Thank you for the opportunity to testify today on proposals dealing with data exclusivity and funding of biomedical research.  My name is James Love.  I am the Director of the Consumer Project on Technology (CPT), which is a non-profit organization created by Ralph Nader.  CPT is engaged in a wide range of projects involving intellectual property and pharmaceutical drugs.  Much of this work is accessible through out home page on the Internet is http://www.cptech.org (no period).

CPT shares the view of Representative Henry Waxman that the proposal to tie a 10 year extension of market exclusivity to a 3 percent royalty for biomedical research is an outrageous and cynical proposal to exploit patients, under the color of addressing an important public health need.

Pharmaceutical drugs marketed in the United States benefit from several different forms of protection from competition.  A firm that invents a drug or a use for a drug can obtain a 20 year patent, not including patent extentions.  The U.S. Orphan Drug Act provides an even broader form of market exclusivity for a very large class pharmaceutical drugs.  After a series of amendments which liberalized the definition of an Orphan Drug, firms can now obtain seven years of market exclusivity when the client population for a drug is less than 200,000 patients for any single indication.  The subject of this hearing is the 1984 Waxman-Hatch act provision concerning the use of health registration data./1/

The current provisions regarding health registration data prevent a new entrant from relying upon the evidence already presented to the FDA to establish the whether a drug is safe and effective, for five years, without the permission of the "owner" of those research data.  After five years, a generic drug manufacturer can "rely upon" these data to support an application to market a generic version of a drug.  Of course, this is only important in those cases where the drug is not already protected by a patent or by the Orphan Drugs Act.

When we talk about drugs which are not protected by patent, we are often talking about drugs which were invented by the U.S. government, such as Taxol, an unpatented cancer drug invented by the National Institutes of Health(NIH)/2/.  When we talk about drugs not protected by the Orphan Drug Act, we are talking about drugs which have large client populations.

Many health care experts believe the current five years of market exclusivity for health registration data is excessive, and perhaps even unnecessary, given the opportunities for market protection which are available under patent and Orphan Drug laws.  However, if one assumes that unpatented drugs deserve special protections from competition, the current open ended protections are excessive.  The best evidence of this is the current situation with Taxol, the unpatented drug invented by the NIH, and marketed by Bristol-Myers Squibb (BMS).

From the very beginning, BMS was able to acquire Taxol in bulk from Hauser Chemical, the former NIH contractor, for $.25 per milligram.  Industry experts say that bulk Taxol can be prepared for human use for less than $.15 per milligram, for a total finished cost of less than $.4.  BMS says it sells Taxol in wholesale markets for $4.87 per milligram.  I am attaching a bill to an uninsured breast cancer patient.  The patient was asked for pay $2,324.70 for nine 30 mg vials of Taxol, or $8.61 per milligram.  The cost of the entire office visit, including $1,1171 for an injection of Carboplatin, another NIH funded cancer drug now sold by BMS, was $4,200.  Breast cancer patients are often expected to repeat these treatments every three weeks or so for 18 months or more, making the total cost of the treatment a great burden.

BMS's Taxol sales are expected to be about $ 1 billion this year, making the drug an enormous profit center for the company.

Following a 1991 CRADA between NIH and BMS, NIH agreed to give BMS exclusive rights to use NIH funded research on Taxol for commercial purposes.  The initial CRADA did not require BMS to provide the government with any royalties.  This agreement has been amended several times, and NIH has also licensed a number of Taxol related patents to BMS, including controversial patents on the doses used to treat cancer patients.  BMS hopes to use these additional NIH patents on recommended doses to argue that generic entrants will infringe on the BMS "use" patents for Taxol, triggering automatic delays in the introduction of generic versions of Taxol.

BMS's role in the events leading up to the FDA marketing approval for Taxol was quite modest, as reported in BMS's own histories of the development of Taxol.  For example, in an April 8, 1997 "Application for Exclusive License to NIH Taxol-Related Patent Portfolio," BMS describes its pre-NDA role as taking over the production and manufacture of Taxol used in the NIH sponsored clinical trials, and the collection of data for the NDA application.  BMS originally offered to provide NCI with 17 kilo's of Taxol for use in government sponsored clinical trials, and to investigate methods for harvesting and manufacturing Taxol.  The amount of money actually spent by BMS on Taxol prior to FDA marketing approval was very modest.  After the drug was approved for marketing, BMS has increased its investments in a variety of technologies which relate to the manufacture of the drug, which is a normal cost of businesses, and it supported a variety of clinical trials, either by providing NIH with Taxol for trials that would be "owned by" BMS, or by conducting its own trials.

In one case BMS rushed an application for to the FDA to qualify Taxol as an Orphan Drug, for treating Karposi's sarcoma, after BMS determined that another firm was about to seek marketing approval for its own version of Taxol, on the basis of its tests on Karposi sarcoma patients. As a consequence, BMS was able to use the Orphan Drug Act to block the introduction of a competitor's versions of Taxol, even though Taxol could not qualify as an Orphan Drug for breast cancer, the most common prescribed use for Taxol.

CPT recommends that Congress reexamine current 5 year period of health registration data exclusivity, to determine if a lesser level of protection is appropriate, given the consequences to consumers of high drug prices.  It is important to appreciate the fact that this is only an issue for drugs not protected by patent or by the Orphan Drug Act.  When drugs are not protected by patent, it is because the company does not own the rights to the discovery of the drug, or the key inventions relating to uses of the drug.  What is at stake is a "sweat of the brow" claim to protection from unfair competition.

Since exclusive rights to data can be an enormous barrier to entry, as evidenced by the Taxol case, CPT recommends congress introduce safeguards to protect consumers, such as a sunset provision after a drug grosses a target of gross sales, or a provision for compulsory licenses of the data, to protect consumers from monopoly power.  This is particularly appropriate given the fact that in most cases, unpatented drug discoveries were invented by the government, or the invention was funded by a government grant.

We are supportive of the suggestion that Congress impose R&D royalty obligations on pharmaceutical companies, in order to promote a higher level of biomedical research in the United States.  We have recommended this approach elsewhere.  However, there is no need to tie this proposal to a higher monopoly profits on unpatented pharmaceutical drugs.  The proposal for matching contributions for R&D has merit, because society benefits from a mix of public and private R&D investments.

 Since January, 1997, CPT has been involved in several disputes involving health registration data as a barrier to entry for pharmaceutical drugs.  Bristol-Myers Squibb is lobbying the United States government to take trade sanctions against South Africa, Canada, Australia, Argentina, the Netherlands and other countries which have approved generic versions of Taxol, the NIH developed cancer drug currently sold by Bristol-Myers Squibb.  The United States government is taking the position in International trade negotiations that Article 39.3 of the TRIPS agreement requires countries to provide 5 years of data exclusivity, such as is currently the case in the United States, under the Waxman-Hatch  Act.  The TRIPS language follows:
 

SECTION 7: PROTECTION OF
UNDISCLOSED INFORMATION

Article 39

1.    In the course of ensuring effective protection against unfair competition as provided in Article 10 bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3.

2.    Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices (See footnote 10) so long as such information:

    (a)    is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

    (b)    has commercial value because it is secret; and

    (c)    has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

3.    Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.

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1/. 21 U.S.C. Sec. 355(c)(3)(D)(ii) (1996)

2/. At the National Cancer Institute.