstrated role of NIH funding in pharmaceutical innovation and the limited representation of NIH-funded patents in DrugPatentWatch (subscription required).
Potential explanations include the following:
- NIH funding produces substantially more published research on the targets of drugs approved 2010-2019 than published applied research on the drugs themselves. This is as it should be. Without this research pharmacology would remain largely a popgun approach to the treatment of disease . For example, imatinib(Gleevec, an early blockbuster cancer drug in the new wave) was developed by Nicholas Lydon and coworkers at Ciba-Geigy (later merged with Sandoz to form Novartis). But without the identification of the targets that imatinib needed to hit to be effective, nothing would have ever come of this. Thousands of scientists have identified protein phosphorylation as the fundamental key to cellular regulation. The target of imatinib is the mutant BCR-ABL protein kinase formed by a gene fusion present on the Philadelphia Chromosome (discovered in 1959 at what became the Fox Chase Cancer Center). BCR-ABL leads to chronic myelogenous leukemia (CML), acute lymphocytic leukemia (ALL), and other cancers. Without the known target, no Gleevec and no inhibition of ABL. None of these antecedents of Gleevec was patented, nor was anyone likely to even consider this (which is another difference between the development of biology and chemistry as disciplines). Patents, not science, are both the subject and object of Bayh-Dole.
- Much of the relevant NIH-supported research that leads to novel pharmaceuticals is in the form of Program Project awards and other career development programs. These are not usually directed at any one particular drug target and seldom at a specific drug. Patents are not the objective of these funding mechanisms.
- A residual, inherent tension still exists between the academic search for new knowledge and its open dissemination and keeping patentable secrets.
These points represent the kernel of truth: NIH support (and similar mechanisms in other countries with large biomedical research establishments) for research forms the foundation of biomedical science. Without this foundation, Big Pharma and Little Pharma would remain without the actual targets they need to function as going concerns.
In keeping with recognition of the support for research discussed here, data used in this study were obtained from DrugPatentWatch. A previous version of this research was also presented in “Government as the First Investor in Biopharmaceutical Innovation: Evidence from New Drug Approvals 2010-2019.” Working Paper Series 133, Institute for New Economic Thinking. 2020 (revised 2021). This paper can be found here at SSRN. No other interested parties are listed in Ledley and Galkina Cleary (2023).
Another recent paper by Ledley, Galkina Cleary et al. includes some of the material discussed here: Comparison of Research Spending on New Drug Approvals by the National Institutes of Health vs the Pharmaceutical Industry, 2010-2019 (2023, open access). The data in this paper are clear and to the point, with what I view as a reasonable use of conventional statistics:
The results of this cross-sectional study found that NIH investment in drugs approved from 2010 to 2019 was not less than investment by the pharmaceutical industry, with comparable accounting for basic and applied research, failed clinical trials, and cost of capital or discount rates. The relative scale of NIH and industry investment may provide a cost basis for calibrating the balance of social and private returns from investments in pharmaceutical innovation.
The key is the final sentence: Both NIH (including similar funding agencies) and industry are needed for pharmaceutical innovation, with NIH providing the foundation. Recognition of this will be essential if a balance between biomedical science as a public good and as a profit-making industry in the form of Biomedicine is to be maintained. Schulthess et al. (2023) does not recognize this. The papers from Galkina Cleary and associates do recognize the roles of public and corporate science, and their results are more recent and more focused.
Nevertheless, questions remain. Bayh-Dole was enacted to reenergize American industry, which it did not really do. But it did change how biomedical research is practiced, while producing thousands of startups as institutions tried to follow in the footsteps of MIT in “technology transfer.” Most of these have disappeared without a trace. A case study of this change is Epogen, which is the trade name for the cytokine erythropoietin. This small protein stimulates red blood cell production and it became a patented blockbuster for Amgen, which along with Biogen and Genentech, was one of the few large Biotech firms established just before Bayh-Dole.
But erythropoietin (not yet Epogen) was not discovered by scientists at Amgen. Instead, erythropoietin was identified and purified to homogeneity (pdf) in 1977 by Eugene Goldwasser’s research laboratory at the University of Chicago. This was pre-recombinant DNA/cloning and 40+ years ago a protein laboriously purified was “proof” of its existence. My first task in the lab was something very similar, so this paper brings back memories of techniques of a former world. Goldwasser’s research was supported by the Energy Research and Development Administration (precursor of the Department of Energy) and United States Public Health Service Grant HL-16005-03. “HL” indicates the grant was from the National Heart, Lung, and Blood Institute of NIH and “03” signifies the third year of the grant; online data for 1977 are not available but Goldwasser’s NIH funding from 1985-1998 is listed here, including grants on erythropoietin.
According to this rather pro forma case study, under the auspices of Bayh-Dole “Amgen promised to pay Eugene Goldwasser (and presumably the University of Chicago) 1% of the sales revenue as the technology fee if Epogen” were ever offered for sale as a pharmaceutical. Epogen was offered for sale, but according to other sources Professor Goldwasser was never paid . Cloning and producing active erythropoietin, a small but complex protein coated with sugars, was a technical tour de force at the time but it would not have happened in the absence of antecedent generous public support for the discovery and characterization of erythropoietin. Similar case studies could be repeated for other products.
Thus, we paid for Epogen twice, many times over (US sales from 1992 to 2017, #6: $55.63 billion). This was undoubtedly worth it, for Epogen is an essential biopharmaceutical to those suffering from anemia caused by kidney failure and cancer . But at what price? And the cost is not only in money, as illustrated perhaps by this story this week and something else covered here previously. Are scientific priority, patent eligibility, and riches dreamed of maladaptive incentives? Yes. Bayh-Dole cannot answer them, but the questions remain: whose intellectual property and at what cost to whom?
 Stayin’ Alive: The 1970s and the Last Days of the Working Class by Jefferson Cowie describes the economy of the 1970s from the correct perspective in my view. Suffice it to say the economy was a complete mess during most of the 1970s, even before neoliberalism became ascendant after the Nixon backlash mid-term election of 1974 that put so many “technocrats” in Congress; these politicians were known later as Atari Democrats.
 Biology as a scientific discipline developed independently of industrial influence. Although early anatomists, physiologists, and microbiologists came from medicine, the healing arts remained a discipline apart through most of the 19th century. This has held true until recently. Chemistry as a discipline was developed by the chemical industry, primarily first in Germany and later in Great Britain and the United States (but not only in these countries). See, for example, Mauve: How One Man Invented a Color That Changed the World. Some comparative history has been done on how this difference affected the trajectories of biology and chemistry, where they intersected, complemented one another, and diverged. I have not kept up with recent research, but this should be fertile field.
 Without going into detail, this p-value indicates there is a very small chance that the data are “wrong” based on a conventional statistical analysis.
 The major Biotech hubs in the US are Boston, Seattle, San Francisco, and San Diego, with a few scattered islands elsewhere (e.g., Amgen in Thousand Oaks, California). Several areas have tried to become Biotech hubs with little success. The Scripps Florida Campus has been taken over by the University of Florida.
 A favorite quote from Sir William Osler, the founder of modern medical education at Johns Hopkins, if only medical students would listen more often: “You cannot become a competent surgeon without a full knowledge of human anatomy and physiology, and the physician without physiology and biochemistry flounders along in aimless fashion, never able to gain any accurate conception of disease, practicing a sort of popgun pharmacy, hitting the malady and again the patient…usually not knowing which.” Without the target, biopharmaceuticals do not exist.
 Eugene Goldwasser was a biochemist of the old school, a contemporary of many who taught me. He provided Amgen with purified erythropoietin, probably a precious milligram or less. Long story short: Amgen scientists determined the partial amino acid sequence of Goldwasser’s erythropoietin and used this information to clone the protein using early recombinant DNA techniques that were primitive, expensive, demanding, and time consuming. My first clones were produced using the same pre-PCR techniques. Thus, the clone was “theirs,” even though they could not have done the work without Goldwasser’s protein. As he noted later, 1% of 1% of the sales of Epogen would have funded his laboratory at a high level for a very long time. Chicago did not pursue a patent and Dr. Goldwasser did not follow up, but he was proud his discovery provided treatment to so many.
 EPO is also on the list of substances banned by WADA.