But before BMS revolutionized cancer treatment, scientists at the National Institutes of Health's National Cancer Institute were hard at work developing the drug. Through a Cooperative Research & Development Agreement (CRADA), BMS was able to step in and take advantage of all of the valuable insight gained by NIH. In return, the agency was able to get a promising new drug into the market quickly.

Such agreements that give private-sector companies access to federally funded research done at government laboratories are an essential mechanism for moving new technology from the laboratory into the public arena. Ironing out the details of these agreements is left to the federal agency and the private company. And that's where some in Congress worry that the taxpayers, who fund the early-stage work, are not getting a fair return on their investment.

Fueled by congressional interest from Sen. Ron Wyden (D-Ore.), the development of Taxol has become a case study into whether NIH's Office of Technology Transfer (OTT) is effectively representing the interests of the American taxpayer in its negotiations. To gain a better understanding of the situation, Sen. Wyden asked the General Accounting Office to examine the legal and financial issues involved with Taxol.

"Sen. Wyden believes that the bringing of Taxol to market was certainly a good thing," says Carol Guthrie, communication director for the senator. "He simply believes that the American taxpayer could have gotten a better deal in terms of cost and return on investment."

In contrast to congressional concern, NIH and BMS are both satisfied with the deals they have struck with each other relating to the development of Taxol.

"Bristol-Myers Squibb is proud of our history with Taxol and of our contribution to helping the thousands of cancer patients who have benefited from this medicine," the company says in a press release. "Following a competitive selection process, Bristol-Myers Squibb was awarded the Taxol compound under a CRADA with the National Cancer Institute in 1991. Since that time, the company has met or exceeded every responsibility under the CRADA, including meeting the supply for more than 600 clinical trials, gaining rapid approval from the [Food & Drug Administration] to bring the medicine to cancer patients, and developing alternative supplies of Taxol to preserve the Pacific yew tree, all while never raising the price of the medicine," the release says.

NIH is also proud of its role in collaborating with BMS in clinical trials that aided the company in its development of Taxol. "It's our mission to improve public health," says Mark L. Rohrbaugh, director of OTT at NIH. "And this is an example of a great public health success."

Since first partnering with BMS in 1991, NIH signed another CRADA in 1998. In the initial agreement, which expired in 1997, BMS was given exclusive rights to NIH's clinical trial data. The two parties also agreed to work together on the remaining clinical trails needed for FDA approval. In return, the original agreement provided NCI with an uninterrupted supply of paclitaxel--the generic name for the compound--for clinical trials as well as general research. The name Taxol was trademarked by BMS in 1992 and may now be used only in reference to the company's drug.

The 1991 agreement also included a clause allowing NIH to terminate the partnership if BMS "failed to exercise best efforts in the commercialization of Taxol [paclitaxel]." This clause served as insurance that the drug would get to market without undo delay.

In addition, NIH negotiated a licensing agreement in 1996 for three Taxol-related patents dealing with alternative administration methods of the drug. For the exclusive license of these inventions, BMS agreed to pay NIH royalties of 0.5%. This modest royalty rate was one of the focuses of the Wyden-requested GAO report, "Technology Transfer: NIH-Private Sector Partnership in the Development of Taxol," released this past June ( GAO-03-829).

"Although NIH estimates that it has invested heavily in research related to paclitaxel, its financial benefits from the collaboration with BMS have not been great in comparison to BMS's revenue from the drug," the GAO report says. Taxol has recorded worldwide sales of more than $9 billion, the report notes.

According to the report, NIH spent a total of $483 million on paclitaxel research--$183 million from 1977 to 1997 (the end of the original CRADA) and $301 million from 1998 to 2002. NIH also reportedly spent $96 million on clinical trials.

For its part, BMS says it spent $1 billion on Taxol development. This figure includes an offset payment of $16 million to NIH for clinical trials and an estimated $92 million in paclitaxel supplied to NIH for trials and research, the report says. BMS also paid NIH $35 million in royalties through 2002. These figures indicate that the partnership was worth $143 million to NIH.

PROGRESSION NIH invested more than four decades of research in Taxol development 1963 National Cancer Institute (NCI) scientists discover antitumor activity in bark extract from Taxus brevifolia (Pacific yew tree) 1971 Researchers Monroe E. Wall and Mansukh C. Wani at Research Triangle Institute identify paclitaxel--the generic name for Taxol--as the active ingredient in the bark extract 1979 Susan B. Horwitz, molecular pharmacologist at Albert Einstein College of Medicine at Yeshiva University in New York City, discovers that paclitaxel stimulates cell growth, causing a disruption in the microtubular dynamics, and in turn blocking cell division 1983 NCI begins Phase I clinical trials 1985 NCI begins Phase II clinical trials 1990 Bristol-Myers Squibb and Florida State University sign a licensing agreement allowing BMS semisynthesis of Taxol 1991 NCI and BMS sign a Cooperative Research & Development Agreement (CRADA) for the development of paclitaxel 1992 BMS trademarks Taxol 1993 BMS launches Taxol to the public as a treatment for ovarian cancer 1996 BMS and NIH sign a licensing agreement allowing BMS exclusive use of three NIH patents on the administration of paclitaxel 1998 BMS and NCI sign another CRADA to further study the drug SOURCE: General Accounting Office report "Technology Transfer: NIH-Private Sector Partnership in the Development of Taxol"

IN RESPONSE to the report, NIH indicated that the value of paclitaxel had been underestimated by GAO. "NCI estimates that the value of the material provided by BMS, based on average wholesale prices at the time, had a value of $151 million," wrote NIH Director Elias A. Zerhouni in a letter to GAO. Using the NIH figure, the total value of the partnership comes to about $202 million, he pointed out.

Zerhouni also noted that the $483 figure that the GAO report cites as the total amount that NIH spent on paclitaxel research is misleading. He explained that this figure includes funding for all related research "conducted by NIH scientists or recipients of NIH funds."

Another issue addressed in the report is whether NIH fully understands the impact its negotiations have on the price various groups pay for the drug. Specifically, Sen. Wyden's office notes that the cost to Medicare--the largest government consumer of Taxol--was not considered.

"NIH said it was not worried about negotiating pricing for government entities because there was a government supply schedule," Guthrie tells C&EN. But it appears NIH overlooked the fact that Medicare is not part of that schedule, she says. For that reason, "Sen. Wyden is encouraging NIH to be aware of what their negotiations do and do not cover.

"The bottom line for Sen. Wyden is that NIH has broad existing authority to--on a case-by-case basis--get better deals for both patients and taxpayers," Guthrie explains. "He wants to see NIH increase its awareness of what that authority is and then use it to do better by the American people."

The GAO report did acknowledge, however, that NIH had considered the issue of price control in its negotiations. "The CRADA noted NIH's concern that Taxol be fairly priced given the public investment in Taxol research and the health needs of the public," the report says, "but it did not require that reasonable evidence be presented to show that this would occur."

But just how the government would be able to evaluate reasonable pricing remains a question in the minds of technology-transfer experts. If the goal is to get new drugs into the market, then requiring final input into the drug's price or requiring too large a financial return may cause companies to walk away from transfer agreements. In that case, everyone loses.

"NIH and other government agencies are not in the business of making money from the fruits of research which they conduct or fund," say Timothy J. Oyer, a shareholder and chairman of Chemical Practice Group, and John R. Van Amsterdam, an associate and member of Biotechnology Practice Group, both at Boston-based law firm Wolf, Greenfield & Sacks. "It is their mission to facilitate the development of technology beneficial to humankind."

To that end, Oyer and Van Amsterdam agree that the government's deal appears to have been successful. "The deal was good enough to get a company to take the risk to fund Phase III trials and get the drug developed. It was also good enough to get the government all the paclitaxel it wanted for research purposes. Both of these goals are the mission of government," they explain.

When it comes to negotiating returns on investment, it comes down to having what someone else wants. NIH was unable to patent Taxol because it was already in the public domain; therefore, it was unable to provide BMS an exclusive license to the drug. Instead, as Oyer and Van Amsterdam point out, NIH was able to offer only exclusive rights to source data from the clinical trials on ovarian cancer patients.

"As such, BMS received only a possible advantage in a race to develop Taxol," they say. "Competitors were free to jump in and compete, with no guarantee of any advantageous outcome for BMS. There were no assurances that others would not be able to catch up or even surpass BMS to develop Taxol for any particular indication."

However, it's important to note that BMS was granted a five-year market exclusivity for Taxol when it received FDA approval as a new drug. The statute at play here provides protection for "unpatentable pharmaceuticals." Through this and other maneuvering, BMS was able to delay the release of generic paclitaxel drugs until 2000 (C&EN, June 10, 2002, page 13, and March 17, page 9).

In contrast to NIH's situation, Florida State University is an example of what a strong bargaining chip can get you. Researchers in the laboratory of chemistry professor Robert A. Holton developed, with funding from NIH, and patented a semisynthesis of Taxol in 1989. The four-step process derived its starting material from the needles of yew trees--which are sustainable--rather than the limited supply of bark from the Pacific yew.

FSU's semisynthesis was essential for BMS to produce massive quantities of the drug, so BMS was willing to negotiate a more lucrative deal. According to the GAO report, FSU and BMS agreed to a patent license in 1990 that paid FSU a royalty rate of approximately 4.2%--a rate significantly higher than NIH received.

In the context of Taxol's development, it is perhaps not so surprising that the royalties are so disproportionate. The key is what the patent licenses offered BMS. In FSU's case, they were providing BMS with a method that was absolutely necessary to produce large amounts of the drug, NIH's Rohrbaugh points out.

	WARRIOR Trademarked by BMS, Taxol hit the market in 1993 and has recorded more than $9 billion in sales worldwide. PHOTO BY RAY STANYARD
	ON DISPLAY FSU researcher Michael W. Davidson captured this image of Taxol crystals under the microscope using polarized light. PHOTO BY MICHAEL W. DAVIDSON, FSU

THE LICENSE with NIH came later in the game--after BMS had FDA approval. The patents cover alternative drug administration methods, and the information is not part of Taxol's labeling and instructions, he says. "What this tells you is that this is not a critical component or technology involved in the manufacture or sale of this product" and so it isn't something that BMS was willing to pay a lot of money for, he explains.

Another factor to consider is that Taxol was only expected to have modest sales when it was first released. Initially targeted at ovarian cancer, the drug was later shown to be an effective antitumor agent for other types of cancer, including breast and lung cancer as well as Kaposi's sarcoma. This success fueled sales and propelled the drug to blockbuster status.

Figuring out which drugs are going to thrive and which are going to fail is no easy task, notes John A. Fraser, director of technology transfer at FSU.

Fraser explains that only a very small percentage of university-patented technology ever leads to licensing deals. And of those that do, an even smaller fraction yields a sizable return to the university. This makes it important to spread the risk taken by university technology-transfer offices.

"I want to move as much of this technology into the private sector on reasonable terms and hope that things will happen," Fraser says. "I have no crystal ball. The more time I spend squeezing things out of a deal, the more likely it is that I might not get to a deal that might be the one that hits."

Fraser believes that Sen. Wyden's concern over securing an appropriate payback for taxpayers, as addressed in the GAO report, is not unreasonable. However, determining how to measure the return is an important issue.

If one looks at the payback in terms of the improvement to public health, then all involved agree that the Taxol deal was a success. But if one focuses on the financial return, it's a different story.

"If you impose a royalty, you're going to drive the price up," Fraser points out. This would only compound the issue of high drug prices.

"But at the end of the day, when you look at it, most people know someone who has had cancer," Fraser points out. "Most people know the word Taxol. Most people are very delighted that all the parties that had a hand were able to move the drug forward so it did get to the marketplace."

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