Letter from NIH Director, Harold Varmus

[thiru balasubramaniam <thiru@cptech.org>]

On September 3, 1999 Ralph Nader, James Love and Robert Weissman wrote
a letter to NIH Director, Harold Varmus, "asking for NIH to give 
the World Health Organization, WHO, access to US government funded
medical
inventions."  Here is the url for the electronic version of this letter:

http://www.cptech.org/ip/health/sa/varmus-sep99.html
_________________________________________________________________________

On October 21, 1999 Robert Weissman received Dr. Harold Varmus'
response. 

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letter----------------


Mr. Robert Weissman 
Essential Action
P.O. Box 19405
Washington, D.C. 20036


Dear. Mr. Weissman:


Thank you for your recommendation on how the National Institutes of
Health 
(NIH) could interact with the World Health Organization (WHO) to provide
it 
with commerical development rights to NIH-owned and -funded health care 
patents.  As we are both aware, the licensing of Government inventions
has 
received much attention in recent months from Members of Congress,
patient
advocacy groups, representatives of industry and the press.  The public
debate 
has been galvanized by concerns about the AIDS crisis in developing
countries 
and the role of anti-AIDS therapeutic drugs in addressing that crisis.

This proposal, if implemented, would have powerful repercussions on the
current
framework for drug development arising from federally supported basic
research.
I am concerned that your proposal that the NIH employ its "Government
use" license
authorities to grant WHO standing authority to contract for the
production of 
Government-supported inventions so as to make anti-AIDS drugs available
for less
cost than offered by pharmaceutical manufacturers would put the current
system at risk
without necessarily resulting in greater accessibility to these drugs. 
I am also 
troubled by the implications of the NIH intervening on behalf of
sovereign foreign
governments in a situation in which many of those governments have the
authority to
achieve the same result and in which U.S. intervention on this matter
has not been
requested.

Moreover, the AIDS crisis in developing countries is a public health
problem involving
much broader issues than access to anti-viral drugs.  The question of
the supply
of drug products must be considered in the context of the equally
important issues
of medical infrastructure, public health programs, treatment monitoring
and compliance,
and emergence of drug-resistant HIV strains.  Unilateral action by NIH
with regard
to NIH-supported patent rights would consequently be ill-advised and
unlikely to
succeed.

My specific thoughts on the intellectual property aspects of this matter
follow.

Programmatic Background


In the early 1980s, Congress enacted the Bayh-Dole Act and the
Stevenson-Wydler
Technology Innovation Act (with later amendments, including the Federal
Technology
Transfer Act of 1986) to encourage the transfer of basic research
findings to
the marketplace.  The primary purpose of these laws is economic
development: 
specifically, to provide appropriate and necessary incentives to the
private 
sector to invest in federally funded discoveries and to enhance U.S.
global 
competitiveness.  To implement these mandates, the Department of Health
and Human
Services (DHHS) has designated NIH as lead agency for technology
transfer for the
Public Health Service (PHS).

While NIH respects and is sensitive to the economic development intent
of the 
authorizing legislation, it carries out this mandate in accordance with
its public
health mission.  For inventions developed within PHS laboratories, NIH
(and PHS)
Patent and Licensing policies consider public health needs as well as
financial 
and market forces.  For example, the PHS Patent Policy states that
patent 
protection should be sought where further research and development is
necessary
to realize a technology's primary use and future therapeutic,
diagnostic, or
preventive uses.  It is well documented that technologies with potential
as 
therapeutics are rarely developed into products without some form of
exclusivity,
given the large development costs associated with bringing the product
to the
market.  No benefit accrues to the public if the technology is left to
languish
and no product reaches the marketplace.

In conjunction with the patent strategy, the PHS licensing strategy
gives preference
to nonexclusive licenses so that market competition and broad
distribution are
fostered.  Exclusive licenses are granted when such rights are believed
to be
necessary to ensure product development.  As to inventions developed
with NIH 
funding, the Bayh-Dole Act gives NIH grantees and contractors authority
to retain
title patents and to license inventions that arise from the NIH funding.

As you have pointed out, the Government has a royalty-free license to
practice and
have practiced an invention it owns or has funded on behalf of the
United States
and on behalf of a foreign government or international organization
pursuant to 
a treaty or other agreement with the United States.  This royalty-free
license
provides the Government with no-cost use of a technology it invented or
funded.
It does not provide rights or access to a licensee's final product.  The
Government
use contemplated by this provision has been interpreted generally to
include
research use, although its full scope has not been determined. 
Providing the 
owner of the technology (licensor) freedom to do further research is a
common
and reasonable provision of exclusive licenses.  To our knowledge, the
Government
use license has never been employed as you propose, as a blanket measure
to
facilitate direct competition with a commercial licensee.

Granting Rights to WHO

In principle, the U.S. Government can license patent rights to the WHO. 
Even if
the doubts regarding WHO's authority to practice inventions under the
Government
use license could be overcome, I do not believe that the lack of such a
license
from the NIH is inhibiting developing countries from addressing their
needs.  As
you stated, many of these countries can issue compulsory licenses, and
those
that not enacted that authority to date can do so if they choose.  The
economies
of scale you mention could be achieved by cooperation among these
countries or 
direct interaction with WHO.  The role of NIH in these sovereign matters
is, 
appropriately, extremely limited.

NIH can only license or otherwise grant rights to patents in countries
where the
agency or its grantees have sought and obtained patent protection. 
Presently,
NIH holds patent rights in selected countries to technologies that have 
contributed to the development of drugs reported as AIDS/HIV-related
treatments.
In those countries where NIH or its grantees have neither sought nor
obtained
patent protection, NIH has no intellectual property rights to be
licensed or 
otherwise granted.

In addition, there is an important distinction between having rights to
a compound
and having rights to the fully developed product.  NIH does not license
drugs that
are ready for marketing.  NIH biomedical technologies are early stage
and, in almost
all cases, require further research, development, and testing, usually
in combination
with other proprietary technologies, to bring a product to market.  To
achieve
this, NIH and its grantees license the early technology to companies
that are able
to embark in the developmental and regulatory aspects of drug
development.  
Without patent protection it is unlikely that the companies would invest
the resources
needed to commercialize these technologies.

The distinction between final product and "raw technology" is important
because
others may well have filed for patents on non-NIH technologies that are
required
for the production of the final product.  Therefore, even with
NIH-granted rights,
WHO or a contract manufacturer of such products may infringe patents
belonging
to others.  Because it is the rule rather than the exception that
multiple patents
cover final drug products, NIH's granting of rights to the early
compound or invention
would be unlikely to significantly improve access to drugs.

Finally, I am concerned that granting rights to WHO for manufacture and
distribution
does not address the aforementioned requirement that a commercial entity
develop
early-stage compounds into safe and efficacious drugs.  As a practical
matter,
it is reasonable to assume that companies will not undertake the
development costs
of these inventions if they believe the Government will readily allow
third parties
to practice the inventions.

On balance, I am not convinced of the benefit of the standardized
transfer of 
manufacturing and distribution rights to the WHO or any other nonprofit
organization.
Critical to successful technology transfer is the assurance that the
Government
will exercise its intellectual property rights in a responsible,
prudent, and consistent
manner.  Undermining licensed intellectual property rights would, I
believe, unnecessarily
jeopardize the development of important therapeutic drugs.

NIH and WHO Interaction

Not all technologies that would be of use to developing countries are
currently licensed.
In the past, the NIH and WHO have worked together on licensing joint
inventions and in 
negotiating with third parties.  In one notable instance, NIH approached
WHO with the
possibility of manufacturing certain vaccines important ot developing
countries.
Unfortunately, limitations of resources did not permit WHO to take
advantage of such
an offer.  NIH welcomes, and is pursuing, further discussions with WHO
on what
can be done to assist developing countries with health care needs.  I
have
directed my technology transfer staff to engage WHO on the intellectual
property
aspects of this matter.  Discussions between my staff and WHO
representatives
are currently being facilitated by Dr. Stuart Nightingale of the Food
and Drug
Administration.

I appreciate the opportunity to explain our position on this issue.


Sincerely,



Harold Varmus, M.D.
Director

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letter---------------------




Thiru
-- 
Thiru Balasubramaniam
thiru@cptech.org
http://www.cptech.org/thiru