Government Denounces Scripps-Sandoz Deal : Biotech: It calls the plan a ‘dangerous exception’ and threatens to take away the lab’s exclusive rights to discovery patents.

The federal government, angered by the Scripps Research Institute’s proposed marketing agreement with a giant Swiss pharmaceutical company, is threatening to take away from Scripps the exclusive rights to patents from its biotechnology discoveries, the director of the National Institutes of Health told Congress on Thursday.

In unusually strong language, Dr. Bernadine Healy denounced the deal between Scripps, a prestigious research organization in La Jolla, and Sandoz Pharmaceuticals, a major drug manufacturer, as an “aberration,” a possible violation of federal law and a “dangerous exception” to the normal dealings between industry and research institutions that use federal funds.

Sandoz has agreed to pay Scripps $30 million a year for 10 years, starting in 1997. In return, the deal would give Sandoz first rights to exclusively license all of Scripps’ future discoveries. Sandoz would also be permitted to take away promising research projects from Scripps laboratories and shift them to Sandoz facilities elsewhere, Healy told the regulation subcommittee of the House Small Business Committee.

Commercial agreements are common between research institutions such as Scripps and commercial drug firms. However, Healy and members of the subcommittee chaired by Rep. Ron Wyden (D-Ore.) are disturbed because they believe the agreement gives Sandoz a virtual monopoly over the intellectual output of Scripps scientists and that it violates a federal law that requires fair access for small businesses to discoveries partially funded by taxpayers.

As part of the controversial contract, Sandoz would also receive the right to approve the renewal of agreements Scripps already has with other companies to develop its discoveries into commercial products.

Scripps’ scientists would need permission from Sandoz to consult with outside organizations, and scientists from elsewhere could be denied access to the Scripps campus by Sandoz, conditions that would infringe academic freedom, Healy said.

All scientists are “desperate for money” because of cutbacks in federal funding, the NIH director said in an interview after the Thursday hearing. “The question is whether the desperation justifies the act,” she said, referring to the proposed agreement between Scripps and Sandoz.

Scripps, the world’s largest private, nonprofit biomedical research organization, receives $70 million a year in taxpayer funds from the NIH, a federal agency that supports biomedical research and conducts its own. Normally, an institution such as Scripps is granted full control of its discoveries, thus holding the exclusive power to issue licenses to companies seeking to make commercial products.

But Healy said that unless the agreement with Sandoz is altered, the NIH will intervene at Scripps and insist that the government assert its right to the patents.

“They couldn’t freely license it (a product or discovery) without coming to us,” Healy said. The government could instruct Scripps to license a product in a non-exclusive way, to break the monopoly sought by Sandoz.

“Most troubling to me is that the Scripps-Sandoz deal could be the wave of the future,” said Wyden. “It could be a model for other institutions.”

He expressed concern that other major U.S. research organizations would seek pharmaceutical companies as financial “sugar daddies.”

“This is a critical case and will set out the rules of the road,” Wyden said. “When a collaborative research and development deal is cut, federal agencies must make sure that the taxpayer’s throat isn’t sliced with the same knife.”

Scripps refused Wyden’s invitation to send an executive to testify at the hearing. However, it issued a statement by Senior Vice President William H. Beers, who said the agreement with Sandoz “is in the best interest of science and the public.”