Golden Fleece

Tax-paid research gives companies new drugs; they sell drugs back to us at exorbitant prices


Bob Dole may not have made it to the White House, but before he left Washington for the greener pastures of Comedy Central and Viagra endorsements, he left us a lasting legacy.

The Pandora's Box Dole bequeathed to us is the Bayh-Dole Act, a law which has engorged the coffers of pharmaceutical corporations, at taxpayer expense.

Prior to the passage of the Bayh-Dole Act, patent laws strictly separated academic research from corporate profit. If a scientist took even one dime of money from the government, then the rights to his or her discovery remained in the public domain. In the mid 1970s, with the economy in a slump, and the US trailing Japan in the technology revolution, corporations began lobbying for changes in the patent laws, changes that would hasten the transfer of technologies from the public to the private sectors.

In 1980, Bob Dole co-sponsored a bill that gave private industry exclusive licensing rights to any promising discoveries arising from federally funded research. In congressional hearings on the bill, then-Commerce Secretary Phillip Klutznick remarked that the bill was akin to "using tax money to pay a contractor to build a road and then allowing the contractor to charge an additional toll to those who travel the road."

Admiral Hyman Rickover added his objections, testifying that rather than serving the public interest, the bill would: "throttle technological development, hurt small business, stifle competition, and cost the taxpayer plenty while promoting greater concentration of economic power in the hands of large corporations".

Nevertheless, Bayh-Dole was enacted in October 1980, and thenceforth, the fruits of academic research passed from taxpayer funded laboratories directly to the wallets of the pharmaceutical manufacturers.

The icing on the cake was augmentation of Bayh-Dole with the Federal Technology Transfer Act of 1986. This law allows government researchers at federal laboratories like the National Institutes of Health (NIH) to cut deals with biotech and pharmaceutical firms, known as Cooperative Research and Development Agreements, effectively privatizing all federally funded research.

All agreements made under the Bayh-Dole Act are secret. Here's one that was made public only when it was nipped in the bud by the NIH. In 1992, Scripps Research Institute, of La Jolla California, a facility which receives $100 million annually from the NIH, made a deal with Sandoz, the Swiss pharmaceutical firm. Sandoz would pay Scripps $300 million over 10 years, in return for exclusive rights to all discoveries made by Scripps.

Al Gore, who chaired the 1981 hearings of the congressional subcommittee on Oversight and Investigation of the House Committee on Science and Technology, viewed technology transfer as "a free lunch for private corporations, enabling them to own the rights to breakthrough discoveries emanating from academic labs, without paying the salaries of scientists, graduate students, and postdocs, and other overhead costs like buildings, support staffs, and libraries. These agreements allow companies to skim the cream produced by decades of taxpayer funded work, blurring the distinctions between property and proprietary interests".

What does this mean to consumers? It means that therapeutic agents whose research and development was already paid for by the American taxpayer, will be charged back to you at the drug store, at considerable markup. Of the 21 drugs introduced between 1965 and 1992 that are considered by experts to have had the highest therapeutic impact on society, publicly funded research was instrumental in the development of 71 percent. Three of these drugs, Capoten, Prozac, and Zovirax posted sales of more than than $1 billion in sales in 1994 and 1995 alone.

It means that if you have cancer, you will pay whatever is asked for the possibility of a cure, gladly, even though you most likely already paid up front. Of the 77 anticancer drugs approved by the FDA up to 1996, and sold at obscene profit by pharmaceutical corporations, 50 were developed under the aegis of the federally funded laboratories of the National Cancer Institute.

It means that you will soon be paying for through the nose for a a patent expected to be "the most lucrative in U.S. history", awarded on April 11 of this year to the University of Rochester. This is a biotech patent for cox-2 inhibitors, compounds which have broad medical applications, including cancer and Alzheimer's disease. The cox-2 inhibitors were developed with funding from the National Institutes of Health under government grant number DK 16177, and are expected to bring in billions.

What about the effects of Bayh-Dole on the AIDS pandemic? The two most valuable drugs in the treatment of AIDS symptoms, AZT and ddI, as well as most of the protease inhibitors, were developed under the auspices of the National Cancer Institute (NCI) and the NIH.

Federal funding at the NCI was responsible for the initial discovery of ddI, which subsidized all preclinical and clinical research. The drug is licensed to Bristol Myers Squibb, on an exclusive basis, for worldwide distribution. Included in the licensing agreement is a reasonable pricing clause, which the government has refused to enforce.

AZT, marketed by Glaxo Wellcome, is a particularly heinous example of corporate profit without regard for the cost in human suffering. AZT was initially synthesized under an NCI grant by Dr. Jerome Horowitz in 1964. NCI scientists, working with researchers at Duke University, were the first to identify the anti-HIV activity efficacy of AZT, to determine effective clinical dosages in humans, to administer AZT to a human being with AIDS, and to perform the first clinical trials. This research, in its entirety, was done under federal funding. In a letter to the New York times in September 1989, NCI researchers Drs. Hiroaki Matsuya and Samuel Broder wrote: "There are few drugs now approved in this country that owe more to government sponsored research." Burroughs (now Glaxo) Wellcome applied for and received a patent for the idea of using AZT to treat AIDS in 1988.

The unconscionable prices demanded by American pharmaceutical manufacturers for AIDS medications, particularly AZT and ddI, are now the subject of worldwide outrage. The Bayh-Dole Act contains provisions for governmental price control, so-called "march-in" rights, over the patents of products "devised all or in part from federally funded research." And a fair pricing clause has been appended, which permits the federal government to force companies to reduce excessive prices. But the Clinton administration has steadfastly resisted all appeals to enforce price controls on drugs developed with public money.

The government does not give planes built with federal funds to Delta or United Airlines, nor does it give away ships built at taxpayers expense to Carnival Cruise Lines. Drugs developed with public funding rightfully belong in the public domain.

Judith Gorman is a writer based in Vermont. For more information on pharmaceutical policy, intellectual property issues, patents and the the Consumer Project on Technology, P.O. Box 19367, Washington, DC 20036; phone 202.387.8030; web (

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