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Report to the Honorable Ron Wyden, U.S. Senate:

United States General Accounting Office:

GAO:

June 2003:

TECHNOLOGY TRANSFER:

NIH-Private Sector Partnership in the Development of Taxol:

GAO-03-829:

GAO Highlights:

Highlights of GAO-03-829, a report to the Honorable Ron Wyden, U.S. 
Senate

Why GAO Did This Study:

The transfer of technology from government-funded medical research 
laboratories to the private sector aims to have new pharmaceuticals 
brought to market more efficiently than would be possible for a 
federal agency acting alone. Much of the pharmaceutical-related 
technology transfer originates with research funded by the National 
Institutes of Health (NIH). GAO was asked to examine the legal and 
financial issues involved in technology transfer as illustrated by the 
research, development, and commercialization of Taxol.  Taxol was 
developed through a cooperative research and development agreement 
(CRADA) between NIH and the Bristol-Myers Squibb Company (BMS) and by 
2001 had become the best-selling cancer drug in history. 

Specifically, GAO examined (1) how the technology transfer partnership 
affected the research and development of Taxol, (2) what NIH’s 
financial investment was in Taxol-related research, and what the 
financial outcomes were of the technology transfer process related to 
Taxol, and (3) what factors influenced how NIH exercised its authority 
in Taxol-related technology transfer activities. GAO reviewed relevant 
materials and statutes governing technology transfer, reviewed the 
patent history of Taxol, interviewed NIH and BMS officials, and 
reviewed data on NIH’s financial investment and drug pricing 
policies.

What GAO Found:

The 1991 NIH-BMS CRADA was one of the first CRADAs to result in a 
major breakthrough drug. NIH’s partnership with BMS provided the 
company with the research results that enabled Taxol to be 
commercialized quickly and made available as a treatment for cancer 
patients. Prior to the CRADA and during the first 2 years of the 
agreement, NIH conducted most of the clinical trials associated with 
the drug. The results of these trials were critical for BMS to secure 
FDA’s approval in 1992 to market Taxol for the treatment of advanced 
ovarian cancer. As agreed in the CRADA, BMS supplied the drug to NIH 
researchers to overcome previous shortages. The additional supplies 
from BMS allowed NIH to increase the number of patients enrolled in 
NIH clinical trials for this drug from 500 patients by 1989 to nearly 
29,000 patients over the course of the CRADA.

NIH made substantial investments in research related to Taxol, but its 
financial benefits from the collaboration with BMS have not been great 
in comparison to BMS’s revenue from the drug. NIH estimates that it 
spent $183 million on all Taxol-related research from 1977 through the 
end of the CRADA’s term in 1997. For one portion of its spending, NIH 
estimates that it spent $96 million to conduct clinical trials 
supporting the CRADA; this was offset by a $16 million payment from 
BMS. In addition, BMS supplied Taxol to NIH, the value of which GAO 
estimates to be $92 million. NIH spent an additional $301 million on 
Taxol-related research from 1998 through 2002, some of which was for 
cancer research, making NIH’s total Taxol-related spending $484 
million through 2002. BMS’s sales of Taxol totaled over $9 billion 
from 1993 through 2002. BMS agreed to pay NIH royalties at a rate 
equal to 0.5 percent of worldwide sales of Taxol as part of a 1996 
agreement to license three NIH Taxol-related inventions developed 
during  the CRADA. Royalty payments to NIH have totaled $35 million. 
The federal government has been a major payer for Taxol, primarily 
through Medicare. For example, Medicare payments for Taxol totaled 
$687 million from 1994 through 1999. 

Several factors affected NIH’s exercise of its broad authority in 
negotiating its Taxol-related technology transfer activities. First, 
NIH did not have a patent on Taxol and thus could not grant an 
exclusive patent license to a CRADA partner. Second, in NIH’s 
evaluation, it was limited by a shortage of available, qualified 
alternative CRADA partners. Finally, the negotiation of royalties for 
NIH’s Taxol-related inventions was affected by multiple 
considerations, including the priorities that both NIH and BMS 
assigned to different factors in the setting of royalties. These 
factors include the stage of development, the potential market value 
of the license, and the contribution to public health of making the 
product available. 

In commenting on a draft of this report, NIH provided additional 
information about its expenditures and the contributions of BMS, which 
GAO incorporated, and also discussed its evaluation of whether BMS’s 
pricing of Taxol was reasonable. 

www.gao.gov/cgi-bin/getrpt?GAO-03-829.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Marcia Crosse at 
(202) 512-7119.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

NIH-BMS Partnership Provided Research Results Critical to Developing 
Taxol's Commercial Uses:

NIH Invested Heavily in Taxol-Related Research, but Federal Financial 
Benefits Have Been Limited:

Several Factors Affected NIH's Exercise of Its Broad Authority in 
Technology Transfer Activities Related to the Development of Taxol:

Concluding Observations:

Agency and Bristol-Myers Squibb Company Comments and Our Evaluation:

Appendix I: Selection of "Clinical Development of Taxol" 
CRADA Partner:

Appendix II: Catalog of CRADAs and License Agreements 
Related to Taxol:

Appendix III: Chronology of the Research and Development of 
Taxol (Paclitaxel):

Appendix IV: Comments from the National Institutes of Health:

Appendix V: GAO Contact and Staff Acknowledgments:

GAO Contact:

Acknowledgments:

Tables:

Table 1: BMS's Worldwide Taxol Sales, 1993-2002:

Table 2: CRADAs Related to Taxol:

Table 3: Patents Related to Taxol:

Figure:

Figure 1: NIH's Funding for Paclitaxel-Related Research:

Abbreviations:

AWP: average wholesale price
BMS: Bristol-Myers Squibb Company
CRADA: cooperative research and development agreement
FDA: Food and Drug Administration
FSU: Florida State University
FSS: Federal Supply Schedule
IND: investigational new drug application
NCI: National Cancer Institute 
NDA: new drug application
NIH: National Institutes of Health 
OFM: Office of Financial Management 
OTT: Office of Technology Transfer
PHS: Public Health Service:

United States General Accounting Office:

Washington, DC 20548:

June 4, 2003:

The Honorable Ron Wyden
United States Senate:

Dear Senator Wyden:

The transfer of technology resulting from federally funded research to 
the private sector is intended to bring pharmaceuticals to the 
marketplace much sooner and more efficiently than would have been 
possible for a federal agency acting alone. Much of the pharmaceutical-
related technology transfer between the public and the private sectors 
originates with research conducted or funded by the National Institutes 
of Health (NIH). NIH uses mechanisms such as cooperative research and 
development agreements (CRADA) with industry partners and the licensing 
of patented inventions arising from research it funds to provide 
incentives for businesses to develop pharmaceuticals. However, the 
financial success of certain drugs that have benefited from government-
funded research has raised concerns about whether the federal 
government is getting a fair return on its investment in the research 
leading to these products.

An example of pharmaceutical technology transfer is Taxol (paclitaxel), 
which by 2001 had become the best-selling cancer drug in 
history.[Footnote 1] Taxol was commercialized by the Bristol-Myers 
Squibb Company (BMS). Through a collaboration with NIH, BMS benefited 
from substantial investments in research conducted or funded by NIH. In 
this instance, the NIH research examined the safety and effectiveness 
of this naturally occurring compound for the treatment of cancer and 
resulted in techniques for administering the drug. NIH transferred its 
research results and discoveries to BMS for its use in seeking approval 
from the Food and Drug Administration (FDA) to market the drug.

You asked us to examine the legal and financial issues involved in 
technology transfer as illustrated by the case of the research, 
development, and commercialization of Taxol. Specifically, you asked us 
to examine the following questions: (1) How did the NIH-BMS technology 
transfer collaboration affect the research and development of Taxol? 
(2) What was NIH's financial investment in Taxol-related research, and 
what were the financial outcomes of the technology transfer process 
related to Taxol? (3) What factors influenced how NIH exercised its 
authority in Taxol-related technology transfer activities?

To address these questions, we reviewed published and unpublished 
documents describing NIH and BMS's partnership and their efforts to 
research and develop Taxol. Using the U.S. Patent and Trademark 
Office's database, we reviewed the patent history of Taxol. We reviewed 
the primary Taxol-related CRADA between NIH and BMS, which was signed 
in 1991. We also reviewed an additional Taxol-related CRADA and the 
license agreement between NIH and BMS.[Footnote 2] We interviewed the 
principal investigators associated with those CRADAs to understand the 
research involved. To assess NIH's investments and financial outcomes 
resulting from Taxol-related research, we obtained and reviewed data 
from NIH's National Cancer Institute (NCI), Office of Financial 
Management (OFM), and BMS's Annual Reports.[Footnote 3] We also 
reviewed Medicare drug purchase data from the Medicare part-B Extract 
Summary System and pricing data from the Federal Supply Schedule (FSS). 
We interviewed officials from BMS and from NIH's OFM, Office of 
Technology Transfer (OTT), and NCI about spending estimates and the use 
of royalty payments. To assess the factors that influence how NIH 
exercises its legal authority, we reviewed the relevant statutes and 
regulations pertaining to the technology transfer process and 
interviewed pertinent officials involved in the process at NIH and BMS. 
We also interviewed officials from one of NIH's key partners in 
paclitaxel-related research, Florida State University (FSU), where much 
of the early research on a semisynthetic method of producing paclitaxel 
was performed. The scope of our report was restricted to NIH's 
investment in paclitaxel, and we did not evaluate the effectiveness of 
commercializing Taxol in comparison to other drugs. For this reason, we 
consider the implications of the development of Taxol as a case study, 
not necessarily as representative of the way NIH performs technology 
transfer activities. We conducted our work from October 2002 to June 
2003 in accordance with generally accepted government auditing 
standards.

Results in Brief:

NIH's collaboration with BMS provided the company with research results 
that enabled paclitaxel to be quickly commercialized as the brand-name 
drug Taxol and made available as a treatment--initially for ovarian 
cancer patients, and later for other cancer patients. Prior to the 
signing of the 1991 CRADA between NIH and BMS, and during the first 2 
years of the CRADA, NIH conducted most of the clinical trials 
associated with paclitaxel. The results of NIH's clinical trials were 
critical for BMS to secure FDA's initial approval in 1992 to market 
Taxol for the treatment of advanced ovarian cancer. Five of the six 
studies submitted to FDA by BMS in support of its marketing application 
were either conducted or funded by NIH. As agreed in the CRADA, BMS 
supplied paclitaxel to NIH researchers to overcome previous shortages 
that had limited NIH's research. The additional paclitaxel supplied by 
BMS allowed NIH researchers to increase the number of patients enrolled 
in NIH clinical trials for paclitaxel from less than 500 patients in 
1989 to 28,882 through the end of the CRADA term. Three inventions--
which were methods for administering paclitaxel and treating side 
effects--resulted from the 1991 CRADA and were later patented by NIH. 
In 1996 NIH signed an agreement to license these inventions to BMS, but 
BMS officials told us that they were not used in any of BMS's 
applications to FDA to expand the approved uses of Taxol. In addition, 
an NIH grant to FSU led to the important discovery of a method for 
producing paclitaxel, which was licensed to BMS by FSU in 1990 and 
later used to produce Taxol.

NIH made substantial investments in research related to Taxol, but its 
financial benefits from the collaboration with BMS have not been great 
in comparison to BMS's revenue from the drug. NIH estimates that it 
invested $183 million in research related to paclitaxel from 1977 
through 1997, the end of the CRADA's term, although not all of this was 
for research supporting the 1991 CRADA. For one portion of its 
investment in Taxol, NIH estimates that its net cost for conducting 
clinical trials that supported the development of Taxol through the 
1991 CRADA was $80 million--NIH estimates that it spent $96 million on 
the studies, and this expense was offset by $16 million in financial 
support from BMS. We estimate that the paclitaxel BMS supplied NIH 
through the CRADA had a value of $92 million. NIH spent an additional 
$301 million on paclitaxel-related research from 1998 through 2002, 
some of which supported cancer research, bringing NIH's total 
investment in paclitaxel-related research from 1977 to 2002 to $484 
million. Overall, BMS officials told us that the company spent $1 
billion to develop Taxol. BMS's worldwide sales of Taxol totaled over 
$9 billion from 1993 through 2002. In its 1996 license agreement with 
NIH, BMS agreed to pay NIH royalties at a rate of 0.5 percent of 
worldwide sales of Taxol, and NIH received royalty payments totaling 
$35 million through 2002. 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, but it did not require that reasonable 
evidence be presented to show that this would occur. The federal 
government has been a major payer for Taxol, primarily through 
Medicare. Medicare payments for Taxol totaled $687 million from 1994 
through 1999, the last full year before a generic version of Taxol was 
approved for marketing.

Several factors affected NIH's exercise of its authority in technology 
transfer activities related to the development of paclitaxel. First, in 
negotiations regarding a CRADA for paclitaxel, NIH's ability to 
exercise its authority was limited because, even though its research 
findings could be valuable in securing FDA approval for marketing the 
drug, NIH did not have a patent on paclitaxel, and thus could not grant 
a possible CRADA partner an exclusive patent license to market the drug 
upon FDA approval. Second, NIH's evaluation suggests that there was a 
shortage of available, qualified alternative CRADA partners. According 
to NIH's records, BMS's CRADA application scored significantly higher 
than others. Finally, the negotiation of royalties for NIH's later 
Taxol-related inventions was affected by multiple considerations, 
including the priorities that both NIH and BMS assigned to different 
factors in the setting of royalties. While nothing in applicable law 
restricts the amount of royalties NIH can negotiate, a number of 
considerations bear on the negotiations. These include the stage of 
product development, the potential market value of the invention, and 
the contribution to public health of making the product available. In 
this case, BMS officials told us that NIH's inventions did not 
contribute to BMS's successful marketing of Taxol.

In commenting on a draft of this report, NIH provided additional 
information about its expenditures and the contributions of BMS, which 
we incorporated, and also discussed its efforts to evaluate the pricing 
of Taxol. In its comments on a draft of this report, BMS expressed 
concern about our estimates of NIH's expenditures; we have revised our 
presentation based on information contained in NIH's comments. BMS also 
expressed concerns that our analysis overstated the cost of Taxol to 
Medicare. Our analysis did not overstate the cost, and we have 
clarified our discussion.

Background:

Taxol is currently used to treat several types of cancer, including 
advanced ovarian and breast cancer, certain lung cancers (non-small 
cell) in patients who cannot have surgery or radiation therapy, and 
AIDS-related Kaposi's sarcoma. The bioactive compound in Taxol was 
first extracted from the bark of the slow-growing Pacific yew tree 
Taxus brevifolia in the 1960s. Following this discovery, the drug was 
developed primarily through research funded by NIH, and then 
transferred to the private sector and successfully commercialized by 
BMS.

Public-Private Technology Transfer:

The 1991 NIH-BMS CRADA was one of the first CRADAs to result in a 
breakthrough drug. The groundwork for the public-private partnership 
that fostered the success of Taxol was laid in 1980. Prior to that 
time, the government generally retained title to any inventions created 
under federal research grants and contracts. This situation became a 
source of dissatisfaction because of a general belief that the results 
of government-owned research were not being made widely available for 
the public's benefit. For example, there were concerns that biomedical 
and other technological advances resulting from federally funded 
research at universities were not leading to new products because the 
universities had little incentive to seek uses for inventions to which 
the government held title. In 1980, the Congress passed two landmark 
pieces of legislation--the Stevenson-Wydler Technology Innovation Act 
of 1980[Footnote 4] and the Bayh-Dole Act[Footnote 5]--with the intent 
of promoting economic development, enhancing U.S. competitiveness, and 
benefiting the public by encouraging the commercialization of 
technologies developed with federal funding.

Although the acts have common objectives, the Stevenson-Wydler Act 
focuses on inventions owned by the federal government, while the Bayh-
Dole Act focuses on inventions created under federal contracts, grants, 
and cooperative research and development agreements. Under the 
Stevenson-Wydler Act, inventions owned by the government remain the 
property of the agencies that produce them. However, the act as amended 
sets out guidelines and priorities that encourage commercialization of 
these inventions through the licensing of technology to U.S. business. 
In 1986 the Federal Technology Transfer Act[Footnote 6] amended the 
Stevenson-Wydler Act and enhanced the authority of federal agencies in 
this area, authorizing them to enter into CRADAs with nonfederal 
partners to conduct research.

The Bayh-Dole Act authorizes federal agencies to execute license 
agreements with commercial entities to promote the development of 
federally owned inventions, and to collect royalties for such licenses. 
The act also gives small businesses, universities, and other nonprofit 
organizations the right to retain title to and profit from the 
inventions arising from their federally funded research, provided they 
adhere to certain requirements. In 1983, a presidential memorandum 
extended this patent policy to large businesses. The act also contains 
several provisions to protect the public's interest in commercializing 
federally funded inventions, such as a requirement that a contractor or 
grantee that retains title to a federally funded invention file for 
patent protection and attempt commercialization. In return, the 
government retains the right to use the inventions without paying 
royalties. In general, most biomedical inventions are not a final end 
product; therefore the government rights would not extend to a final 
product.

NIH's Role in Technology Transfer:

NIH, with a budget of over $23 billion in fiscal year 2002, is the 
principal federal agency that conducts and funds biomedical research, 
including research on drugs. Within NIH, OTT is responsible for 
licensing the inventions of NIH employees to the private sector for 
development to benefit the public health. OTT oversees patent 
prosecution, negotiates and monitors licensing agreements, and provides 
oversight and central policy review of CRADAs.[Footnote 7] NIH's stated 
goals with regard to the technology transfer process are, in order of 
priority, to foster scientific discoveries, to facilitate the rapid 
transfer of discoveries to the bedside, to make resulting products 
accessible to patients, and to earn income. NIH has broad authority 
under the statutes described above to negotiate agreements with outside 
partners in pursuit of its technology transfer goals.

NIH scientists and laboratories, scientists and laboratories in 
academia or other research institutions that receive public funding, 
and industry researchers are often all involved in the development of 
pharmaceuticals. Usually, government and academic scientists conduct 
basic research on the biology of a disease and identify compounds, 
methods, and chemical reactions and pathways that may be of value in 
treating disease. They also conduct preclinical and clinical testing of 
drugs (phase 1 and 2 trials). Industry conducts more extensive clinical 
trials (phase 3 trials) and markets the drugs, although there is some 
overlap in these roles.[Footnote 8] NIH's overall mission and 
authority, as well as the requirements of the Federal Food Drug and 
Cosmetic Act, suggest that NIH cannot sponsor a drug through FDA's new 
drug application (NDA) process. This act requires those who submit NDAs 
to FDA to provide "a full description of the methods used in, and the 
facilities and controls used for, the manufacture, processing, and 
packing, of such drug."[Footnote 9] While NIH conducts its own research 
and funds biomedical research at other institutions, it does not have a 
manufacturing, processing, or packing facility.

NIH can, however, license inventions directly to pharmaceutical firms 
without the necessity of working through a CRADA. For example, NIH 
officials told us that of the 16 drugs and vaccines currently approved 
by FDA that contain an NIH technology, only 3 involved a CRADA. To 
attract private-sector partners, NIH publicizes the availability of 
technologies that it seeks to license directly. NIH officials told us 
that it has entered into CRADAs with private-sector partners in at 
least two other cases that were similar to paclitaxel--naturally 
occurring substances for which shortages had limited NIH's ability to 
conduct research.

The Public Health Service (PHS) created a model CRADA because the 
Federal Technology Transfer Act of 1986 provided few specifics about 
the CRADA process. In general, the model CRADA sets forth the policies 
of NIH and other PHS agencies on various aspects of cooperative 
research and intellectual property licensing that derive from the 
Federal Technology Transfer Act. The model CRADA has been updated 
several times over the years. The 1991 CRADA between NIH and BMS 
referred to a March 27, 1989, version of the model CRADA. The 1989 
model CRADA stated that NIH would be willing to grant exclusive 
licenses to its CRADA collaborators. The 1989 model CRADA also 
contained a provision known as the "reasonable price clause." It stated 
that PHS has "a concern that there be a reasonable relationship between 
the pricing of a licensed product, the public investment in that 
product, and the health and safety needs of the public. Accordingly, 
exclusive commercialization licenses granted for [NIH] intellectual 
property rights may require that this relationship be supported by 
reasonable evidence." NIH dropped the reasonable pricing clause in 
1995, and the current version of the model CRADA no longer has any 
stipulation regarding the pricing of products that are developed under 
the CRADA.

Under federal law and NIH policy, royalty income from license 
agreements is shared between the inventors and the institute or center 
within NIH in which the technology was developed. NIH uses the 
royalties for multiple purposes that contribute to the technology 
transfer program and the research of its laboratories. Specifically, 
the royalty payments can be used to (1) reward employees of the 
laboratory, (2) further scientific exchange among the laboratories of 
the agency, (3) educate and train employees of the agency or 
laboratory, (4) support other activities that increase the potential 
for transfer of the technology of the laboratories of the agency, (5) 
pay expenses incidental to the administration and licensing of 
intellectual property by the agency or laboratory, and (6) support 
scientific research and development consistent with the research and 
development missions and objectives of the laboratory.

Federal laws also generally prohibit agencies from disclosing 
information that concerns or relates to trade secrets, processes, 
operations, statistical information, and related information.[Footnote 
10] Therefore the federal technology transfer process that NIH engages 
in with the private sector is not entirely transparent to the general 
public, nor are the details of the negotiations and agreements that NIH 
makes with industry partners publicly known. However, information may 
be disclosed to those who have oversight authority over the agencies 
that generate such information, such as the Congress and its oversight 
bodies. In this way, information about the details of the federal 
investment and return on investment in the commercialization of a drug 
like Taxol can be examined for policymaking purposes.

The Development of Taxol:

NIH played a role in both basic and clinical research leading to the 
development and use of Taxol. In 1958, NCI, a component of NIH, 
initiated the Natural Products Program, which screened 35,000 plant 
species for anticancer activity. Researchers at the Research Triangle 
Institute found that an extract from the bark of the Pacific yew tree 
had antitumor activity in 1963 and isolated the compound paclitaxel in 
the bark of the Pacific yew in 1971. In 1979, scientists at Albert 
Einstein College of Medicine discovered how paclitaxel works to prevent 
cell division.

In 1983, NCI filed an investigational new drug application (IND) with 
FDA to initiate clinical trials of paclitaxel. The IND was approved, 
and phase 1 trials began. In 1985, NCI began funding phase 2 clinical 
trials. By 1989, two studies of paclitaxel's effect on ovarian cancer 
had demonstrated positive results.

In August 1989, NIH announced in a Federal Register notice that it was 
seeking a pharmaceutical company that could develop paclitaxel to a 
marketable status.[Footnote 11] The notice stated that paclitaxel could 
not be patented. Instead, NIH offered a potential CRADA partner the 
exclusive rights to the source data from its clinical trials. Although 
20 commercial firms replied to the announcement, only 4 companies, BMS 
among them, decided to apply for the CRADA opportunity.

NIH chose BMS as its CRADA partner, and the CRADA, "Clinical 
Development of Taxol," took effect on January 23, 1991. (For details on 
the CRADA partner selection process, see app. I.) Under the 1991 CRADA, 
NCI and BMS agreed to collaborate on ongoing and future clinical 
studies to obtain FDA approval for the marketing of paclitaxel, and NCI 
would make available exclusively to BMS the data and the results of all 
paclitaxel studies. As part of the CRADA, BMS was to supply NCI with 
sufficient amounts of paclitaxel for research and clinical trials. NCI 
could terminate the agreement if BMS "failed to exercise best efforts 
in the commercialization of taxol [paclitaxel]." Following this first 
Taxol-related CRADA, NIH entered into another CRADA with BMS in 1998 
and has had other paclitaxel-related CRADAs with two other companies 
(see app. II).

In 1991, a phase 2 trial of paclitaxel demonstrated its effectiveness 
in treating breast cancer. In 1992, BMS filed and received approval for 
trademark protection for the name Taxol. Also in 1992, BMS filed an NDA 
for Taxol with FDA. On December 29, 1992, FDA approved Taxol for the 
treatment of ovarian cancer, an indication for which it had been shown 
to be effective in earlier studies. In January 1993, Taxol was 
introduced into the marketplace by BMS for the treatment of ovarian 
cancer.

FDA's approval of BMS's NDA to market Taxol for the treatment of 
ovarian cancer triggered a provision in federal law granting BMS 5 
years of marketing exclusivity for Taxol as a new chemical entity under 
the Drug Price Competition and Patent Term Restoration Act of 
1984.[Footnote 12] The statute provides marketing protection for 
unpatentable pharmaceuticals, stating that during this 5-year period 
"no application…may be submitted" to FDA that "refers" to the approved 
drug, a provision that generally prohibits the introduction of a 
generic drug during the exclusivity period.[Footnote 13] Prior to the 
expiration of this period, in June 1997, BMS received two patents 
regarding the administration of Taxol. In July 1997, a number of 
generic drug manufacturers filed applications with FDA to market a 
generic version of paclitaxel, and notified BMS of their intent. BMS 
then filed suit in a federal district court alleging violations of its 
most recent patents. Under federal law, this granted BMS an additional 
30 months of marketing exclusivity while the issues were being resolved 
in court.[Footnote 14] (See the chronology in app. III for more 
information on the research and development of Taxol.):

NIH-BMS Partnership Provided Research Results Critical to Developing 
Taxol's Commercial Uses:

The NIH-BMS collaboration provided BMS access to NIH research results 
that were critical for BMS's quick commercialization of Taxol. It 
provided other benefits for both parties and for the health of the 
public as well. BMS supplied paclitaxel to NIH, enabling NCI to 
dramatically expand its paclitaxel research. BMS later licensed three 
NIH inventions that resulted from the CRADA; however, BMS ultimately 
decided not to use any of the inventions in its applications to FDA for 
approval to market Taxol for additional indications. An NIH grant led 
to the important discovery of a method for the semisynthesis of 
paclitaxel by FSU researchers.

NIH-BMS Collaboration Gave BMS Access to Critical Research Results:

The NIH-BMS collaboration gave BMS unlimited access to NIH research 
results that were critical to BMS's ability to quickly receive FDA 
approval to market Taxol. BMS submitted an NDA for paclitaxel to FDA on 
July 21, 1992, 18 months after the 1991 CRADA took effect, and FDA 
approved the drug for initial marketing on December 29, 1992. 
Paclitaxel was one of the first oncological compounds tested by NCI, 
and the public health community was highly interested in exploring its 
potential. The collaboration between NIH and BMS was beneficial to BMS 
because it gained access to the results of NIH's basic, preclinical, 
and clinical research studies related to paclitaxel, including NIH 
studies conducted both prior to and during the term of the CRADA. Prior 
to the signing of the 1991 CRADA, and during the first 2 years of the 
CRADA, NCI conducted most of the clinical trials associated with 
paclitaxel. These studies were important for securing FDA's initial 
approval to market Taxol for the treatment of advanced ovarian cancer. 
Five of the six studies submitted to FDA by BMS in support of its 
marketing application were either conducted or funded by NIH; one was 
conducted by BMS.[Footnote 15] BMS subsequently applied to FDA to 
market Taxol for other indications, including metastatic breast cancer 
and AIDS-related Kaposi's sarcoma. BMS has received FDA approval to 
market Taxol for eight indications as of May 12, 2003.

NIH-BMS Collaboration Allowed NIH to Expand Its Paclitaxel Research:

Under the terms of the 1991 CRADA, BMS supplied paclitaxel for NCI's 
own studies as well as for NCI-funded trials at other institutions that 
were initiated pursuant to the CRADA. Three months after the CRADA was 
signed, BMS began shipments of paclitaxel to NIH. BMS reported that by 
the end of 1991, 1.35 kilograms of bulk drug, or 45,000 vials, had been 
delivered. In January 1992, shipments were increased from 5,000 vials 
per month to 25,000 vials per month, and by April 50,000 vials per 
month were being provided at no charge to NIH.

BMS's shipments of paclitaxel overcame shortages that had limited NCI 
research. In 1989, before the CRADA, a cumulative total of fewer than 
500 patients had been treated with paclitaxel. Because of BMS's efforts 
to expand the collection and production of paclitaxel, NCI was able to 
establish more than 40 treatment referral centers for therapy of 
patients with refractory ovarian cancer (previously treated, 
unresponsive ovarian cancer) and breast cancer. According to NCI, 
28,882 patients were treated in its clinical trials over the course of 
the CRADA, and the paclitaxel was supplied free of charge by BMS to NCI 
for use in both the clinical trials and the treatment centers.

NIH Licensed Inventions from CRADA to BMS:

In 1996, NIH signed an agreement to license to BMS three patented 
paclitaxel-related inventions that resulted from the 1991 CRADA. While 
the compound itself was not patented, NIH patented three methods for 
using paclitaxel in cancer treatment. These inventions were (1) use of 
G-CSF (granulocyte colony-stimulating factor) to avoid the side effects 
of using Taxol in higher doses, (2) a 96-hour infusion method to 
overcome multidrug resistance, and (3) a method for using Taxol in 
combination with another drug (cisplatin). BMS licensed these three 
inventions because it thought they had potential to provide important 
contributions to treatment. BMS considered adding these methods as new 
indications to the Taxol product label, but ultimately decided not to 
use any of the inventions in its applications to FDA for approval to 
market the drug.

NIH Funding Supported Development of Semisynthesis Process for 
Producing Paclitaxel:

The supply of natural paclitaxel was a continuing problem, since the 
bark of the Pacific yew was scarce and it took about 10,000 to 30,000 
pounds of dried bark to produce about 1 kilogram of the 
compound.[Footnote 16] Under the terms of the 1991 CRADA, BMS agreed to 
initiate an aggressive search for alternative sources of paclitaxel to 
lessen or eliminate dependence on the Pacific yew. Prior to the signing 
of the CRADA, however, NCI had funded research at FSU that led to the 
development of a semisynthetic process for producing paclitaxel that 
started the manufacturing process with materials from another type of 
yew tree that was plentiful. NIH provided about 
$2 million in funding to FSU for this research. Researchers at FSU 
patented the semisynthesis process in 1989 and subsequently licensed 
the patent to BMS in 1990. Under the terms of the license agreement, 
BMS paid FSU substantial royalties for this patent in order to increase 
the supply of Taxol.[Footnote 17] BMS officials told us that BMS did 
not start using the FSU invention to manufacture Taxol until 1996.

NIH Invested Heavily in Taxol-Related Research, but Federal Financial 
Benefits Have Been Limited:

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. NIH 
estimates that it has invested $183 million in research related to 
paclitaxel from 1977 through 1997, the end of the CRADA's term, 
although not all of this was for research supporting the 1991 CRADA. 
For one portion of its investment in Taxol, NIH estimates that its net 
cost for conducting clinical trials that supported the development of 
Taxol through the 1991 CRADA was 
$80 million--NIH estimates that it spent $96 million on the studies, 
and this expense was offset by $16 million in financial support from 
BMS. We estimate that the paclitaxel BMS supplied NIH through the CRADA 
had a value of $92 million. In addition, NIH spent an additional $301 
million on paclitaxel-related research from 1998 through 2002, some of 
which supported cancer research, bringing NIH's total investment in 
paclitaxel-related research from 1977 to 2002 to $484 million. Overall, 
BMS officials told us that the company spent $1 billion to develop 
Taxol. Worldwide sales of Taxol have totaled over $9 billion through 
2002. As a result of its license agreement with BMS, NIH has received 
$35 million in royalty payments. The 1991 CRADA noted NIH's concern 
that Taxol be fairly priced given the public investment in Taxol 
research and the health needs of the public, but it did not require 
that reasonable evidence be presented to show that this had occurred. 
The federal government has been a major payer for Taxol, primarily 
through Medicare. For example, Medicare payments for Taxol totaled $687 
million from 1994 through 1999.

NIH's Financial Investment in Paclitaxel Increased Significantly in the 
1990s:

Based on figures provided by NIH of its yearly expenditures for all 
research involving paclitaxel, we estimate that NIH spent $183 million 
on paclitaxel-related research from 1977 through 1997, the end of the 
CRADA's term.[Footnote 18] NIH officials told us that these figures 
reflect all NIH research using paclitaxel--even when it is given to 
patients as the standard of care in studies of other remedies--not just 
research investigating paclitaxel and Taxol. This figure includes 
spending for research on the effectiveness of paclitaxel for conditions 
other than cancer as well as research to develop analogues or 
alternative compounds to paclitaxel to increase the number of available 
drugs. We estimate NIH spent an additional $301 million on paclitaxel-
related research from 1998 through 2002, some of which supported cancer 
research, bringing NIH's total investment in paclitaxel-related 
research from 1977 to 2002 to $484 million. (See fig. 1.):

Figure 1: NIH's Funding for Paclitaxel-Related Research:

[See PDF for image]

Note: GAO analysis based on data provided by NIH.

[End of figure]

NIH estimates that its net expenditures to conduct clinical trials that 
supported the 1991 CRADA were $80 million. NIH estimates that it spent 
$96 million to conduct the clinical trials and BMS provided a 
reimbursement of $16 million to offset the costs of the studies. NIH's 
estimate includes costs incurred during the CRADA and costs associated 
with clinical trials conducted prior to the CRADA, the results of which 
helped BMS obtain FDA approval to market Taxol. Almost all ($15.6 
million) of BMS's financial support was paid to offset clinical trial 
costs during the last several years of the CRADA. In addition, we 
estimate the paclitaxel BMS supplied to NIH under the CRADA had a value 
of 
$92 million (based on FSS prices).[Footnote 19]

NIH Has Received about $35 Million in Royalties on Taxol Sales:

NIH's financial benefits from the collaboration with BMS have not been 
great in comparison with BMS's revenue from the drug. In 1996, when BMS 
licensed from NIH three patents on methods for using Taxol in cancer 
treatment, it negotiated its first and only license agreement with NIH 
for Taxol, requiring BMS to pay royalties to NIH at a rate of 0.5 
percent of its worldwide sales of Taxol. The NIH-BMS license agreement 
resulted in about $35 million in royalties for NIH through 
2002.[Footnote 20] NIH reports that 10 individual inventors received 22 
percent of the total $35.3 million in royalty payments, or an 
aggregated amount of $7.7 million, while NIH kept the remainder, $27.5 
million.[Footnote 21]

Worldwide Taxol sales totaled over $9 billion from 1993 through 2002. 
Sales exceeded $1 billion annually from 1998 through 2001 (see table 
1). BMS officials told us that the company invested over $1 billion 
toward the development of Taxol since signing the CRADA in January 
1991.[Footnote 22] Costs included supporting clinical trials (including 
its payments to NIH), preparing the NDA, and finding alternative 
sources of the compound through yew cultivation and research on the 
semisynthesis process and plant cell culture techniques. For example, 
BMS officials told us that the company's clinical trials had enrolled 
over 21,000 patients by 1997.

Table 1: BMS's Worldwide Taxol Sales, 1993-2002:

Year: 1993; Total sales in dollars: 162,000,000.

Year: 1994; Total sales in dollars: 344,000,000.

Year: 1995; Total sales in dollars: 580,000,000.

Year: 1996; Total sales in dollars: 813,000,000.

Year: 1997; Total sales in dollars: 941,000,000.

Year: 1998; Total sales in dollars: 1,204,000,000.

Year: 1999; Total sales in dollars: 1,453,000,000.

Year: 2000; Total sales in dollars: 1,561,000,000.

Year: 2001; Total sales in dollars: 1,112,000,000[A].

Year: 2002; Total sales in dollars: 857,000,000.

Year: Total; Total sales in dollars: 9,027,000,000.

Source: BMS.

[A] Taxol sales decreased after 2000, in part, because the first 
generic version of paclitaxel was released to the marketplace in late 
2000.

[End of table]

1991 CRADA Did Not Require Evidence That Taxol Would Be Reasonably 
Priced:

At the time the 1991 CRADA was negotiated, NIH had a reasonable pricing 
policy that there should be "a reasonable relationship between the 
pricing of a licensed product, the public investment in that product, 
and the health and safety needs of the public."[Footnote 23] NIH's 
standard reasonable pricing clause was modified in the 1991 CRADA. The 
CRADA noted NIH's concern that "there be a reasonable relationship 
between the pricing of Taxol, the public investment in Taxol research 
and development, and the health and safety needs of the public." BMS 
agreed in the 1991 CRADA that these factors would be taken into account 
in establishing a fair market price. However, the 1991 CRADA did not 
require that reasonable evidence be presented to show that this would 
occur.[Footnote 24] In its comments on a draft of this report, NIH 
stated it gathered other evidence to reach its conclusion that the 
price of Taxol was reasonable. NIH also entered into a CRADA with 
another company to develop a product that could provide competition for 
Taxol (see CRADA 148 in app. II). This alternative product, Taxotere 
(docetaxel), received its first marketing approval from FDA in 1996.

Federal Government Is a Major Payer for Taxol:

The federal government, primarily through Medicare, has been a major 
payer for Taxol. Medicare payments for Taxol totaled $687 million from 
1994 through 1999, the last full year of marketing exclusivity for 
Taxol. Medicare payments for Taxol were $202 million in 1999, 
accounting for more than one-fifth of Taxol's total domestic sales. 
Medicare's payments reflect, in part, the price it pays for Taxol. 
Compared to other federal programs, Medicare pays relatively more for 
Taxol than it does for other widely used cancer drugs. To assess the 
pricing of Taxol, we reviewed the price Medicare pays for Taxol and 
other cancer drugs compared to the prices paid by federal programs that 
directly procure these drugs.[Footnote 25] We found that in the fourth 
quarter of 2002, Medicare paid 6.6 times the price these other federal 
programs paid for Taxol, while it paid an average of 3.0 times the 
price these other federal programs paid for other widely used cancer 
drugs.[Footnote 26]

Several Factors Affected NIH's Exercise of Its Broad Authority in 
Technology Transfer Activities Related to the Development of Taxol:

Although NIH has broad authority under applicable statutes to negotiate 
CRADAs and license agreements with outside partners, several factors 
affected its exercise of that authority in the technology transfer 
activities related to the development of Taxol. Such negotiations 
involve a weighing of NIH's goals and priorities with those of a 
potential partner, recognizing that tradeoffs may be necessary to reach 
an agreement. In the case of Taxol, NIH's ability to exercise its 
authority was limited because it did not have a patent on paclitaxel 
and because its evaluation found that there was a shortage of 
available, qualified alternative CRADA partners. With regard to the 
license negotiations on the inventions resulting from the CRADA, the 
setting of royalties was affected by the criteria that both NIH and BMS 
used to help guide royalty negotiations. BMS officials told us that 
NIH's inventions did not contribute to BMS's successful marketing of 
Taxol.

NIH's Negotiating Position for the CRADA Was Potentially Affected by 
Its Lack of a Patent on Paclitaxel and by the Shortage of Qualified 
Alternative Partners:

One factor affecting NIH's CRADA negotiating position is its ability to 
offer a potential partner exclusive marketing rights to an invention. 
In its paclitaxel negotiations, NIH's position was affected by the fact 
that it did not have a patent on paclitaxel.[Footnote 27] As NIH 
acknowledged in the 1991 CRADA, because of this NIH was unable to grant 
any potential partner an exclusive patent license to market paclitaxel. 
NIH was able to offer potential partners access to the findings of the 
research it conducted prior to the CRADA and to its research during the 
term of the CRADA.

Another factor affecting the leverage that NIH has in negotiating a 
CRADA is the availability of other qualified applicants. If NIH were to 
be dissatisfied with the CRADA negotiations with an applicant, it 
theoretically could turn to another applicant and begin new 
negotiations, accepting the inherent delays. It also could seek 
multiple CRADA partners, recognizing that multiple partners may grant 
less favorable terms than one receiving an exclusive agreement. In the 
case of paclitaxel, it was advantageous for NIH to enter into a CRADA 
with an industry partner qualified to bring paclitaxel to the 
marketplace and to provide an adequate supply of paclitaxel for its 
work. NIH received four applications from potential CRADA partners. 
Using nine criteria to rank applications, including that an applicant 
have experience with both natural products and other drug development 
and be able to supply adequate amounts of the drug as needed for future 
clinical trials (see app. I), NIH reviewers scored the BMS application 
substantially higher than all of the others. While some concerns were 
raised about the BMS application, greater concerns were raised about 
other applications. For example, the applicant that received the 
second-highest score was cited as having no experience in the United 
States involving natural products and no experience in developing 
pharmaceutical agents in the United States and as providing incomplete 
responses, especially on how it would make Taxol available and how much 
it could supply annually.

License Negotiations under the CRADA Resulted in Royalty Payments to 
NIH:

Applicable law does not restrict the royalty rate NIH can negotiate in 
a license agreement, although NIH's model CRADA at the time of the 
Taxol negotiations suggested that a ceiling be set at 5 to 8 percent. 
This specification has since been removed, and the current model CRADA 
sets no ceiling. By law, NIH is required to offer its CRADA partners 
the option to choose an exclusive license for any inventions that arise 
from the CRADA work.[Footnote 28] NIH is not prohibited from specifying 
in the CRADA what the royalty rate will be, rather than waiting until a 
subsequent license agreement is negotiated.

When NIH and BMS entered into the license agreement 5 years after the 
1991 CRADA took effect, how the parties viewed the benefits of an 
agreement likely affected the royalty rate negotiations. NIH officials 
indicated that they generally take eight factors into account in 
negotiating royalty rates. These include the stage of product 
development, the type of product, the market value of the product, the 
uniqueness of the materials, the scope of the patent coverage, the 
market timing, NIH's contribution to the product, and the public health 
benefit. An NIH OTT official reported that the ultimate determination 
of a royalty rate is not the result of a neat formula but is based on a 
balancing of these factors, with the public health benefit receiving 
the highest consideration. In contrast, BMS officials told us that the 
company considers three factors when negotiating royalty rates: 
scientific risk, coverage, and exclusivity. In the case of Taxol, a BMS 
official reported that the company determined it had high scientific 
risk (i.e., it did not know if the inventions would be successful), 
narrow coverage (i.e., the license was for very specific ways of 
treating a tumor), and a lack of exclusivity (i.e., the treatment 
regimens BMS licensed would not prevent other firms from marketing 
generic paclitaxel after BMS's period of marketing exclusivity 
expired), all making the inventions less valuable.

In general, NIH's leverage in negotiating royalty rates is affected by 
the amount of competition for a license. In 2000, NIH's director of OTT 
testified that the vast majority of NIH inventions require active 
marketing and more often than not only one firm is generally interested 
in licensing any particular type of technology.[Footnote 29] In fiscal 
year 2000, there were 45 requests for exclusive licenses, and only 2 
technologies had two applications for licenses each. For nonexclusive 
license requests, there were 253 requests, and only 31 had more than 
one application. NIH's director of OTT reported that, at that time, OTT 
had approximately 2,000 technologies available for licensing, 30 
percent of which had been available for more than 5 years. In the case 
of Taxol, it is not clear whether other companies would have been 
interested in the inventions developed out of the CRADA, as BMS had 
exclusive rights to market paclitaxel at that time.

Concluding Observations:

From the perspectives of NIH and BMS, the 1991 CRADA is an example of a 
successful collaboration between the public and private sectors in 
pharmaceutical technology transfer. Early studies supported by NIH on 
the clinical effectiveness of Taxol and made available to BMS under the 
CRADA were critical to BMS's success in rapidly commercializing its 
brand-name drug Taxol for the treatment of cancer. The additional 
supplies of the scarce paclitaxel provided by BMS to NIH under the 
CRADA were critical for the expansion of NIH's research.

NIH's goals in the technology transfer process emphasize public health 
benefits over financial considerations. In the case of Taxol, the 
benefit to public health was clearly demonstrated, as there were few 
treatments for women with ovarian or breast cancer when Taxol came on 
the market. However the financial return to NIH was more limited. NIH 
made a substantial investment in the development of Taxol. In return, 
NIH received royalty payments of about $35 million from its license 
agreement with BMS, and received paclitaxel and financial support from 
BMS for the CRADA research. We noted that the federal government has 
spent over half a billion dollars in payments to health care providers 
for Taxol under the Medicare program. In light of the significant 
federal investment, questions remain regarding the extent to which NIH 
used its broad authority in its negotiations with BMS on the royalty 
payments and the price of the drug to obtain the best value for the 
government.

Agency and Bristol-Myers Squibb Company Comments and Our Evaluation:

We provided a draft of this report to NIH and BMS for their review. In 
its comments, NIH provided us with additional information about its 
expenditures related to the 1991 NIH-BMS CRADA and BMS's contributions 
to NIH research under the CRADA, and also presented the reasons that it 
did not patent paclitaxel. NIH acknowledged that the 1991 CRADA did not 
require that evidence be presented to assure that Taxol was reasonably 
priced; however, NIH states that its analysis of other information led 
it to conclude that Taxol was fairly priced. In response, we have 
incorporated the new information from NIH into the report as 
appropriate. However, we were not able to evaluate the basis for NIH's 
judgment that Taxol was fairly priced. NIH's comments are included as 
appendix IV. NIH also provided technical comments, which we have 
incorporated as appropriate.

In its comments, BMS expressed concern that our estimates of NIH's 
expenditures for the development of Taxol gave an exaggerated view of 
NIH's spending. We have revised our presentation of NIH's spending 
based on additional information contained in NIH's comments. BMS also 
expressed two concerns about our analysis of the price of Taxol to 
Medicare relative to other cancer drugs. First, BMS suggested that our 
analysis may include payments to physicians for administering the drugs 
in addition to the procurement price of the drugs. However, our 
analysis considered only the prices for drug procurement and did not 
include payments for physician services. Second, BMS suggested that our 
findings may change if our analysis excluded generic drugs and was 
restricted to brand name drugs. However, only 2 of the 12 comparison 
drugs in our analysis are generic drugs and our findings do not change 
if they are excluded. We found that, while Medicare generally pays more 
for cancer drugs than other federal programs that can directly procure 
pharmaceuticals, this price premium for Taxol is greater than average. 
BMS also made technical comments, which we incorporated as appropriate.

As we agreed with your office, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
30 days from the date of the report. At that time, we will send it to 
the Secretary of Health and Human Services, the Director of NIH, and 
others who are interested. We will make copies available to others upon 
request. In addition, the report will be available at no charge on 
GAO's Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please call 
me at (202) 512-7119. Another contact and key contributors are listed 
in appendix V.

Sincerely yours,

Marcia Crosse
Acting Director, Health Care--Public Health and Science Issues:

Signed by Marcia Crosse:

[End of section]

Appendix I: Selection of "Clinical Development of Taxol" CRADA Partner:

On August 1, 1989, NIH published a notice in the Federal Register 
seeking a pharmaceutical company that could effectively pursue the 
clinical development of paclitaxel for the treatment of cancer. 
Included in the Federal Register announcement were nine criteria for 
the selection of the CRADA partner:

* Experience in the development of natural products for clinical use.

* Experience in preclinical and clinical drug development.

* Experience in and ability to produce, package, market, and distribute 
pharmaceutical products in the United States and to provide the product 
at a reasonable price, and experience in doing so.

* Experience in the monitoring, evaluation, and interpretation of the 
data from investigational agent clinical studies under an 
investigational new drug application.

* Willingness to cooperate with the Public Health Service in the 
collection, evaluation, publication, and maintaining of data from 
clinical trials of investigational agents.

* A willingness to cost-share in the development of paclitaxel, 
including the acquisition of raw material and isolation or synthesis of 
paclitaxel in adequate amounts as needed for future clinical trials and 
marketing.

* Establishment of an aggressive development plan, including 
appropriate milestones and deadlines for preclinical and clinical 
development.

* An agreement to be bound by the HHS rules involving human and animal 
subjects.

* Provision for equitable distribution of patent rights to any 
inventions.

NIH's Taxol CRADA Review Committee met on October 10, 1989, to review 
the applications of the four potential CRADA partners. The committee 
scored BMS's application substantially higher than all of the others, 
with none of the other applications receiving a higher score than BMS 
on any of the individual criteria. Some of the strengths of the BMS 
application that were discussed were BMS's extensive experience with 
natural products, its impressive record in the area of production of 
anticancer agents and substantial experience in preclinical drug 
development, and its bearing of financial responsibility for collection 
of the compound and preclinical toxicology studies. Weaknesses 
discussed were pricing and the estimates of available paclitaxel. The 
applicant receiving the second-highest score was cited as having no 
experience in the United States for natural products and no experience 
in developing drugs in the United States.

[End of section]

Appendix II: Catalog of CRADAs and License Agreements Related to Taxol:

NIH has had four CRADAs and one CRADA amendment related to paclitaxel 
(see table 2). Two of the CRADAs and the CRADA amendment were with BMS 
and concerned development of the drug Taxol. One CRADA was with Rhône-
Poulenc Rorer (now Aventis) and involved research on Taxotere, a part 
of the taxane class of chemotherapy drugs, whose original source is the 
yew tree. It is also a treatment that can help destroy cancer cells in 
the body after previous chemotherapy. An additional CRADA, which is 
ongoing, is with Angiotech and the Johns Hopkins University and 
involves the use of paclitaxel to coat stents used in angioplasty.

Table 2: CRADAs Related to Taxol:

CRADA number: 64; Title: Clinical Development of Taxol; Partners: NCI 
and BMS; Active dates: 1/23/91 to 12/31/97.

CRADA number: 97 (amendment 
to 64); Title: Clinical Development of Taxol: Studies on Mechanisms of 
Action and Resistance, Identification of Analogs Active in Resistant 
Cell Lines; Partners: NCI and BMS; Active dates: 7/17/95 to 12/31/97.

CRADA number: 686; Title: Taxol: Studies on the Mechanisms of Action 
and Resistance; Partners: NCI and BMS; Active dates: 6/9/98 to 6/9/01.

CRADA number: 148; Title: CRADA for the Clinical Development of 
Taxotere; Partners: NCI and Rhône-Poulenc Rorer; Active dates: 5/14/92 
to 3/1/00.

CRADA number: 363; Title: Use of Paclitaxel and Microtubule-Stabilizing 
Agents for the Prevention of Restenosis; Partners: NIH, Angiotech, and 
the Johns Hopkins University; Active dates: Currently active.

Source: NIH.


[End of table]

Although paclitaxel itself has not been patented, methods of 
administration of the drug have been patented. There are a few patents 
pertaining to paclitaxel (see table 3). The government has an interest 
in three of these patents: 5496804, 5496846, and 6150398. Patent 
5496804 is for a method for treating paclitaxel side effects with G-CSF 
(granulocyte colony-stimulating factor); patent 5496846 is a method for 
using paclitaxel in a 96-hour infusion for breast cancer; and patent 
6150398 is for a method of treating cancer by administration of 
paclitaxel and a DNA cross-linking antineoplastic agent (cisplatin). 
Patents 5641803 and 5670537 are held by BMS solely. One is a method for 
administering Taxol over 3 hours, and the other is for a method of 
effecting tumor regression with a low-dose, short-infusion Taxol 
regimen.

Table 3: Patents Related to Taxol:

Patent number: 5496804; Title: Method for Treating Taxol Side Effects 
with G-CSF; Assignee: Department of Health and Human Services; Date 
approved: 3/5/1996.

Patent number: 5496846; Title: Taxol Treatment of Breast Cancer; 
Assignee: Department of Health and Human Services; Date approved: 3/5/
1996.

Patent number: 5641803; Title: Methods for Administration of Taxol; 
Assignee: Bristol-Myers Squibb Co.; Date approved: 6/24/1997.

Patent number: 5670537; Title: Method for Effecting Tumor Regression 
with a Low-Dose, Short-Infusion Taxol Regimen; Assignee: Bristol-Myers 
Squibb Co.; Date approved: 9/23/1997.

Patent number: 6150398; Title: Methods for the Treatment of Cancer; 
Assignee: Department of Health and Human Services; Date approved: 11/
21/2000.

Source: U.S. Patent and Trademark Office.

[End of table]

NIH has one exclusive patent license agreement with BMS that resulted 
from CRADA 64, "Clinical Development of Taxol." This license agreement 
covers three patents: 5496804, 5496846, and 6150398.

In addition, BMS and FSU established a major license agreement 
concerning the semisynthetic production of Taxol. Other NIH CRADAs 
involving the other industry partners (i.e., Rhône-Poulenc Rorer, 
Angiotech, and the Johns Hopkins University) did not result in any 
patented inventions or license agreements.

[End of section]

Appendix III: Chronology of the Research and Development of Taxol 
(Paclitaxel):

1958:

* The National Cancer Institute (NCI) initiates the Natural Products 
Program to screen 35,000 plant species for anticancer activity.

1963:

* Researchers at Research Triangle Institute in North Carolina find 
that an extract from the bark of the Pacific yew tree has antitumor 
activity.

1971:

* Researchers at Research Triangle Institute identify compound 17--
paclitaxel--the active ingredient in the Pacific yew tree.

1979:

* Researchers at Albert Einstein College of Medicine discover how 
paclitaxel works to prevent cell division, by means of a mechanism 
called tubulin stabilization.

1980:

* Stevenson-Wydler Technology Innovation Act and Bayh-Dole Act enacted.

1983:

* NCI files an investigational new drug application (IND) to initiate 
clinical trials of paclitaxel. IND is approved, and phase 1 clinical 
trials begin.

1985:

* NCI begins phase 2 clinical trials.

1986:

* Federal Technology Transfer Act enacted.

1987:

* Hauser Chemical becomes contractor to NIH, collecting yew tree bark 
and manufacturing paclitaxel.

1989:

* Researchers at Florida State University (FSU), funded by NIH, patent 
a process for the semisynthesis of Taxol.

* NCI publishes a Federal Register announcement petitioning 
pharmaceutical companies to compete for the right to develop 
paclitaxel. Four companies, including Bristol-Myers Squibb (BMS), 
apply.

1990:

* FSU and BMS sign a license agreement for BMS's use of the 
semisynthesis process.

1991:

* NCI signs CRADA with BMS for the clinical development of paclitaxel.

1992:

* U.S. Patent and Trademark Office approves BMS's application to 
trademark the name Taxol.

* BMS files a new drug application (NDA) with FDA for use of Taxol to 
treat ovarian cancer.

* BMS obtains FDA approval in December for treatment of patients with 
metastatic carcinoma of the ovary after failure of first-line or 
subsequent therapy.

* Pacific Yew Act enacted (Pub. L. No. 102-335, 106 Stat. 859).

1993:

* BMS introduces Taxol into the marketplace for treatment of ovarian 
cancer.

* BMS files supplemental NDAs with the FDA, one for further defining 
the optimal dose and schedule of the administration of Taxol, another 
for use of paclitaxel as a secondary therapy for breast cancer.

1994:

* BMS obtains FDA approval in April for treatment of breast cancer 
after failure of combination chemotherapy for metastatic disease or 
relapse within 6 months of adjuvant chemotherapy. Prior therapy should 
have included an anthracycline unless clinically contraindicated.

* BMS obtains FDA approval in June for new dosing regimen for patients 
who have failed initial or subsequent chemotherapy for metastatic 
carcinoma of the ovary.

* FDA approves supplemental NDA for semisynthetic production of Taxol 
by using the process developed by FSU.

1996:

* NCI and BMS CRADA extended through December 1997.

* NIH is awarded patents for Taxol Treatment of Breast Cancer and 
Method for Treating Taxol Side Effects with G-CSF.

* NIH and BMS sign license agreement, whereby NIH provides BMS with 
exclusive rights to three NCI inventions involving Taxol. BMS is 
required to provide NIH with royalty payments and research support, and 
meet benchmarks for the clinical development of Taxol.

* NIH begins to receive royalty payments from BMS.

1997:

* BMS obtains FDA approval in August for second-line therapy for AIDS-
related Kaposi's sarcoma.

* Other drug companies begin developing generic versions of paclitaxel 
and file NDAs and abbreviated new drug applications with FDA.

1998:

* BMS obtains FDA approval in April for first-line therapy for the 
treatment of advanced carcinoma of the ovary in combination with 
cisplatin.

* BMS obtains FDA approval in June for use of Taxol injection, in 
combination with cisplatin, for the first-line treatment of non-small-
cell lung cancer in patients who are not candidates for potentially 
curative surgery and/or radiation therapy.

1999:

* BMS obtains FDA approval in October for adjuvant treatment of node-
positive breast cancer administered sequentially to standard 
doxorubicin-containing combination chemotherapy.

2000:

* First generic version of paclitaxel approved in September.

* Generic versions of paclitaxel enter the marketplace.

2002:

* BMS obtains FDA approval in June for new dosing regimen for the 
first-line treatment of advanced ovarian cancer: every 3 weeks at a 
dose of 175 milligrams per square meter of body surface followed by 
cisplatin at a dose of 75 mg/m2.

[End of section]

Appendix IV: Comments from the National Institutes of Health:

DEPARTMENT OF HEALTH & HUMAN SERVICES	

Public Health service:

National Institutes of Health 

Bethesda, Maryland 20892:

www.nih.gov:

MAY 30 2003:

Ms. Marcia Crosse:

Acting Director, Health Care - Public Health and Science Issues:

U.S. General Accounting Office 441 G St., N.W.

Washington, D.C. 20548:

Dear Ms. Crosse:

We are pleased to have the opportunity to review and comment on the 
draft General Accounting Office (GAO) report entitled Technology 
Transfer. NIH-Private Sector Partnership in the Development of Taxol, 
GAO-03-839. Enclosed is the National Institute of Health response. It 
includes both general and technical comments. We believe that 
incorporation of these comments into the final GAO report will clarify 
various issues and enhance the overall accuracy of the report.

Sincerely,

Elias A. Zerhouni, M.D.
Director

Signed for Elias A. Zerhouni, M.D.:

Enclosure:


Comments of the National Institutes of Health (NIH) on the U.S. General 
Accounting Office (GAO) Draft Report "Technology Transfer: NIH-Private 
Sector Partnership In the Development of Taxol," GAO-03-839, May 2003:

The NIH is pleased to provide comments on this draft GAO report. The 
development of the cancer-fighting drug Taxol is an example of how the 
determined efforts of scientists from not-for-profit, academic, 
government, and for-profit organizations came together through a 
variety of public-private partnerships spanning over 30 years to 
develop a life-saving therapy that has become a standard of care for 
ovarian, breast, lung, and other cancers.

In 1989, NCI was faced with a dilemma of having evidence of clinical 
activity with a promising new drug, but was severely hampered by the 
limited supply. Because it was extremely difficult to manufacture, the 
NCI could only obtain enough of the drug to treat a few hundred cancer 
patients in clinical trials.	In order to expand the phase 2 studies, to 
develop drug combinations, to initiate phase 3 trials, to make the drug 
available on a compassionate basis, and to receive FDA approval, NCI 
advertised in the Federal Register for a pharmaceutical partner to help 
meet these goals.

As NCI's partner under a subsequent CRADA, Bristol Meyers Squibb (BMS) 
rapidly and substantially increased the amount of Taxol available for 
research and commercialization, cooperated in executing a broad 
research agenda exploring Taxol's usefulness in many patient 
populations, and provided expertise necessary to rapidly achieve FDA 
approval. Taxol, and more recently the generic paclitaxel, are now 
widely used. According to information from BMS, more than one million 
patients have been treated with Taxol.

Background:

Examining the financial aspects of the development of Taxol in 
isolation from the NC's mission tells only part of the story. To 
understand fully the development of Taxol, one must understand the role 
of NIH in leading biomedical research. In July 2001, NIH submitted to 
Congress a document entitled °A Plan to Ensure Taxpayers' Interests Are 
Protected" that described the nature of research and the arduous road 
that many biomedical technologies (inventions) follow to reach the 
public. A copy of that document is attached, but it can also be found 
at http://www.nih.gov/news/070101wyden.htm. The report explains how 
NIH stewardship of federal resources that support biomedical research 
has protected the taxpayers' interests.

The NIH mission is to sponsor and conduct medical research and advance 
public health. In furtherance of that mission, the NIH employs 
mechanisms and authorities provided under the Bayh-Dole Act, the 
Stevenson-Wydler Act, and subsequent legislation to assist in combining 
the scientific expertise of the NIH and its funding recipients with the 
scientific and business expertise of private-:

sector companies. These laws were enacted to encourage government-owned 
and government-funded research laboratories to pursue 
commercialization of the results of their research.

The Stevenson-Wydler Technology Innovation Act of 1980 calls for the 
NIH and other federal agencies to execute license agreements with 
commercial entities to promote the development of technologies 
discovered by government scientists. The Act also provides a financial 
return to the public in the form of royalty payments and related fees 
paid to the U.S. Treasury. In 1986, the Act was amended by the Federal 
Technology Transfer Act of 1986 (FTTA), which authorizes federal 
agencies to enter into cooperative research and development agreements 
(CRADA) with non-federal partners to conduct research and to receive 
royalty payments directly.

The Patent and Trademark Amendments of 1980 (P.L. 96-517), known as the 
Bayh-Dole Act, aimed to address barriers to development and promote the 
synergy necessary to commercialize federally funded inventions. The Act 
was enacted to allow federal agencies to secure patent rights and 
convey the rights to commercial entities through licensing, thereby 
promoting the transfer of federally-funded technologies to the public 
and enhancing economic development. A key provision of the Act provides 
grantees and contractors, both for-profit and not-for-profit, the 
authority to retain title to government-funded inventions and makes 
them responsible for using the patent system to promote the use, 
commercialization, and public availability of inventions.

General Comments:

A. Reasonable Pricing:

The draft report makes several references to the wording of the 
reasonable pricing clause in the original BMS CRADA (#64), noting that 
it did not require that reasonable evidence be presented. We believe 
that without further elaboration, this provides the false impression 
that evidence was not presented or considered. The following paragraphs 
clarify this issue and enhance the accuracy of the report. We suggest 
that GAO incorporate them in the report:

As a part of the CRADA, BMS acknowledged the National Cancer 
Institute's (NCI) concern that there be a reasonable relationship 
between the pricing of Taxol, the public investment in Taxol research 
and development, and the health and safety needs of the public. NCI 
acknowledged BMS' concern that because Taxol was not patentable, market 
exclusivity for a period necessary to recover its investment in Taxol 
research and development might not be available. In addition, NCI 
acknowledged that due to the limited supply of natural resources for 
production of Taxol and the complexity of the manufacturing process, 
Taxol would be expensive to develop and manufacture. Both parties 
agreed to take these factors into consideration in establishing a fair 
market price for Taxol. Although the CRADA did not
require that reasonable evidence be presented, NCI collected this 
evidence and believed that the pricing strategy of BMS for Taxol met 
the requirements of the CRADA.

NCI considered the possibility of conducting a detailed cost-base 
analysis of the proposed price, but rejected this alternative. Instead, 
NCI measured the fairness and reasonableness of the proposed price by 
comparison with similar products and concluded that the proposed price 
met the reasonable pricing requirements under the CRADA because: (a) 
the price of Taxol fell below the median for recently approved oncology 
drugs, even though Taxol was substantially more expensive to produce 
due to its complex structure; (b) BMS established an indigent access 
program to make it available free of charge to patients who could not 
afford it; (c) medical and government institutions received the drugs 
at a significant discount; (d) patients receiving the drug under a 
compassionate-release program would continue to receive the drug free 
of charge following FDA approval; and (e) BMS would continue to provide 
Taxol free of charge to NCI-sponsored trials initiated under the CRADA. 
An additional factor in NCI's accepting the proposed price of Taxol as 
being reasonable was that the price of Taxol marketed in the United 
States was lower than that in Canada. This was considered significant 
because attention had been drawn to prices of drugs in the United 
States versus overseas. (See testimony of Bruce Chabner, Director, 
Division of Cancer Treatment, National Cancer Institute, at the Hearing 
"Pricing of Drugs Co-developed by Federal Laboratories and Private 
Companies," January 25, 1993, Serial No. 103-2.):

B. Intellectual Property Rights:

On the opening page and throughout the report, GAO states that °NIH did 
not have any intellectual property rights to offer because the drug is 
a naturally occurring compound that cannot be patented." That statement 
is incorrect.

In general, naturally occurring compounds that are isolated and have 
utility would be patentable subject matter. However, in the case of 
paclitaxel, the previous isolation of paclitaxel, publication of the 
structure, and publication of antitumor activity created a bar to 
obtaining patent rights. Paclitaxel was in the public domain.

For a background document on the discovery, we suggest that GAO view an 
article entitled "Anticancer Research Honored at RTI" in the May 19, 
2003, issue of Chemical & Engineering News (see http://www.cen-
online.org). The article describes an event last month at the Research 
Triangle Institute's (RTI) Natural Products Laboratory in Research 
Triangle Park, NC. The event was the designation by the American 
Chemical Society of the laboratory as a National Historic Chemical 
Landmark due to the discovery there of the "revolutionary anticancer 
drugs camptothecin and Taxol (paclitaxel) by Mansukh C. Wani and the 
late Monroe E. Wall." It also chronicles the development of Taxol, a 
name given by Wall, and later trademarked by BMS.

We recommend that GAO revise its statements on the opening page and:

throughout the report to reflect the actual situation --that the NIH 
had no intellectual property rights to offer because the chemical was 
known, its activity had been published, and it could not meet the 
criteria for a patent.

C. Valuation of NIH's and BMS' Respective Contributions to Paclitaxel 
Research:

On the summary page and throughout the draft report there are various 
statements of the estimated NIH investment in research related to Taxol 
since 1977. While there are some clarifying statements located in the 
middle of the report, we believe the $484 million figure cited as the 
NIH investment needs to be clarified, both in the summary and 
throughout the report because it cites all funding for any research 
related to Taxol, paclitaxel, taxotere etc., whether conducted by NIH 
scientists or recipients of NIH funds. We request that GAO recalculate 
the value and expense figures by incorporating information from the 
following two paragraphs, and limit the comparison to the CRADA 
activity.

The amount of funds used to support NIH activities associated with the 
BMS CRADA has been estimated at $96 million. This was the estimate 
provided by NCI in response to an inquiry from the Congressional 
Research Service in February 1999. The figure actually represents costs 
incurred during the CRADA and costs associated with clinical trials 
conducted prior to the CRADA but whose information was provided to BMS 
as a part of the CRADA and used to support the BMS application to the 
FDA. We believe that this figure appropriately reflects the NIH's 
involvement with BMS in the development of the FDA-approved drug Taxol.

Additionally, the GAO report does not address the financial 
contributions of BMS to the CRADA. During the CRADA period, BMS 
provided $16 million to the NIH to support the costs of the clinical 
trials conducted under the CRADA. Under the terms of the agreement, BMS 
also provided quantities of Taxol (paclitaxel) at no cost to the NIH. 
The ability of BMS to provide large quantities of material:

provided the needed boost to accelerate research and move toward the 
actual approval of a new cancer treatment drug. The 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. Adding this to the 
amount NIH received through royalties, the total value to the NIH would 
exceed $200 million.

D. Disclosure of Commercial Information:

Finally, as GAO is aware, federal CRADAs often contain trade secrets, 
commercial confidential information, or other privileged information 
that the Trade Secrets Act (18 U.S.C. 1905), the Federal Technology 
Transfer Act (15 U.S.C. 3710a(c)(7)(a)), and the Freedom of Information 
Act (5 U.S.C. 552(b)(4)) protect from public disclosure. Payments made 
to the NIH pursuant to CRADAs and licenses, as well as revenues from 
royalties arising from NIH inventions for intramural research 
(including CRADAs), cannot be disclosed without certain:

consents (e.g., from the CRADA or the license partner). For the 
purposes of this report, however, the CRADA partner, BMS, voluntarily 
agreed to permit disclosure of its commercial information so that the 
study could be completed and its results made publicly available. The 
NIH is grateful for BMS' willingness to release its commercial 
information.

[End of section]

Appendix V: GAO Contact and Staff Acknowledgments:

GAO Contact:

Martin T. Gahart, (202) 512-3596:

Acknowledgments:

Other key contributors to this report are Helen Desaulniers, Anne 
Dievler, Julian Klazkin, Carolyn Feis Korman, Carolina Morgan, and 
Roseanne Price.

FOOTNOTES

[1] Paclitaxel is the name of the generic equivalent of Taxol. The drug 
was known as taxol from its discovery in the 1960s until 1992, when BMS 
trademarked the name Taxol. At that time, BMS objected to researchers 
using taxol as the generic name, and so it was changed to paclitaxel. 
In this report, we use the name Taxol to refer to the brand-name drug 
sold by BMS, and we use paclitaxel to refer to the drug in other 
contexts. 

[2] BMS voluntarily agreed to the disclosure of its commercial 
information in the CRADAs and the license agreement so that our study 
could be completed and the results of our review could be made publicly 
available. 

[3] Throughout the report, dollars are reported as actual dollars, not 
adjusted for inflation.

[4] Pub. L. No. 96-480, 94 Stat 2311. 

[5] Pub. L. No. 96-517, § 6(a), 94 Stat. 3019.

[6] Pub. L. No. 99-502, 100 Stat. 1785.

[7] OTT also manages the patent and licensing activities for FDA and is 
responsible for the central development and implementation of 
technology transfer policies for NIH, FDA, the Centers for Disease 
Control and Prevention, and the Agency for Healthcare Research and 
Quality.

[8] Phase 1 studies of an investigational new drug for cancer are 
generally conducted in a small group of cancer patients to test for 
safety; phase 2 studies are generally conducted to test for safety and 
effectiveness in several hundred patients who have the condition under 
investigation; and phase 3 studies, which are performed after 
preliminary evidence suggesting effectiveness has been obtained in 
phase 2 trials, may include several hundred to several thousand people.

[9] 21 U.S.C. § 355(b)(1)(D) (2000).

[10] See 15 U.S.C. § 3710a(c)(7); 18 U.S.C. § 1905 (2000). See Public 
Citizen v. NIH, 209 F. Supp. 2d 37 (D.D.C. 2002), see also, 5 U.S.C. § 
552(b)(4) (2000), which exempts trade secrets, and commercial and 
financial information that is privileged or confidential, from public 
disclosure. 

[11] 54 Fed. Reg. 31733 (1989).

[12] Pub. L. No. 98-417, 98 Stat. 1585. 

[13] 21 U.S.C. § 355(c)(3)(D)(ii) (2000). See H.R.Rep. No. 98-857, pt. 
1, at 29 (1984), reprinted in 1984 U.S.C.C.A.N. 2647, 2647-48, 2662.

[14] 21 U.S.C. § 355(j)(5)(B)(iii) (2000). In theory, a company could 
choose to waive its right to marketing exclusivity. In the case of 
Taxol, NIH and BMS could have agreed to such a waiver during CRADA or 
licensing negotiations, but we are not aware of such discussions.

[15] BMS officials told us that the number of patients in the five NCI 
trials and the one BMS trial were very similar (186 and 159 patients, 
respectively).

[16] In response to the demand for Pacific yew bark, the Pacific Yew 
Act was enacted in 1992. The purposes of the Pacific Yew Act are to (1) 
provide for the efficient collection and utilization of those parts of 
the Pacific yew that can be used in the manufacture of paclitaxel for 
the treatment of cancer, (2) provide for the sale of Pacific yew for 
the commercial production and sale of paclitaxel at a reasonable cost 
to cancer patients, 
(3) ensure the long-term conservation of the Pacific yew, and (4) 
prevent the wasting of Pacific yew resources while successful and 
affordable alternative methods of manufacturing paclitaxel are being 
developed. Pub. L. No. 102-335 § 2(b), 106 Stat. 859-860.

[17] BMS officials declined to disclose the amount of the Taxol-related 
royalties BMS paid to FSU. However, we estimate that FSU received a 
royalty rate of approximately 4.2 percent of BMS's total worldwide 
sales of Taxol. For example, FSU's Office of Technology Transfer 
website reported that FSU received $67 million in royalties in 2000 and 
an FSU official told us that 98 percent of those royalties were from 
the license with BMS (www.techtransfer.fsu.edu/tts.html, downloaded 
June 3, 2003). This represents about 4.2 percent of Taxol's total 
worldwide sales in calendar year 2000. 

[18] NIH officials told us that NIH could not estimate its paclitaxel-
related expenditures for years earlier than 1977.

[19] FSS prices represent the prices at which some federal programs can 
purchase Taxol. NIH estimated that the paclitaxel supplied by BMS had a 
value of $151 million based on average wholesale prices, which are 
generally higher than FSS prices. 

[20] From 1996 through 2002, NIH's total royalty income from all its 
licensed inventions was $296 million. 

[21] NIH distributes royalty income in accordance with federal law and 
NIH policy. The inventors' share of royalties varied from year to year, 
based on BMS's sales per year. The income remaining after the 
inventors' share went to NCI. 

[22] A recent analysis estimated that the average out-of-pocket cost of 
developing a new drug was $543 million (in 2000 dollars). See J.A. 
DiMasi, R.W. Hansen, and H.G. Grabowski, "The Price of Innovation: New 
Estimates of Drug Development Costs," Journal of Health Economics, vol. 
22 (2003).

[23] Shortly after introducing the policy of "reasonable pricing," 
industry objected, considering it a form of price control, and many 
companies withdrew from further interaction with NIH. According to NIH, 
this ultimately created a barrier to expanded research relationships. 
The policy was revoked by NIH in 1995.

[24] HHS-OIG, Technology Transfer and the Public Interest: Cooperative 
Research and Development Agreements at NIH, OEI-01-92-01100 
(Washington, D.C.: November 1993).

[25] Federal agencies that directly procure pharmaceuticals have access 
to the FSS. Medicare does not purchase cancer drugs directly, but 
instead pays providers for cancer drugs that they have purchased. FSS 
prices are negotiated and are based on the actual best prices 
manufacturers charge some of their customers. Manufacturers must also 
sell brand-name drugs listed on the FSS to four federal drug 
purchasers--the Department of Veterans Affairs, the Department of 
Defense, the Public Health Service, and the Coast Guard--at a price at 
least 24 percent lower than the nonfederal average manufacturer price, 
a ceiling price that is lower than the FSS price for many drugs. 
Medicare payments are determined by the average wholesale price (AWP), 
a number reported by manufacturers. AWP often considerably exceeds the 
price a manufacturer actually receives for a drug. See U.S. General 
Accounting Office, Medicare: Payments for Covered Outpatient Drugs 
Exceed Providers' Costs, GAO-01-1118 (Washington, D.C.: Sept. 21, 
2001). 

[26] For this analysis, we examined the FSS and Medicare prices for 
Taxol and 12 other drugs for the treatment of cancer that were 
identified as among the top 35 drugs for Medicare Part B spending in 
2001 and 2002 by the Centers for Medicare and Medicaid Services. These 
prices reflect solely drug procurement prices; they do not include any 
payments for administering the drugs.

[27] In its comments on a draft of this report, NIH stated that it 
could not patent paclitaxel because the relevant information about the 
compound was already in the public domain.

[28] 15 U.S.C. § 3710a(b)(1) (2000). 

[29] Public Citizen v. NIH, at 54.

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