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Academia (vs. Industry)

The NIH, Pfizer, and Senator Wyden

Senator Ron Wyden (D-Oregon) seems to be the latest champion of the “NIH discovers drugs and Pharma rips them off” viewpoint. Here’s a post from John LaMattina on Wyden’s recent letter to Francis Collins. The proximate cause of all this seems to be the Pfizer JAK3 inhibitor:

Tofacitinib (Xeljanz), approved last November by the U.S. Food and Drug Administration, is nearing the market as the first oral medication for the treatment of rheumatoid arthritis. Given that the research base provided by the National Institutes of Health (NIH) culminated in the approval of Xeljanz, citizens have the right to be concerned about the determination of its price and what return on investment they can expect. While it is correct that the expenses of drug discovery and preclinical and clinical development were fully undertaken by Pfizer, taxpayer-funded research was foundational to the development of Xeljanz.

I think that this is likely another case where people don’t quite realize the steepness of the climb between “X looks like a great disease target” and “We now have an FDA-approved drug targeting X”. Here’s more from Wyden’s letter:

Developing drugs in America remains a challenging business, and NIH plays a critically important role by doing research that might not otherwise get done by the private sector. My bottom line: When taxpayer-funded research is commercialized, the public deserves a real return on its investment. With the price of Xeljanz estimated at about $25,000 a year and annual sales projected by some industry experts as high as $2.5 billion, it is important to consider whether the public investment has assured accessibility and affordability.

This is going to come across as nastier than I intend it to, but my first response is that the taxpayer’s return on this was that they got a new drug where there wasn’t one before. And via the NIH-funded discoveries, the taxpayers stimulated Pfizer (and many other companies) to spend huge amounts of money and effort to turn the original discoveries in the JAK field into real therapies. I value knowledge greatly, but no human suffering whatsoever was relieved by the knowledge alone that JAK3 appeared to play a role in inflammation. What was there was the potential to affect the lives of patients, and that potential was realized by Pfizer spending its own money.
And not just Pfizer. Let’s not forget that the NIH entered into research agreements with many other companies, and that the list of JAK3-related drug discovery projects is a long one. And keep in mind that not all of them, by any means, have ever earned a nickel for the companies involved, and that many of them never will. As for Pfizer, Xeljanz has been on the market for less than six months, so it’s too early to say how the drug will do. But it’s not a license to print money, and is in a large, extremely competitive market. And should it run into trouble (which I certainly hope doesn’t happen), I doubt if Senator Wyden will be writing letters seeking to share some of the expenses.

34 comments on “The NIH, Pfizer, and Senator Wyden”

  1. Virgil says:

    Another way to look at the “return on investment” is put real numbers on it. I have no idea whose lab discovered this particular aspect of JAK3 signaling in disease, but let’s assume they had a couple of modular RO1s funding the work. So, the dollar amount of the “public investment” is about $3m (including indirect costs).
    Pfizer on the other hand (given that they’re anticipating sales of $2.5bn) probably spent at least that much bringing this to approval.
    So yeah, the public who fronted 0.1% of the total costs for this drug, should be the ones to decide how much it costs. Right!

  2. Anonymous says:

    “….the first oral medication for the treatment of rheumatoid arthritis”? Um, what about methotrexate, leflunomide and prednisone? They’re all used to treat RA and they’re all oral. Sure mtx and pred are used for all sorts of other things but they sure as hell are used to treat RA. Don’t want a JAK3 inhibitor, take one of them.

  3. Pies says:

    Return on investment for the public? Hmm… Let’s say it really does sell $2.5 bio a year, let’s say 1 billion of that is taxable profit, let’s say the tax rate is 10%, that’s 100 mio for the public. A great return on 1 or 3 mio or whatever NIH spent!!

  4. Anonymous says:

    And yet people complain that politicians are out of touch. The nerve!

  5. PharmaHeretic says:

    An increase in pharma profits will not translate into increased remuneration for people like you. Nor will it translate into more jobs for people like you or even more job security. Heck, they won’t even give you a better deal because you support them.
    So what are you defending anyway? Corporations, including those in the pharma sector, have broken their end of the social contract years ago. Just ask all your ex-colleagues who are either underemployed, unemployed or no longer employed in that sector.
    But keep on playing by the old rules- it is entertaining.

  6. Derek Lowe says:

    #5, PharmaHeretic:
    That’s an interesting way to look at it, but it’s not where I’m coming from. My long-term goal is not to press this point in hopes of getting paid more, or in hopes of increasing the employment of medicinal chemists, although I certainly have no problem with either of those.
    And I never thought I was signing any sort of social contract when I took a job in this business. I understood that they could pitch me out onto the sidewalk any time that they saw fit, for whatever reasons occurred to them. They still can.
    But I think that we still need a drug industry, and drug research, and that there are things that could help the long-term potential to discover new medicines, and things that could hurt it. And besides, I think that Wyden is, as far as I can understand his position, wrong.

  7. Anon says:

    It’s much easier to have an “I told you so attitude” after the fact and say “they” knew it was worth something. Why didn’t the NIH recognize that and pursue it? Probably because there are hundreds of such discoveries and the percentage of them that can lead to somewhere anytime soon is minimal.
    However on the other side of the coin this does seem like a case where public funded research brought pharma something they didn’t already have…I say “seem like” because for all I know there were labs that came across it and were scooped.
    I’m kind of on the fence about this.
    You could take a tech transfer office approach to this and say the academics that discovered it should have patented it so they and the tax payer could have a ROI (through funding more research). However it is likely patenting a target wouldn’t yield very much since it would expire by the time a drug was brought to market. In which case we are talking about patent reforms.
    I think “we” the taxpayers are just going to have take this in stride, getting a new drug albeit a very expensive drug that will pad someone else’s bonus.

  8. Hap says:

    As I far as I can tell, the point of basic research by the NIH, NSF, and others is to creat knowledge that can be integrated into revenue-generating inventions by other people. In this case, it worked – it probably generated jobs for someone, tax revenue where there wasn’t, and a drug for sick people where there wasn’t one. In addition, the knowledge that NIH funded probably led to more knowledge about what JAK3 does based on the activity and function of Xeljanz.
    The NIH does have march-in rights, but they’ve never been exercised, even in cases where they might have had a better argument to do so (TaxolXXXXXpaclitaxel), Just as with the patenting of discoveries by universities, I’m not sure how NIH taking money from commercialized discoveries would lead to more discoveries and their useful consequences than just letting companies follow the intellectual consequences of those discoveries unabated, even if those discoveries are unlikely to keep me employed.
    If discoveries are only leading to jobs for other countries, then the balance of benefits might change such that Congress might not want to fund NIH and NSF so much, or would have to decide whether the existence of new products that would not otherwise have existed (and whatever taxes and savings are gained by having them) is worth what they are spending on them.

  9. Electrochemist says:

    If we’re going to go that route, why not expect Apple and Google to ante-up for the “use” of NSF- and DARPA-sponsored research? Haven’t GM and Ford leveraged DoD-funded research?

  10. @countthebricks says:

    Excellent point #9 Electrochemist
    I would also add that the NIH is not in the business of producing marketable drugs. They discover knowledge and allow the people who are in the business of producing marketable drugs to do what they do best.

  11. Confused says:

    Don’t companies that profit from products based on public-funded findings (be it Google or Pfizer or Ford) pay taxes? (OK, at least in theory…) Don’t they employ lot’s of people who also pay taxes? Universities these days protect their intellectual property and the public sees a pay back from that as well (at least from public universities…)-by the Senators logic I see no reason why a private University should profit from publicly-funded research, especially not after charging a highly dubious 50-70% overhead on those public funds.

  12. bbooooooya says:

    “If we’re going to go that route, why not expect Apple and Google to ante-up for the “use” of NSF- and DARPA-sponsored research? Haven’t GM and Ford leveraged DoD-funded research?”
    H’uh? What are you talking about? Nothing the government does creates value, and it should be cut to the bones. Just ask the GOP and the Tea Bag Party Brain trust.

  13. NUchemist says:

    What a surprise, another Democrat hostile to business, trying to take credit for accomplishments of the private sector. In the eyes of left-wing politicians, good things only come from government programs.

  14. Vader says:

    “Nothing the government does creates value, and it should be cut to the bones. Just ask the GOP and the Tea Bag Party Brain trust.”
    Thank goodness you showed up to demolish that dangerous straw man.
    On the original topic: A Congressman is playing the ignorant demagogue? Dog bites man.

  15. milkshake says:

    As much as I dislike big pharma, the prices of new drugs are lesser problem than the ripoff that goes on in billing departments of not-for-profit medical centers:

  16. Anonymous academic says:

    @10: “I would also add that the NIH is not in the business of producing marketable drugs.”
    And a good thing too – the last thing the NIH needs right now is Congress asking why they spent hundreds of millions of dollars developing a drug candidate that failed in Phase III. You don’t need to work in Big Pharma to realize that most of the risks are in fact already privatized. (And I have yet to meet a single NIH grant recipient who thinks it should work any other way!)
    @14: “A Congressman is playing the ignorant demagogue?”
    Sadly, when he’s not talking about pharmaceutical R&D Wyden is one of the few senators who actually does his job, i.e. asking difficult questions about some of the administration’s creepier national security policies. I wish he’d just stick to that.

  17. bad wolf says:

    A lot of this seems like confusion with entertainment IP, where the person involved with some initial idea in a book/movie/whatever takes a lion’s share, while the technicians bringing a project to ‘life’ get little money and less recognition.
    From my understanding of the economics involved the public gets ROI on taxes etc. from the companies using the research. Sure, I’d like some more direct way to couple input/output to see if we’re really getting what our investment’s worth, but how? Straight taxing pharma companies to support NIH seems like it would be a loser long-term. Maybe the health of the industry overall could be used to gauge the need for more/less investment in basic research: is it working or not?

  18. cynic says:

    To sum the recurring theme I see on this blog:
    “The government does not create drugs, it only creates fundamental knowledge. Drug companies create drugs, and should be entitled to control that intellectual property for profit as they see fit.”
    To me, this seems to be extremely similar to the theme: “The government does not create research publications, it only creates fundamental knowledge. Publishing houses create research publications and should be entitled to control that intellectual property for profit as they see fit.”
    But on the occasions when that topic has come up around here, most of the commenters appear to take the opposing point of view. I think an external observer would view this as clearly inconsistent, and attribute the inconsistency to the selfish fact that many of the commenters are employees of drug companies rather than publishing houses. I’d be interested in reading some comments (or maybe a post?) on this postulated inconsistency.

  19. Anonymous says:

    There is a simple solution to this fantasy problem. Introduce a tax on new drugs to cover world-wide basic biology research costs and competitor company costs incurred in generating the science exploited for the invention of the drug. Then tack on the capitalization charges for the cost of money over decades. Once that dollar amount is agreed upon, the tax is added to the drug price for the patients and other payers to cover. The money collected is then divvied up and paid out to all those who provided the founding science for the drug including for me-too work and new methodologies. Those that benefit could be foreign governments, other pharmaceutical companies around the world and world-wide academic institutions as well as NIH. To each would go; a sum equal to their contributions. Of course payers might object to the prices of drugs going into the stratosphere, but the true costs of inventing drugs would become instantly transparent. All contributors to the invention of new drug would be fairly and appropriately rewarded for playing their part in this new wonder drug. Right now drug companies just cover their own costs of successes and failures in these type cost calculations. Maybe Wyden is right and everyone who plays a part should be rewarded.

  20. Dan Quayle says:

    My sole purpose as Veep was “Technology Transfer” which is a euphemism for pillage the Commons for the greatest corporate profit. My partners in Big Pharma especially BMS, really appreciated turning public research into a private cash cow. Turning naturally-occurring Taxol into intellectual property w licensing and huge cost per dose, as an example, made me MUCH richer. Sorry if you got nuthin sucka…

  21. Dan Quayle says:

    My sole purpose as Veep was “Technology Transfer” which is a euphemism for pillage the Commons for the greatest corporate profit. My partners in Big Pharma especially BMS, really appreciated turning public research into a private cash cow. Turning naturally-occurring Taxol into intellectual property w licensing and huge cost per dose, as an example, made me MUCH richer. Sorry if you got nuthin sucka…

  22. bad wolf says:

    Wow, making Quayle jokes in 2013. Making them 3 times? Even better.

  23. Toad says:

    @17 Cynic
    Please be aware that “Publishing houses create research publications” is NOT accurate. I am in the middle of submitting a paper to an ACS journal. The co-authors and I have written the text, drawn the structures and schemes, written the abstract and supplemental information, and formatted the paper to journal specifications. Our peers in science will review, edit, comment and make suggestions and rate the value to science and the particular journal. And we will make the corrections. What exactly is the publisher creating?
    The publisher indeed serves a purpose, primarily as a conduit for the paper to a wide audience, and for standardization. However, I don’t think it is worth what they charge the readers (including institutions). Others can do what they do, as PLOS and others have shown.
    I just think there should be other options. eBay and PayPal take their cut if you want to sell something, but there are other viable options to the community as well, like garage sale, ads, craigslist, etc.
    Apologies to the other readers for being off the post topic, but your comparison is flawed.

  24. Dr. Z says:

    The senator is a Democrat = Comunist. Why is he reacting like this? Who is John Galt? 😉

  25. Aziridine says:

    Really I would like to see inside the drug companies and figure out if they really need to charge as much as they do. I’m not sure what earning reports can tell us about it, I’m no expert.
    But drug pricing has nothing to do with the costs of making drugs. Its about what the market will bear…
    Regardless of the how profitable the drug companies are, if the NIH or anyone else wants to see the profit from this drug, I feel that they should shoulder the risks and costs of development.
    I think if the Senator wants drug prices to be lower, he should focus on making sure that the system favors a competitive drug market.

  26. Pinkie says:

    Wow apparently even the mention of a politician brings out the classic arguments. We have democrats are communists, and why didn’t you sign the social contract

  27. Mike c says:

    #18 Cynic: when universities invent active pharmaceutical ingredients they patent, license, sue thebejeezus out of companies, just like the big pharmas. But most of the drugs are not invented by universities, 20% in the best years. For universities to get a bigger piece of the pie we’d have to allow them to patent discoveries about natural systems (as opposed to inventions), which is generally considered a bad idea.

  28. Stubbie says:

    Saying that the NIH deserves a cut on the JAK3 inhibitor is like saying that Euclid deserves a cut on all vehicles with wheels, because, you know, those wheels use circles.

  29. Anonymous Coward says:

    17: There’s a significant difference in the apportionment of money and responsibility needed to go from research to publication and from research to drug.
    To go to a publication, the authors have to organize their work. The work was likely paid for by a granter, and the results therein were mainly dependent on the skills and intelligence of the people performing the work, or at least dependent on them recognizing their position in the right place and the right time. Editors (both paid by the journal and paid by other employers or granters) have to see if it’s OK for their journal and send it to reviewers who return (hopefully) useful input. Once the input comes back, either the paper goes elsewhere, is edited by the author for publication in that journal, or is accepted. The journal then has to edit the paper further, format it (if the authors haven’t already, which is unlikely) and has to have the software, servers, and data storage facilities to hold the paper and allow access by others to it.
    Some of these steps (review, academic editors’ upkeep) are paid for by others. At the high end, a large grant might generate five to ten (good) papers, at probably $100-200K apiece, and so the ratio of the cost of a publication to the costs of the research that created it is &lt&lt 1 (at most, 0.1 or so). It doesn’t mean that publishers’ work is negligible, or that they shouldn’t be paid for their work, but the primacy of author and granter input into the published output complicates what is in other cases (such as music and works of fiction) the “I write, you pay me and publish work and make money” model. In addition, granting agencies fund research to generate knowledge to be used by everyone so that other useful things can be achieved, businesses started, jobs created, etc., and journal costs may constitute a significant barrier to that purpose.
    On the other hand, to take research to a drug, you’ve got to see if the research works (that you have a real target), make drugs (compounds that both inhibit the target and can behave like drugs in living things), test them in lots of animals, and then in some people for safety, some more for activity, and a lot more for efficacy, and it has to do well in all of these stages (better than other drugs for the same indication), which most don’t. You’ve also got to make it stably, distribute it, and not have it hurt the general population (phase IV/postmarketing surveillance). All of the costs for these activities dwarf the cost of the original research (NIH’s total budget is probably something like 4 times Pfizer’s R+D budget), and haven’t been systematized (so you can’t rely on input from one to do another) so that costs by one company have to be respent by others. In that case, the drug companies spend far more to find the drug than the original researchers did to find the phenomenon or even a lead compound, and have a far higher standard of correctness in their work to make their work remunerative.
    There is probably a contribution of people not wanting to pay for others’ work but wanting to be paid for their own, but for the most part the analogy between journals and drugs is fatally flawed because the proportions of inputs from others and from those who actually get paid for the work differ drastically.

  30. Former Pfizerite says:

    I think everyone is missing the underlying point of Senator Wyden’s complaint. Pfizer is pricing Xeljanz at $25K/year which is a whopping 7% discount to current biological RA therapies. A 7% discount for a twice daily dose of 5mg of small molecule drug with a structure that any competent organic chemistry grad student could synthesize in their sleep. There simply is no justification for the $25K/year pricing besides being on par with the price that insurance companies & Medicare have been willing to pay for existing biologics.
    Perhaps the “NIH original funding” card is a desperate bid to raise awareness and create some kind of pricing relief, but it’s about the only card that Senator Wyden can play.

  31. NMH says:

    I would be all for pharma pricing the drugs at what they want to as long as all of the major health care providers including medicare could negotiate with the drug makers for prices. That would bring a competitive supply-demand element to drug pricing, which is missing right now in the US.
    Its really up to Phara high echelons to make it a safe place to work for R and D scientists. Managers with a social conciousness are needed.

  32. johnnyboy says:

    @31: I think it’s you who are missing the point. Pricing of a drug never has remotely anything to do with how easy or hard it is to synthesize the molecule. Cost of production is a tiny drop in the bucket of the cost of commercialization. The main, and probably the only, factor in determining a drug’s price is what the market will bear (ie. the cost of competing drugs).
    As far as ‘pricing relief’, the US government deliberately threw away the only means it had for it when it passed Bush’s medicare bill, which forbids medicare administration to do any bargaining with drug companies. Every other western country government has the means to do so, and actively negotiates drug pricing with pharma, which is why drugs are cheaper everywhere else than the US. Don’t blame big pharma for high US drug prices, blame your own government.

  33. johnnyboy says:

    Oh and I forgot: Wyden voted yes on Bush’s medicare bill, and was actually determinant in the passing of the bill.

  34. FIerce says:

    If you really want to see the difference between academic research and real life drug research, just toggle between “Fierce Biotech” and “Fierce Biotech Research”. The former is a minefield of failed studies, bankrupt companies or regulatory reviews and 483’s that shut the place down. The latter reads like “one injection cured the mouse of all forms of cancer” (literally), or alzheimers and RA. Further studies will be required before it can be a drug. Yeah right, 5 years later, you too can be a drama story on the Fierce pages…

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