REGENER 0 N REGENERON PHARMACEUTICALS, INC. 777 OLD SAW MILL RIVER ROAD NV 10SQ1-6707 TAR~VTCWN, 914-347-7000 FAX 914·347-2113 E-mail eriC.browtt9rOregpha.com ERIC S. BREWSTER TECHNOLOOV TRANSFER ADMINISlRATOR July 19,1994 Harold Safferstein, Ph.D. Technology Transfer Branch Nation Institute of Allergy and Infectious Diseases National Institutes of Health Building 31, Room 7A-32 9000 Rockville Pike Bethesda, MD 20892 Dear Dr. Safferstein: My name is Eric Brewster, and I am the Technology Transfer Administrator for Regeneron Pharmaceuticals, Inc. of Tarrytown, New York. I am writing to explain Regeneron's strong opposition to the "reasonable pricing" clllllse now re.quired in all NIH/private sector aweem.ents. Regeneron was founded in 1988 to develop biotechnology-based products to treat neurological diseases and conditions for which no cures exist. Regeneron is engaged in the discovery and development of neurotrophic fa<;tors, which are naturally occurring proteins that promote the proliferation, survival, differentiation, and function of cells of the nervous system. These neurotrnphic factors may have the potential to be used as drugs to treat a wide variety of neurological conditions, including motor neuron diseases such as amyotrophic lateral sclerosh (AL5, commonly known as Lou Gehrig's disease), diseases of the peripheral nervous system (such as diabetic neuropathy), and diseases of the central nervous system (such as Parkinson's di~ease and Al7.heimer's disease). Regeneron. like ether biotechnolugy-based companies, ha;; estltblished its own research and development ,.;taff and facilities for the discovery, characterization, and development of new technologies. In addition to the technology developed hy our own scientists, Regeneron has gained access, through cooperative arrangements with corporate partner~ and re.-;earcher., at major medical, academic;, government, and cornmercial institutions, to technology that has had a positive impact on both basic research and the drug development process. Regeneron has a limited number of sponsored research agreements with academic laboratories focused on novel neurotrophic factors &nd their use and has entered into licensing agreements for specific t&hnology for cormnercial development from a small number of academic imtitutions and corporations. We hnve collaborative development agreements with larger corporations to conduct basic research and commercialize specific compounds. Most frequently, we enter into research collaboration agreements with academicians who require Regeneron's scientific know how and materials (which have great value, and wh'.ch are provided without financial charge) for their research projecL•, the majority of which are federally funded. In return for providing materials and scientific help, we seek to license rights in any inventions whic.h ue generated. Regeneron currently has agreements of this type with 372 investigators all over the world Regeneron provides proprietary substances to these investigators with an aggregate value in the millions of dollars. You can see that the technology transfer process goes in both directions-we transfer technology into fed.erally funded labs at at least the same rate ttat we hope to trans.fer it out. Reports of the NIH Panels on CRADA Forums I and 11 A-25 REOEl'iERON PHARMACEUTfCALS, INC. or. H. Saffersteln NIH CRADA Fo11Jm Pg. 2. Regeneron has provided proprietary mate.rial, free of chllfge, to over 180 academic, government, and commercial institutions througli collaboration agreements. These collaborations provide scientists with research material and technology not available oomme.rcially and permit Regeneron to license potential technology wh.Vch may result from these collaborative studies. These agreements provide Regeneron with resowroes far beyond our current cap11bilities. Without such agreements, the company would likely not have been founded, would not be as far along as we are in our development efforts, and certainly would not have been able to obtain financial backing from risk-oriented investom. About !he only type of technology ttansfer or collaboration arrongement that we do not participate in is CRADAs with l\'1H intramural scientists. Alone among the Federal agencies with t-'Chnology transfer programs, NIH has, as a matter of adininistrarive discretion, included in its technology transfer agreements certain tenns which permit 11.'lli to specify or regulate the price for any product which is developed from the transferred technology. The NIH price review process is undermining tc:clmo!ogy tran.sfor for one simple reason: there is no way for a private firm to evaluate the impact of the drug pricing clauses on the potential for commercial development of a product. As a result, an increasing number of biotechnology and pharm.aceutical companies, particularly large companies which have. ample resources and scientific capacil y to fund their own research and develop their own technology, now refuse to enter into CRADAs with NIH, and they refuse to enter into joint ventures with other companies that have entered into CRADAs. Regeneron has in the past year, however, entered into two collaborations with NIH intmmuial scientists using collaboration agreements other than a CRADA. I wuul<.I like to describe one of these collaborations in detail. Scientists at Regeneron and Dr. Igor Klatzo of the National Institute for Neurological Disorders and Stroke (NINOS/NIH), (me of lhe world's ltlading researchers in the area of cardiac arrest cerebral ischemia, dccid~d to enter into <1 collaborat.i ve study on the effects of one of Regeneron's proprie.tary materials on cerebral ischemia in rats. Unlike our agreement• with researcbers al academic insiltutiuns, this collaborntion was fonnalized using an agreement which does not grant Regeneron lhe Erst option lo license any cechr10Iogy developed as a result of the collaboration. We entered into this agreement because we believe that although a great deal of important knowledge will be gained through tills coJiab:>ration, no new patentable' technology wil! result from it. To date, Regeneron has alre~dy provided Dr. Kl atzo with know how, assistance, and proprietary materials valued at over $300,000. fo light of some particularly exciting recent results obtained during this collaboratio11, which is now only itvcn months old. additional experimems have been planned. In order for Dr. Klatzo to carry out these experiments, he will be provided with additional materials rnlued atoverSl.2 million' Clearly, research of this type could not be undertaken without the assisrnnce of rhe biotechnology and pharmaceutical indu~try. I bring up this ex;unple because, like Regeneron, many private companies 1tre declining to enter into CRAOAs wi.th the NIH. As a result, "IIH researchers Me being cut off from resource> (kn::>w how, materials, anct, in effect, support) that woLtld be available to ·;hem at academic institutions outsictc the "'IH (since the pcicing clause :iow appEes only to CRADAs relating to the intramural (Bethesda) and not the exttanmral (university and foundation) research programs funded A-26 Appendix A ReoeNeRON PHARMACEUTICALS, ING. Dr. H. Safforstoin NIH CRADA Forum Pg. 3. by NIH). In addition to threatening the NIB'~ position as one of the world's foremost biomedical research instirutions, this will ultimately be a loss for science, the biotechnology lndusll)', and the American puhlic. The issue is not whether private companies are willing to share the economic benefits of transferred technology with the government. We are willing to pay reasonable fees and royalties. A private company can take these potential future royalty payments into account as it develops a product. This is standard practicf' when one private company licenses technology from another. Royalty requirements work because firms can reasonably predict what they will cost and how they will affect their potential for commercial success with the product. Many independent studies have found that the NIH discretionary price review process is crippling the technology transfer process at NIH. • The NIH insistence on price controls has "nearly ruined the system," said Dr. Steven Paul, ·the former scientific director of the National Institute of Mental Health and a creator of the NIH technology transfer program. Cited by Dr. Robert Goldberg in "Race Against the Cure: The Health Hazards of Pharmaceutical Price Controls," Policy Review, Spring 1994 (number 68), pg. 34. • The HHS Inspector General noted that the controversy at NIH over CRADA pricing threatellS support for the program (Office of Inspector General, Dept. of HHS, Technology Transfer and the Public Interest: Cooperative Research and Development Agreements at NIH (OBI- 92-0110()) (Nov. 93)). This report finds that the use of an arbitrary "reasonable price clause" is undermining the transfer of NIH patents to private oompanie~. Many private biomedical research companies now refuse to participate in CRADAs. This fact undermines the rationale for appropriating so mnny billions of dollars to fund th.is basic research. The impact of these price contirols has been startling. 1993 was the worst year for new CRADAs in the history of the program. In 1992, 47 new CR.ADA!! were reached and in 1993 this declined to 26 new CRADAs. Moreover, most of these new CRADAs do not involve drug development, a trend that results from the application of the pricing clause. • Dr. Bruce Chabner, Director of the National Cancer Institutes (NCI) Division of Cancer Treatment, in testimony at a congressional heating last year discussed specific instances in which companies have discontinued projects OT suspended CRADA negotiations because of ccncems raioed by the "reawnable pricmg clause." Chabner noted that "Other companies have simply refused to lx!come involved with the NCI in early drug development .... NCI has no doubt that companies will 11ot accept the risks of investing large. sums in the development of a govenunent produ<;t iflheir freedom to realiie a profit is restricted. These companies are not willing to put their corporate fate in the hamls of a government-appointed committee of experts. There are less risky ways for companies to make a profit." Te>limony or D1. Brw:e Chabner, Director of the Division of Cancer Trea1menl, National Centi:r ln~ltlute, before Lhe House Subcommittee on Regulation, Business Opportunities and Energy of the House Comrniuee on Small Business (Jan. 25, l 993). • The Comm.itt·~e to Study '.\·fodication Development at the NatioP.al Institute on Drug A1:ms.: stares that the "reasonable-pricing clause required in (DJ-THS CRADAs) in the last year bas been idt:nli!ied by NIDA as a major deterrent to attractil;g private-sector partnerships ... " The Committe~ "recommends a change in the reas•Jnable pricing provision3 of DfillS Reports of the NIH Panels on CRADA Forums I and II A-27 flEGENERON Pi'IARMACEVTICALe . .'NC. Dr. H. Saffarstein NIH CRADA Forum Pg. 4. CRADAs so that licensees or manuf~turers of medications know explicitly the ultimate pricing or pricing structure for their potential therapeutic ll&ent." It found that the numw of CRADAs established by NIH had dropped from 12.6 "in 1992 to about 26 in 1993. Development of Anti-Addiction Medications: [ssues for the Government and Private Sector, Institutes of Medicine, 1994. • A recent article cites NIH officials attributing the price control clause for the precipitous decline in CRADAs. "Many pharmaceurical companies are reconsidering CRADAs, and NIH officials say four of the largest - Pfizer, Abbott Laboratories, Merck and the Upjohn Co. -- have told NIH that they plan to forego new CRADAs unless the pricing clause is removed." Christopher Anderson, "Rocky Road for Federal Research Inc.", Science, 497 (October 22, 1993). • The Cancer Letter has recently published a draft "Action Plan on Breast Cancer" developed from a recent NIH conference convened by Sec.retary Donna Sha!ala which recommends "'increase(d) efforts to speed the translation of basic rese which could hire employees and pay trucientifk collaborations between intramural NIH researchers and industry, inhibits the transfer and development of technology that would ultimately benefit the public, dues not necessarily reflect the public investment in NIH-supported research (or, more accuratt:ly, underestimates the private investment in intramu:ral NIH research), may ultimately undermille the ~llI's position as a leading biomedical research institution, and essentially blocks, n1ther thrui fi.irthers, the intent of the Federal Technology Transfer Act of 1986 (FI'TA). cstabli~hment A-28 Appendix A RECliNERON FIHARNACEUTlCALS, INC. Dr. H. Saffers:eln NIH CRADA Forum Pg. 5. Thank you for the opporrunity to share lhese views with Dr. Varmus and the Nlli CRADA Porum Panel. ~'y~~ Eric S. Brewster Technology Tmnsfer Administrator cc: Sen. Alfonse D'Arnato Sen. Daniel P. :l\1oynihan Reports of the NIH Panels on CRADA Forums I and II A-29