Global Competitiveness and the U.S. Pharmaceutical Industry

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19 Pages

File Name (Dublin Core)

s-leg_433_028_003

Title (Dublin Core)

Global Competitiveness and the U.S. Pharmaceutical Industry

Description (Dublin Core)

Mentions the Bayh-Dole Act and HR 1443 (Federal Research Commercialization Act).

Date (Dublin Core)

1993-08-25

Date Created (Dublin Core)

1993-08-25

Congress (Dublin Core)

103rd (1993-1995)

Topics (Dublin Core)

See all items with this valueTechnology transfer

See all items with this valuePatent laws and legislation

See all items with this valuePharmaceutical industry

Policy Area (Curation)

Science, Technology, Communications

Creator (Dublin Core)

Research Corporation Technologies

Record Type (Dublin Core)

reports

Names (Dublin Core)

See all items with this valueUnited States. Bayh-Dole Act

Rights (Dublin Core)

http://rightsstatements.org/vocab/CNE/1.0/

Language (Dublin Core)

eng

Collection Finding Aid (Dublin Core)

https://dolearchivecollections.ku.edu/index.php?p=collections/findingaid&id=23&q=

Physical Location (Dublin Core)

Collection 003, Box 433, Folder 28

Institution (Dublin Core)

Robert J. Dole Institute of Politics, University of Kansas, Lawrence, KS

Archival Collection (Dublin Core)

Robert J. Dole Senate Papers-Legislative Relations, 1969-1996

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(page 1)
RESEARCH CORPORATION TECHNOLOGIES
101 North Wilmot Road, Suite 600, Tucson, Arizona 85711-3336 Phone 602-748-4400 FAX 602-748-0025
To: Carolyn Cross
FAX No. (913) 864-
(start of written note)
5272
(end of written note)
From: John T. Perchorowicz, Ph.D. Associate, Institutional Relations Research Corporation Technologies
Date: 25 August 1993
Direct Phone: (602) 748-4436
No. Pages: 19
(end of letterhead)
Dear Carolyn:
Just a reminder of our Technology Transfer Coalition will occur on Wednesday, 1 September at 2 p.m. In the Upjohn office located at 1455 F Street NW, Suite 450. The purpose will be to finalize a paper to be used to in our efforts, Please confirm your attendance by facsimile or phone call to me or Edle Goetz, my secretary. I look forward to seeing you there. The remainder of this facsimile Is a document written by RCT and provided to our lobbyist for his consideration.
c: Bernd Weinberg
(page 2)
The Pharmaceutical and Biotechnology Industries and Academic Research
Global Competitiveness and the U.S. Pharmaceutical Industry
The United States continues to play a leadership role in the manufacture of products that require above average levels of R&D to develop. This position was seriously challenged by Japan in the 1980's, particularly in the manufacture of office, computer and communications equipment (see Figure I for details):
On a global basis, the United States continues to be an undisputed world leader in the pharmaceutical industry (Figures 2, 3 and 4). U.S. pharmaceutical firms clearly lead in the introduction of new drugs (see Figures 3 and 4 for details). Research based pharmaceutical firms concentrated in the United States, the United Kingdom and Germany have not only taken the lead in developing new drug products but have also been successful in marketing these products on a global basis. Japanese pharmaceutical firms have Introduced a number of new products over the past decade (see Figure 3) and dominate their home market. Japanese pharmaceutical firms have yet to rival research-based pharmaceutical firms in the United States and Europe In developing and gaining world wide market acceptance of important new drugs.
The vitality and growth of the U.S. pharmaceutical Industry has been supported by national policies that encourage and reward efforts to develop and gain marketing approval for new drug therapies. Some of the more important policies and practices Include
1) Government funded university-based research
2) Government support of clinical trials
3) high standards for market approval and
4) freedom in pricing
Absent significant changes in these policies, U.S. research-based pharmaceutical firms should continue to compete favorably with firms based in the European community and Japan and retain Its Internationally competitive position. Significant changes In national policy that act to discourage efforts and decrease rewards to develop and gain marketing approval for new drug introductions, e.g. the threat of or the imposition of price controls, will jeopardize the ability of U.S. pharmaceutical and biotechnology companies to favorably compete and have the real potential of causing the U.S. based pharmaceutical Industry to lose its competitive position and world-wide leadership role.
(page 3)
Alt text: a bar graph shows the global market shares in high-tech industries --1980 and 1990.Breaking it down into industrial chemical, drugs & medicines, Engines & turbines, office & comp eq., Radio TV & comm eq., Aircraft, and Scientific Instruments. The graph is divided between the United States, Japan, EC-12, and ROW showing each one having a certain percentage of the global market shares per industry.
(Page 4)
Alt text: Bar graph titled "Share of 1988 World Pharmaceutical Sales by Country of Origin of Firms Involved. With the United States at 35%, Japan at a little over 20%, Germany a little over 10%, Switzerland a little under 10%, the United Kingdom a little under 10%, and "others" at a little over 15%. Sourced from GAO-High-Technology Report, p49
(Page 5)
Alt text: A bar graph titled "Pharmaceuticals Industry: International Competitiveness as Measured by New Drug Introductions. The graph shows 2 bars for each country, one to represent 1961-1980 and the other to represent 1981-1987. For the graph representing 1961-1980 the numbers appear as follows: United states a little under 25%, France a little under 20%, Germany a little under 15%, Japan 10%, Italy a little under 10%, the United Kingdom 5%, Others a little under 15%. For the bar representing 1981-1987 the numbers appear as follows: United states around 22.5%, France around 7.5%, Germany 10%, Japan around 27.5%, Italy around 8%, Switzerland around 7.5%, United Kingdom a little under 5%, Others 10%. Sourced from GAO--High-Technology Competitiveness, p49.
(page 6)
Alt text: A bar graph titled "Pharmaceuticals Industry: International Competitiveness as Measured by Consensus new Drug Approvals--1970 to 1985. The following percentages relate to each country's percent of New Drug Introductions, and the numbers appear as the following: United states a little higher than 40%, Switzerland a little higher than 10%, United Kingdom 10%, Germany a little under 10%, Sweden around 5%, Italy around 5%, Japan around 5%, France around 4%, others around 8.5%. The graph is sourced from GAO-High-Technology Report. Consensus drugs are those sold in majority of major markets worldwide.
(Page 7)
Are the Pharmaceutical and Biotechnology Industries Dependent Upon Universities?
The pharmaceutical and biotech industries depend upon colleges and universities to educate young people entering their businesses. The biotech industry owes its very existence to discoveries and technologies developed in universities. Colleges, universities and other non-profit research institution have also been an Important source of new pharmaceutical and biotech products and processes (see Figure 5 for some details).
Ditzel (1991) recently summarized the dependence of seven U.S. Industries on academic research (see Table 1). The data in Table 1'clearly reveal that the : pharmaceutical industry depends upon the output of academic research. Approximately 40 percent of new pharmaceutical products and pharmaceutically related processes were either developed with very substantial contributions from university-based research or could not have been developed without substantial delay without the benefit of university-base research. The pharmaceutical and biotech Industries Interact heavily with universities and depend upon academic research and personnel to develop new pharmaceutical products and processes.
(page 8)
Some Biomedical Products Transferred from Universities and Non Profit Institutions
Steroids
Warfarin .
Vitamin D Irradiation
Crest
Retin A
Pyrethrins
Cephalosporins
GCSF
Streptomycin
Human Growth hormone Insulin
Cisplatin
Carboplatin Prostate specific antigen -Blood test for prostate cancer MRI
How to Make Monclonal Antibodies
Silver Sulphadiazines
Synthetic Penicillin
Neupogen
Ovarian an breast cancer tests CA-125 and CA 15-3
Cohen - Boyer Gene Splicing Process
Hepatitis B. Vaccine
Synthetic Lung Surfactant
Recombinant Drugs and Vaccines
Radiopharmaceuticals Medical and Body Imaging Products
Digital Vascular Imaging Skeletal Imaging Anticoagulants Medical Diagnostic Tests and Probes Gene Therapies
(Page 9)
Products and Processes: Percentage whose development depended on recent academic research*
Industry
Products
Processes
Information processing
28
27
Electrical
9
7
Chemical
8
6
Instruments
21
3
Drugs
44
37
Metals
22
21
Oil
2
2

(Page 10)
Invention and Intellectual Property-Based Technology Transfer from Universities to Industry
Brief History
Universities, colleges, medical research and other types of non-profit Institutions have long been involved in transferring inventions, intellectual property discoveries, ideas, and people to industry. For purposes of this brief report, Invention and intellectual property - based technology transfer from universities and other institutions to Industry is divided Into two distinct periods 1) the activity from the period around World War II to :1980 and 2) the activity between the Passage of the Bayh-Dole Act (1980) and the present.
Pre Bayh-Dole
Historically, the federal government has been the largest provider of funds supporting R&D at universities. This funding dominance by the government remains true today. In the 1940's and 50's technology transfer took place in a chaotic context. There was no single or overriding government policy governing ownership of inventions arising within universities from research supported, wholly or in part, by the federal government. Each R&D supporting federal agency funding university research through grant or contract had its own policy. During this period, more than 25 different federal agency policies existed. Some pervading provisions within this multi-agency federal policy context included government retention of assignment of title to inventions, denial of patent rights to inventions to institutions, a philosophy that Invention made with federal funding or government support should be made freely available to the public and an absence of incentive (financial or otherwise) to participate in technology transfer.
During the period of the 1960's and early 70's universities attempted to persuade several federal agencies, in particular the Department of Health, Education and Welfare (HEW) and the National Science Foundation (NSF), to enter into Institutional Patent Agreements (IPA). Although the policies of both of these agencies permitted a waiver of rights to inventions made under their support, such wavers included restrictive provisions and transferring technology was not workable (see Bremer 1989, for details). Commercial firms would not accept the provisions imposed in these wavers After many years of sustained effort, universities succeeded in obtaining IPA's from HEW and NSF in the late 1960's and early 1970's. The availability of IPA's with these two agencies facilitated efforts of universities to engage in Invention and intellectual property base technology transfer In a more meaningful and significant manner. It is important to note that federal. agencies other than NSF and HEW held to their policy of taking title to Inventions made with funds they supplied.
The context under which Universities conducted invention - based technology transfer during this period was stifling. Invention disclosure rates were low, commercially meaningful transfers rare and overall level of activity is Insignificant. Although the government held title of Inventions, a Judiciary Committee Report of 1978 revealed that only 4% of some 28,000 government owned patents were ever licensed. Revenue generated from this meager licensing activity was negligible. Prior to 1968 not one drug whose discovery had been funded by the government had ever been commercialized
(Page 11)
Post Bayh-Dole
Following more than two decades of effort, Public Law 96-517, the Bayh-Dole Act, was enacted in 1980. Modeled after the HEW IPA agreements, this singular act transformed the context within which university-based technology transfer was conducted. The law changed the presumption that the government retained title: to inventions made by university people with federal funds to the presumption that contractors - grantees would elect to retain title. Parenthetically, it took over a year to settle arguments raised by the Department of Energy, the Department of Defense and NASA over the writing of regulations under this law. The passage of Bayh-Dole and subsequent technology transfer legislation have had a profoundly positive Influence on Invention and Intellectual property based technology transfer for universities, colleges, medical research and other non-profit institutions.
Some important elements of post Bayh-Dole activity Include:
Title to inventions put in hands of University
Government retained a royalty-free right to practice Invention
Small business preference
Preference for products to be' manufactured and sold in U.S.
Government support viewed as leveraged funding. Return to the government on Its Investment of federally funded research realized through downstream effects of placing products into commerce.
No significant government intervention in the process of transferring university-based inventions into the hands of Industry.
Effects of Bayh-Dole on University-Based Transfer of Inventions and Intellectual Property
Public Law 96-517, the Bayh-Dole Act, is landmark legislation. It is the fundamental law underpinning Invention and intellectual property by universities, colleges, medical research organizations and other non-profit institutions. The Bayh-Dole Act, now 35 HSC .200 et seq., assigned ownership and responsibility for overseeing the identification, protection and commercialization of inventions to. universities, when federal funds supported the research from which these inventions emerged. Since the passage of Public Law 96-517 there has been profound growth in technology transfer activity within the non-profit research Institutional community. This community Is a, if not the, major player in a large and growing technology transfer business being conducted In the United States today. Some facts Indicative of the growth and contributions of this community to the technology transfer business in the United State since 1980 Include:
(Page 12)
A dramatic and steadily Increasing number of patents issuing annually to U.S. universities, colleges, medical research and other non-profit Institutions. This number has more than quadrupled - from around 400 In 1980 to over 2000 In 1992. The number of patents Issued to universities, colleges and medical research organizations is a relatively direct measure; of the confidence these institutions have that the inventions on which they are based can be licensed or otherwise commercialized by industry. There Is no other credible reason for such Institutions to obtain patents, since universities are not in the business of making and selling products and, therefore, have no proprietary product line to protect.
A dramatic and steadily Increasing number of professionals engaged In Invention and intellectual property - based technology transfer at universities since 1980. The Association of Technology Managers (AUTM), the professional membership society of technology transfer officers and staff at U.S. universities, medical research and other non-profit research institutions now has over 1,000 members. . Membership in AUTM has rocketed, Increasing more than ten-fold since 1980. . In 1980, membership in this society, then known as the Society of University Patent Administrators, numbered less than 100 members.
A dramatic and Impressive Increase in the number of companies Initiated as a result of the transfer of Ideas, technology, people and Intellectual property from the university and medical research community.
The biotechnology Industry was born from within the university community. Its growth and competitive position in the world economy depends upon strong interactions with the university and medical research community.
Dramatic and impressive increase in licensing revenue to universities, colleges and medical research organizations. Revenue from licensing inventions alone exceeded $200 million in 1992. Revenue for all universities and medical research Institutions was probably less than $5 million in 1980. This revenue serves to support further research activity and provides incentives to Inventors and their Institutions.
(Page 13)
Impact of HR1334 - Federal Research Product Commercialization Act on University-Based Technology Transfer of Inventions and Intellectual Property
Several provisions of HR1334 will be detrimental to the continued growth and success of transferring technology from universities to Industry, particularly, the pharmaceutical and biotech industries. A concern underlying the philosophical basis of this legislation is the reimposition of a third-party, the federal government, into the process through several of the specific actions sought. The complexity of negotiations proposed in HR1334 will increase profoundly with the addition of each new voice at the table. Evidence earlier in this document clearly indicates that since nonprofits have been granted independence and freedom from such complexity, their success has been dramatic. A number of provisions of the proposed legislation Impact on this observation.
First, HR1334 seeks to change the long-standing national policy of allowing: prices to be market driven. Moreover, in an attempt to ensure that pharmaceutical products are available to the public at a fair price, HR1334 stipulates that price will be determined at the time such "products" are licensed.
University-based pharmaceutical and biotechnology Inventions are typically characterized as early stage and embryonic. At the time of discovery and early patent filings, the ultimate embodiment of products of these inventions may not even be known but only anticipated. Such inventions may only represent part of a: marketable product. These Inventions are universally characterized by high levels of uncertainty and commercial risk. Often, the most important risk-limiting asset associated with technologies of this type are the claims written into patent applications which define these inventions. It is not unusual for licenses to be consummated during patent prosecution, before final claims are defined. Therefore, it would be extremely difficult, If not impossible, to set a price for a "product" at the stage most pharmaceutical and biotechnology Inventions are licensed.
Second, HR1334 introduces the notion of direct return to the government on Its R&D investment in basic research and clinical trials conducted at universities and medical research institutions .. Federal support of R&D at universities has traditionally been viewed as a leveraged form of funding. Return to the government on Its Investment has come from the multiple effects (beneficial economic Impact on healthcare, businesses, created and grown, Jobs created, products sold, etc.) resulting from placing the products of these investments into commerce. The notion that the government is entitled to an additional return directly related to these Investments in basic research represents a major change in national policy. Adding additional consideration to be paid to the original funding agency will impact negatively on local technology transfer offices. Charges of this type contribute to increasing costs and brought about by the added Involvement of government in the transfer process. Government reimbursement costs levied on top of commonly accepted, negotiated license costs serve to Impact negatively on the ability of the U.S. based pharmaceutical and biotechnology industries to compete favorably and maintain their leadership roles in the fiercely competitive, global marketplace.
(page 14)
Pharmaceutical and biotechnology products would be available to developers in a "competitive bidding" environment under HR1334. These products would be preferentially licensed on a non-exclusive basis. If exclusive licenses were granted, that would be done only after publishing the government's Intention to do so in the Federal Register and waiting for comment or opposition. It would be rare to have more than one firm interested in obtaining non-exclusive licenses. The strategy of offering non-exclusive licensing to inventions is widely used by several government agencies, including the NIH. The performance of government agencies - federal. laboratories, the NIH intramural program, Agriculture DOE, DOD etc. · in realizing revenue from transferring inventions to Industry has been poor (see GAO Report - Technology Transfer, Dec. 1992, for details). The practice of offering non-exclusive licenses to developers of pharmaceutical products is generally not regarded positively by most university and Industry representatives experienced in licensing pharmaceuticals. It does not work. The granting of exclusive licenses only after publishing intention to do so In the Federal Register and waiting for comment serves to delay the licensing process, and hence the process of actively developing a marketable product.
Under HR1334 individuals representing the government must become Involved as decision makers in the licensing of pharmaceutical and biotechnology inventions of universities developed under federal support. 96-517-Bayh-Dole gave title to inventions to universities and removed government as a significant intermediary/ participant in the transfer process. As shown earlier, Bayh-Dole has had a profoundly beneficial influence on university-based technology transfer. The provisions of Bayh-Dole are not in need of change. Issues such as whether and, if so, how the government should determine the price of pharmaceuticals should be dealt with in a different legislative manner/context. Namely, resolution of such issues must not be coupled to technology transfer legislation that would impair the now successful and rapidly growing transfer of products from universities to the pharmaceutical and biotechnology industries.
(Page 15)
INVENTION AND INTELLECTUAL PROPERTY TRANSFER FROM FEDERAL LABORATORIES AND AGENCIES TO INDUSTRY
The federal government maintains a large investment in R&D through its federal laboratories and the intramural or In-house research programs of many federal agencies. Much has been written about the changing missions of some of these laboratories and their Importance to America's competitiveness in a global market economy.
The performance of intramural programs of federal agencies - federal laboratories and in-house laboratories of the: NIH, FDA, NIST, etc. - contrasts markedly with that for universities, colleges, medical research institutions and other non-federal Institutions engaged in R&D funded by the government. Overall, the performance of federal agencies in transferring inventions and Intellectual property to Industry has been poor.
Prior to 1968; not one drug whose discovery had been funded by the government had ever been commercialized.
Prior to about 1980, the government owned about 30,000 patents, had licensed only about 4% of these patents and realized negligible income from this licensing activity.
Since 1981, Invention disclosures resulting from in-house R&D In Federal Agencies have not risen dramatically (see Figure 6 for details). Disclosure rates ranged between 1425 and 2000 annually over the period: 1981-1991.
Cumulative revenue over the period 1981-1991 from the licensing of Inventions resulting from In-house R&D in Federal Agencies was only $36.5 million and the in-house activities of NIH contributed the majority of this income (See Figures 7 & 8 for details).
The 11 year cumulative revenue (1981-1991) of $36.5 million for federal agencies is less than the yearly revenue of Research Corporation Technologies In 1992. RCT is the largest U.S. technology commercialization company whose principal business function is to patent, develop and commercialize inventions for universities, colleges, medical research and other types of non-profit institutions. The yearly revenue generated by U.S. universities, colleges and medical research institutions from licensing Inventions exceeded $200 million in 1992.
Several major conclusions can be drawn from comparative analyses of the performance and practices of invention and intellectual property-based transfer by universities, colleges and medical research organizations and In-house federal agencies and their associated laboratories.
The federal government, though its various agencies, provide large amounts of R&D funding to its in-house or intramural laboratories and to universities, colleges, medical research and other Institutions on an extramural basis. There is a need for all government agencies to have a uniform technology transfer policy.
(Page 16)
Inventions, supported in whole or in part, arise in universities, colleges, and: medical research institutions and in the laboratories of agencies of the federal government. The practices and outcomes of transferring Inventions from universities and medical research Institutions differ markedly from that occurring from In-house government agencies. Legislative attempts to change technology transfer policies of the federal government must be aware of and distinguish between these two sources of technology transfer that share: one common feature - federal funding.
Government and federal agencies can learn much about the process of transferring technology to industry from universities and medical research Institutions. Federal agencies should consider following the lead the universities, colleges and medical research organizations as they seek to develop successful programs for transferring inventions and intellectual property to Industry.
Universities, colleges and medical research organizations are fully capable of transferring inventions and intellectual property to industry. The Intrusion/participation of government in the university-based transfer process is both unnecessary and regressive.
Government policy and law should facilitate/enhance the efforts of federal and non-federal Institutions and agencies to transfer inventions and intellectual property to industry. Government policy and law should assist both the transferring party (government and non-government Institutions) as well as the receiving parties (industry) who develop products, assume large risk and ultimately place products into commerce. Public Law 96-517 - Bayh-Dole accomplished these objectives. This landmark legislation does not appear to. need significant change. Erosion of major provisions of 96-517 represent serious threats to university and medical research Institutions and to the competitive positions of the U.S. pharmaceutical and biotechnology industries.
(page 17)
Alt text: A bar graph titled "NIH contributed the majority of Project revenues generated by Federal Agencies). With the Y-Axis counting millions of dollars (from 10 to 0 in increments of 2) and the X-Axis split up into the year of the donation (annually from 1981 to 1991). Each individual bar is split up between all other, Other HHS, and NIH. The data on the bar reads as follows: All other 0.04 in 81, 0.09 in 82, 0.11 in 83, 0.22 in 84, 0.24 in 85, 0.22 in 86, 0.34 in 87, 0.40 in 88, 1.07 in 89, 1.27 in 90, 1.56 in 91. Other HHS 0.00 in 91, 0.01 in 82, 0.01 in 83, 0.02 in 84, 0.03 in 85, 0.02 in 86, 0.04 in 87, 0.05 in 88, 0.12 in 89, 0.32 in 90, and 0.53 in 91. NIH 0.04 in 81, 0.04 in 82, 0.14 in 83, 0.13 in 84, 0.73 in 85, 3.72 in 86, 3.30 in 87, 4.86 in 88, 4.67 in 89, 5.51 in 90, 6.54 in 91
(page 18)
Alt text: a horizontal bidirectional bar graph titled "Total invention Disclosures and project revenue at federal agencies during the eleven-year period -- 1981-91". The Y-axis lists several federal agencies, and the Y axis is split in half with the left half detailing disclosures in thousands, and the right half detailing revenue in millions of dollars. The data of the chart appears as follows (the chart does not give exact numbers, so the following numbers are rough estimations): For Disclosures in thousands - USDA 1, DOC 0.6, DOD 11, DOE 0.1, HHS 1.9, DOI 0.4, DOT 0.0, EPA 0.05, NASA 2.2, TVA 0.5. For revenue in the millions of dollars - USDA 2, DOC 0.5, DOD 1, DOE 0, HHS 32, DOI 0.5, DOT 0, EPA 0, NASA 1, TVA 0.
(Page 19)
Alt text: A bar graph titled "Invention Disclosures Resulting from in-house R&D in Federal Agencies" With the Y-Axis detailing the number of invention disclosures and the X-axis counting the years from 1981-1991 annually. The bar graph separates each bar by contribution from the DOD, NASA, HHS< USDA, TVA, and Others.

(page 1)
RESEARCH CORPORATION TECHNOLOGIES
101 North Wilmot Road, Suite 600, Tucson, Arizona 85711-3336 Phone 602-748-4400 FAX 602-748-0025
To: Carolyn Cross
FAX No. (913) 864-
(start of written note)
5272
(end of written note)
From: John T. Perchorowicz, Ph.D. Associate, Institutional Relations Research Corporation Technologies
Date: 25 August 1993
Direct Phone: (602) 748-4436
No. Pages: 19
(end of letterhead)
Dear Carolyn:
Just a reminder of our Technology Transfer Coalition will occur on Wednesday, 1 September at 2 p.m. In the Upjohn office located at 1455 F Street NW, Suite 450. The purpose will be to finalize a paper to be used to in our efforts, Please confirm your attendance by facsimile or phone call to me or Edle Goetz, my secretary. I look forward to seeing you there. The remainder of this facsimile Is a document written by RCT and provided to our lobbyist for his consideration.
c: Bernd Weinberg
(page 2)
The Pharmaceutical and Biotechnology Industries and Academic Research
Global Competitiveness and the U.S. Pharmaceutical Industry
The United States continues to play a leadership role in the manufacture of products that require above average levels of R&D to develop. This position was seriously challenged by Japan in the 1980's, particularly in the manufacture of office, computer and communications equipment (see Figure I for details):
On a global basis, the United States continues to be an undisputed world leader in the pharmaceutical industry (Figures 2, 3 and 4). U.S. pharmaceutical firms clearly lead in the introduction of new drugs (see Figures 3 and 4 for details). Research based pharmaceutical firms concentrated in the United States, the United Kingdom and Germany have not only taken the lead in developing new drug products but have also been successful in marketing these products on a global basis. Japanese pharmaceutical firms have Introduced a number of new products over the past decade (see Figure 3) and dominate their home market. Japanese pharmaceutical firms have yet to rival research-based pharmaceutical firms in the United States and Europe In developing and gaining world wide market acceptance of important new drugs.
The vitality and growth of the U.S. pharmaceutical Industry has been supported by national policies that encourage and reward efforts to develop and gain marketing approval for new drug therapies. Some of the more important policies and practices Include
1) Government funded university-based research
2) Government support of clinical trials
3) high standards for market approval and
4) freedom in pricing
Absent significant changes in these policies, U.S. research-based pharmaceutical firms should continue to compete favorably with firms based in the European community and Japan and retain Its Internationally competitive position. Significant changes In national policy that act to discourage efforts and decrease rewards to develop and gain marketing approval for new drug introductions, e.g. the threat of or the imposition of price controls, will jeopardize the ability of U.S. pharmaceutical and biotechnology companies to favorably compete and have the real potential of causing the U.S. based pharmaceutical Industry to lose its competitive position and world-wide leadership role.
(page 3)
Alt text: a bar graph shows the global market shares in high-tech industries --1980 and 1990.Breaking it down into industrial chemical, drugs & medicines, Engines & turbines, office & comp eq., Radio TV & comm eq., Aircraft, and Scientific Instruments. The graph is divided between the United States, Japan, EC-12, and ROW showing each one having a certain percentage of the global market shares per industry.
(Page 4)
Alt text: Bar graph titled "Share of 1988 World Pharmaceutical Sales by Country of Origin of Firms Involved. With the United States at 35%, Japan at a little over 20%, Germany a little over 10%, Switzerland a little under 10%, the United Kingdom a little under 10%, and "others" at a little over 15%. Sourced from GAO-High-Technology Report, p49
(Page 5)
Alt text: A bar graph titled "Pharmaceuticals Industry: International Competitiveness as Measured by New Drug Introductions. The graph shows 2 bars for each country, one to represent 1961-1980 and the other to represent 1981-1987. For the graph representing 1961-1980 the numbers appear as follows: United states a little under 25%, France a little under 20%, Germany a little under 15%, Japan 10%, Italy a little under 10%, the United Kingdom 5%, Others a little under 15%. For the bar representing 1981-1987 the numbers appear as follows: United states around 22.5%, France around 7.5%, Germany 10%, Japan around 27.5%, Italy around 8%, Switzerland around 7.5%, United Kingdom a little under 5%, Others 10%. Sourced from GAO--High-Technology Competitiveness, p49.
(page 6)
Alt text: A bar graph titled "Pharmaceuticals Industry: International Competitiveness as Measured by Consensus new Drug Approvals--1970 to 1985. The following percentages relate to each country's percent of New Drug Introductions, and the numbers appear as the following: United states a little higher than 40%, Switzerland a little higher than 10%, United Kingdom 10%, Germany a little under 10%, Sweden around 5%, Italy around 5%, Japan around 5%, France around 4%, others around 8.5%. The graph is sourced from GAO-High-Technology Report. Consensus drugs are those sold in majority of major markets worldwide.
(Page 7)
Are the Pharmaceutical and Biotechnology Industries Dependent Upon Universities?
The pharmaceutical and biotech industries depend upon colleges and universities to educate young people entering their businesses. The biotech industry owes its very existence to discoveries and technologies developed in universities. Colleges, universities and other non-profit research institution have also been an Important source of new pharmaceutical and biotech products and processes (see Figure 5 for some details).
Ditzel (1991) recently summarized the dependence of seven U.S. Industries on academic research (see Table 1). The data in Table 1'clearly reveal that the : pharmaceutical industry depends upon the output of academic research. Approximately 40 percent of new pharmaceutical products and pharmaceutically related processes were either developed with very substantial contributions from university-based research or could not have been developed without substantial delay without the benefit of university-base research. The pharmaceutical and biotech Industries Interact heavily with universities and depend upon academic research and personnel to develop new pharmaceutical products and processes.
(page 8)
Some Biomedical Products Transferred from Universities and Non Profit Institutions
Steroids
Warfarin .
Vitamin D Irradiation
Crest
Retin A
Pyrethrins
Cephalosporins
GCSF
Streptomycin
Human Growth hormone Insulin
Cisplatin
Carboplatin Prostate specific antigen -Blood test for prostate cancer MRI
How to Make Monclonal Antibodies
Silver Sulphadiazines
Synthetic Penicillin
Neupogen
Ovarian an breast cancer tests CA-125 and CA 15-3
Cohen - Boyer Gene Splicing Process
Hepatitis B. Vaccine
Synthetic Lung Surfactant
Recombinant Drugs and Vaccines
Radiopharmaceuticals Medical and Body Imaging Products
Digital Vascular Imaging Skeletal Imaging Anticoagulants Medical Diagnostic Tests and Probes Gene Therapies
(Page 9)
Products and Processes: Percentage whose development depended on recent academic research*
Industry
Products
Processes
Information processing
28
27
Electrical
9
7
Chemical
8
6
Instruments
21
3
Drugs
44
37
Metals
22
21
Oil
2
2

(Page 10)
Invention and Intellectual Property-Based Technology Transfer from Universities to Industry
Brief History
Universities, colleges, medical research and other types of non-profit Institutions have long been involved in transferring inventions, intellectual property discoveries, ideas, and people to industry. For purposes of this brief report, Invention and intellectual property - based technology transfer from universities and other institutions to Industry is divided Into two distinct periods 1) the activity from the period around World War II to :1980 and 2) the activity between the Passage of the Bayh-Dole Act (1980) and the present.
Pre Bayh-Dole
Historically, the federal government has been the largest provider of funds supporting R&D at universities. This funding dominance by the government remains true today. In the 1940's and 50's technology transfer took place in a chaotic context. There was no single or overriding government policy governing ownership of inventions arising within universities from research supported, wholly or in part, by the federal government. Each R&D supporting federal agency funding university research through grant or contract had its own policy. During this period, more than 25 different federal agency policies existed. Some pervading provisions within this multi-agency federal policy context included government retention of assignment of title to inventions, denial of patent rights to inventions to institutions, a philosophy that Invention made with federal funding or government support should be made freely available to the public and an absence of incentive (financial or otherwise) to participate in technology transfer.
During the period of the 1960's and early 70's universities attempted to persuade several federal agencies, in particular the Department of Health, Education and Welfare (HEW) and the National Science Foundation (NSF), to enter into Institutional Patent Agreements (IPA). Although the policies of both of these agencies permitted a waiver of rights to inventions made under their support, such wavers included restrictive provisions and transferring technology was not workable (see Bremer 1989, for details). Commercial firms would not accept the provisions imposed in these wavers After many years of sustained effort, universities succeeded in obtaining IPA's from HEW and NSF in the late 1960's and early 1970's. The availability of IPA's with these two agencies facilitated efforts of universities to engage in Invention and intellectual property base technology transfer In a more meaningful and significant manner. It is important to note that federal. agencies other than NSF and HEW held to their policy of taking title to Inventions made with funds they supplied.
The context under which Universities conducted invention - based technology transfer during this period was stifling. Invention disclosure rates were low, commercially meaningful transfers rare and overall level of activity is Insignificant. Although the government held title of Inventions, a Judiciary Committee Report of 1978 revealed that only 4% of some 28,000 government owned patents were ever licensed. Revenue generated from this meager licensing activity was negligible. Prior to 1968 not one drug whose discovery had been funded by the government had ever been commercialized
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Post Bayh-Dole
Following more than two decades of effort, Public Law 96-517, the Bayh-Dole Act, was enacted in 1980. Modeled after the HEW IPA agreements, this singular act transformed the context within which university-based technology transfer was conducted. The law changed the presumption that the government retained title: to inventions made by university people with federal funds to the presumption that contractors - grantees would elect to retain title. Parenthetically, it took over a year to settle arguments raised by the Department of Energy, the Department of Defense and NASA over the writing of regulations under this law. The passage of Bayh-Dole and subsequent technology transfer legislation have had a profoundly positive Influence on Invention and Intellectual property based technology transfer for universities, colleges, medical research and other non-profit institutions.
Some important elements of post Bayh-Dole activity Include:
Title to inventions put in hands of University
Government retained a royalty-free right to practice Invention
Small business preference
Preference for products to be' manufactured and sold in U.S.
Government support viewed as leveraged funding. Return to the government on Its Investment of federally funded research realized through downstream effects of placing products into commerce.
No significant government intervention in the process of transferring university-based inventions into the hands of Industry.
Effects of Bayh-Dole on University-Based Transfer of Inventions and Intellectual Property
Public Law 96-517, the Bayh-Dole Act, is landmark legislation. It is the fundamental law underpinning Invention and intellectual property by universities, colleges, medical research organizations and other non-profit institutions. The Bayh-Dole Act, now 35 HSC .200 et seq., assigned ownership and responsibility for overseeing the identification, protection and commercialization of inventions to. universities, when federal funds supported the research from which these inventions emerged. Since the passage of Public Law 96-517 there has been profound growth in technology transfer activity within the non-profit research Institutional community. This community Is a, if not the, major player in a large and growing technology transfer business being conducted In the United States today. Some facts Indicative of the growth and contributions of this community to the technology transfer business in the United State since 1980 Include:
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A dramatic and steadily Increasing number of patents issuing annually to U.S. universities, colleges, medical research and other non-profit Institutions. This number has more than quadrupled - from around 400 In 1980 to over 2000 In 1992. The number of patents Issued to universities, colleges and medical research organizations is a relatively direct measure; of the confidence these institutions have that the inventions on which they are based can be licensed or otherwise commercialized by industry. There Is no other credible reason for such Institutions to obtain patents, since universities are not in the business of making and selling products and, therefore, have no proprietary product line to protect.
A dramatic and steadily Increasing number of professionals engaged In Invention and intellectual property - based technology transfer at universities since 1980. The Association of Technology Managers (AUTM), the professional membership society of technology transfer officers and staff at U.S. universities, medical research and other non-profit research institutions now has over 1,000 members. . Membership in AUTM has rocketed, Increasing more than ten-fold since 1980. . In 1980, membership in this society, then known as the Society of University Patent Administrators, numbered less than 100 members.
A dramatic and Impressive Increase in the number of companies Initiated as a result of the transfer of Ideas, technology, people and Intellectual property from the university and medical research community.
The biotechnology Industry was born from within the university community. Its growth and competitive position in the world economy depends upon strong interactions with the university and medical research community.
Dramatic and impressive increase in licensing revenue to universities, colleges and medical research organizations. Revenue from licensing inventions alone exceeded $200 million in 1992. Revenue for all universities and medical research Institutions was probably less than $5 million in 1980. This revenue serves to support further research activity and provides incentives to Inventors and their Institutions.
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Impact of HR1334 - Federal Research Product Commercialization Act on University-Based Technology Transfer of Inventions and Intellectual Property
Several provisions of HR1334 will be detrimental to the continued growth and success of transferring technology from universities to Industry, particularly, the pharmaceutical and biotech industries. A concern underlying the philosophical basis of this legislation is the reimposition of a third-party, the federal government, into the process through several of the specific actions sought. The complexity of negotiations proposed in HR1334 will increase profoundly with the addition of each new voice at the table. Evidence earlier in this document clearly indicates that since nonprofits have been granted independence and freedom from such complexity, their success has been dramatic. A number of provisions of the proposed legislation Impact on this observation.
First, HR1334 seeks to change the long-standing national policy of allowing: prices to be market driven. Moreover, in an attempt to ensure that pharmaceutical products are available to the public at a fair price, HR1334 stipulates that price will be determined at the time such "products" are licensed.
University-based pharmaceutical and biotechnology Inventions are typically characterized as early stage and embryonic. At the time of discovery and early patent filings, the ultimate embodiment of products of these inventions may not even be known but only anticipated. Such inventions may only represent part of a: marketable product. These Inventions are universally characterized by high levels of uncertainty and commercial risk. Often, the most important risk-limiting asset associated with technologies of this type are the claims written into patent applications which define these inventions. It is not unusual for licenses to be consummated during patent prosecution, before final claims are defined. Therefore, it would be extremely difficult, If not impossible, to set a price for a "product" at the stage most pharmaceutical and biotechnology Inventions are licensed.
Second, HR1334 introduces the notion of direct return to the government on Its R&D investment in basic research and clinical trials conducted at universities and medical research institutions .. Federal support of R&D at universities has traditionally been viewed as a leveraged form of funding. Return to the government on Its Investment has come from the multiple effects (beneficial economic Impact on healthcare, businesses, created and grown, Jobs created, products sold, etc.) resulting from placing the products of these investments into commerce. The notion that the government is entitled to an additional return directly related to these Investments in basic research represents a major change in national policy. Adding additional consideration to be paid to the original funding agency will impact negatively on local technology transfer offices. Charges of this type contribute to increasing costs and brought about by the added Involvement of government in the transfer process. Government reimbursement costs levied on top of commonly accepted, negotiated license costs serve to Impact negatively on the ability of the U.S. based pharmaceutical and biotechnology industries to compete favorably and maintain their leadership roles in the fiercely competitive, global marketplace.
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Pharmaceutical and biotechnology products would be available to developers in a "competitive bidding" environment under HR1334. These products would be preferentially licensed on a non-exclusive basis. If exclusive licenses were granted, that would be done only after publishing the government's Intention to do so in the Federal Register and waiting for comment or opposition. It would be rare to have more than one firm interested in obtaining non-exclusive licenses. The strategy of offering non-exclusive licensing to inventions is widely used by several government agencies, including the NIH. The performance of government agencies - federal. laboratories, the NIH intramural program, Agriculture DOE, DOD etc. · in realizing revenue from transferring inventions to Industry has been poor (see GAO Report - Technology Transfer, Dec. 1992, for details). The practice of offering non-exclusive licenses to developers of pharmaceutical products is generally not regarded positively by most university and Industry representatives experienced in licensing pharmaceuticals. It does not work. The granting of exclusive licenses only after publishing intention to do so In the Federal Register and waiting for comment serves to delay the licensing process, and hence the process of actively developing a marketable product.
Under HR1334 individuals representing the government must become Involved as decision makers in the licensing of pharmaceutical and biotechnology inventions of universities developed under federal support. 96-517-Bayh-Dole gave title to inventions to universities and removed government as a significant intermediary/ participant in the transfer process. As shown earlier, Bayh-Dole has had a profoundly beneficial influence on university-based technology transfer. The provisions of Bayh-Dole are not in need of change. Issues such as whether and, if so, how the government should determine the price of pharmaceuticals should be dealt with in a different legislative manner/context. Namely, resolution of such issues must not be coupled to technology transfer legislation that would impair the now successful and rapidly growing transfer of products from universities to the pharmaceutical and biotechnology industries.
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INVENTION AND INTELLECTUAL PROPERTY TRANSFER FROM FEDERAL LABORATORIES AND AGENCIES TO INDUSTRY
The federal government maintains a large investment in R&D through its federal laboratories and the intramural or In-house research programs of many federal agencies. Much has been written about the changing missions of some of these laboratories and their Importance to America's competitiveness in a global market economy.
The performance of intramural programs of federal agencies - federal laboratories and in-house laboratories of the: NIH, FDA, NIST, etc. - contrasts markedly with that for universities, colleges, medical research institutions and other non-federal Institutions engaged in R&D funded by the government. Overall, the performance of federal agencies in transferring inventions and Intellectual property to Industry has been poor.
Prior to 1968; not one drug whose discovery had been funded by the government had ever been commercialized.
Prior to about 1980, the government owned about 30,000 patents, had licensed only about 4% of these patents and realized negligible income from this licensing activity.
Since 1981, Invention disclosures resulting from in-house R&D In Federal Agencies have not risen dramatically (see Figure 6 for details). Disclosure rates ranged between 1425 and 2000 annually over the period: 1981-1991.
Cumulative revenue over the period 1981-1991 from the licensing of Inventions resulting from In-house R&D in Federal Agencies was only $36.5 million and the in-house activities of NIH contributed the majority of this income (See Figures 7 & 8 for details).
The 11 year cumulative revenue (1981-1991) of $36.5 million for federal agencies is less than the yearly revenue of Research Corporation Technologies In 1992. RCT is the largest U.S. technology commercialization company whose principal business function is to patent, develop and commercialize inventions for universities, colleges, medical research and other types of non-profit institutions. The yearly revenue generated by U.S. universities, colleges and medical research institutions from licensing Inventions exceeded $200 million in 1992.
Several major conclusions can be drawn from comparative analyses of the performance and practices of invention and intellectual property-based transfer by universities, colleges and medical research organizations and In-house federal agencies and their associated laboratories.
The federal government, though its various agencies, provide large amounts of R&D funding to its in-house or intramural laboratories and to universities, colleges, medical research and other Institutions on an extramural basis. There is a need for all government agencies to have a uniform technology transfer policy.
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Inventions, supported in whole or in part, arise in universities, colleges, and: medical research institutions and in the laboratories of agencies of the federal government. The practices and outcomes of transferring Inventions from universities and medical research Institutions differ markedly from that occurring from In-house government agencies. Legislative attempts to change technology transfer policies of the federal government must be aware of and distinguish between these two sources of technology transfer that share: one common feature - federal funding.
Government and federal agencies can learn much about the process of transferring technology to industry from universities and medical research Institutions. Federal agencies should consider following the lead the universities, colleges and medical research organizations as they seek to develop successful programs for transferring inventions and intellectual property to Industry.
Universities, colleges and medical research organizations are fully capable of transferring inventions and intellectual property to industry. The Intrusion/participation of government in the university-based transfer process is both unnecessary and regressive.
Government policy and law should facilitate/enhance the efforts of federal and non-federal Institutions and agencies to transfer inventions and intellectual property to industry. Government policy and law should assist both the transferring party (government and non-government Institutions) as well as the receiving parties (industry) who develop products, assume large risk and ultimately place products into commerce. Public Law 96-517 - Bayh-Dole accomplished these objectives. This landmark legislation does not appear to. need significant change. Erosion of major provisions of 96-517 represent serious threats to university and medical research Institutions and to the competitive positions of the U.S. pharmaceutical and biotechnology industries.
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Alt text: A bar graph titled "NIH contributed the majority of Project revenues generated by Federal Agencies). With the Y-Axis counting millions of dollars (from 10 to 0 in increments of 2) and the X-Axis split up into the year of the donation (annually from 1981 to 1991). Each individual bar is split up between all other, Other HHS, and NIH. The data on the bar reads as follows: All other 0.04 in 81, 0.09 in 82, 0.11 in 83, 0.22 in 84, 0.24 in 85, 0.22 in 86, 0.34 in 87, 0.40 in 88, 1.07 in 89, 1.27 in 90, 1.56 in 91. Other HHS 0.00 in 91, 0.01 in 82, 0.01 in 83, 0.02 in 84, 0.03 in 85, 0.02 in 86, 0.04 in 87, 0.05 in 88, 0.12 in 89, 0.32 in 90, and 0.53 in 91. NIH 0.04 in 81, 0.04 in 82, 0.14 in 83, 0.13 in 84, 0.73 in 85, 3.72 in 86, 3.30 in 87, 4.86 in 88, 4.67 in 89, 5.51 in 90, 6.54 in 91
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Alt text: a horizontal bidirectional bar graph titled "Total invention Disclosures and project revenue at federal agencies during the eleven-year period -- 1981-91". The Y-axis lists several federal agencies, and the Y axis is split in half with the left half detailing disclosures in thousands, and the right half detailing revenue in millions of dollars. The data of the chart appears as follows (the chart does not give exact numbers, so the following numbers are rough estimations): For Disclosures in thousands - USDA 1, DOC 0.6, DOD 11, DOE 0.1, HHS 1.9, DOI 0.4, DOT 0.0, EPA 0.05, NASA 2.2, TVA 0.5. For revenue in the millions of dollars - USDA 2, DOC 0.5, DOD 1, DOE 0, HHS 32, DOI 0.5, DOT 0, EPA 0, NASA 1, TVA 0.
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Alt text: A bar graph titled "Invention Disclosures Resulting from in-house R&D in Federal Agencies" With the Y-Axis detailing the number of invention disclosures and the X-axis counting the years from 1981-1991 annually. The bar graph separates each bar by contribution from the DOD, NASA, HHS< USDA, TVA, and Others.