Health Agency Drops Reasonable-Price Rule on Shared-Research Drugs

Drug manufacturers will no longer have to pledge to charge a “reasonable price” for new drugs and other technologies that result from collaborative research agreements with the federal government, the National Institutes of Health said Tuesday.

The requirement, inspired by public uproar over the original high price of the AIDS drug AZT, “has driven industry away from potentially beneficial scientific collaborations with (federal) scientists,” NIH Director Harold Varmus said in a statement.

Many experts believe that cooperation among scientists in the public and private sectors offers the best hope for both discovering and developing breakthrough drugs and other medical technologies.

Drug companies seeking to commercially develop advances made through federally conducted research have been required to sign contracts known as cooperative research and development agreements.

Under these agreements, private companies may provide funds, personnel and other equipment to support research conducted in collaboration with Public Health Service scientists, most of whom are at the NIH. For their part, federal laboratories may provide similar resources, except funds, and may grant their non-governmental collaborators exclusive license options to any federal scientific “invention” that results from their research.

The research on AZT, which was conducted without a cooperative agreement, was developed by Burroughs Wellcome Inc. based on earlier work conducted at the NIH’s National Cancer Institute. Burroughs Wellcome was attacked for its introductory price of AZT, which initially cost between $8,000 and $10,000 for a year’s supply.

The company, under heavy public pressure, ultimately dropped the price of AZT on its own. Later, the cost was further reduced for patients after researchers determined that lower doses of the drug were just as effective.

In 1989, the Public Health Service, acting through the NIH Patent Policy Board, adopted a policy statement requiring pricing clauses in each agreement, but it did not establish a specific pricing formula.

Many drug and biotechnology companies, which already pay fees and royalties to the government for license options on federal research, complained bitterly about pricing restrictions and threatened to stop working with the government.

“Most large drug companies in general don’t seek research agreements with the government because of the burdens the government imposes,” said Steve Berchem, a spokesman for the Pharmaceutical Research and Manufacturers of America. “This is one of them.”