Bayh-Dole and the Academia-Industrial Complex

This post was written by Maggie Mahar and Niko Karvounis

In 1980 Ronald Reagan claimed the presidency and America headed in a new, sharply more conservative direction.  It is no accident that this also was the year that “the corporatization of health care” in America began in earnest. This was the phrase that Paul Starr would use in his Pulitzer-prize-winning The Social Transformation of American Medicine to describe a revolution that would turn U.S. healthcare into an enormous for-profit business.

Thanks to changes in tax laws, for-profit HMOs would begin to replace not-for-profit  HMOs, and for-profit hospitals would begin to flourish. By 1986 for-profits had captured 14 percent of the nation’s acute-care hospital market. In this brave new world, more and more hospitals would be run, not physicians but by businessmen. After all, as Fortune magazine had declared some years earlier: “the management of medical care was too important to be left to doctors.”  Some physicians began to see themselves as entrepreneurs.  “Those who talked about ‘health care planning” in the 1970s now talk about “health care marketing,” Starr wrote in 1982. “Instead of public planning, there will be corporate planning.” And the goal driving that planning, Starr suggested, would no longer be better health, but rather “the rate of return on investments.”

Against that backdrop, in 1980 the Bayh-Dole Act was passed, and the face of medical research in America was forever altered.  The bill would bring academic institutions into the commercial world in a way that, at the time, seemed to ensure medical progress. Nature magazine offers a concise overview of the legislation, explaining that it “shifted the incentive structure that governed research and [the] development  . . . of federally funded [medical] inventions by allowing institutions to own inventions resulting from federally sponsored research and to exclusively license those inventions.” In other words, after Bayh-Dole, a university research team that came up with a drug could patent it and sell it to businesses.

This may seem hard to imagine today, but before Bayh-Dole, there was no such collaboration between those who invented a drug and for-profit companies.  Federally-funded research was considered a public good, owned by everybody and nobody. If, say, Doctor A created a breakthrough cancer drug at Harvard,  Doctor B at Stanford had free reign to experiment  with it as needed to improve it—as did other academics. There were no significant legal hurdles to open, ongoing collaboration and little profit attached to research.

Bayh-Dole changed all this, by granting academic researchers who created new medications proprietary rights to their breakthroughs.  At the time,  the idea was that granting intellectual property rights to universities would promote innovation (1) by protecting inventors, thus giving them the security of knowing that if they spent time and money on a project, they would reap the financial rewards (2) spurring competition by opening the possibility of making a profit on your invention; and (3) marrying academia and industry so that industry’s infrastructure could be used to more efficiently distribute new drugs to patients and providers. 

What the legislators did not entirely understand is that the best research scientists in academia work as hard as they can whether or not there is hope of personal profit. They compete, not for money, but for fame within their field —and the enormous personal satisfaction of knowing that you have made a lasting contribution to medicine. Dangling $100,000 in front of them may well get their attention, but it won’t make them more creative or more industrious—though it may make them set their own best ideas aside to do whatever the person with the $100,000 wants them to do.   

Nevertheless, at the time, “technology transfer,” i.e. exploiting the practical and commercial applications of scientific research in the commercial world, made sense: structure incentives so that we see more inventions move from research to practical applications for patients. 

But Bayh-Dole has had many unforeseen consequences that, today, raise some serious concerns about the future of medical innovation in the U.S.

For one, the pipeline from academia to industry has turned out to be a two-way street. Corporations aren’t just buying inventions once they’re created; they’re actually ordering up innovations before they’re developed by influencing research agendas. Business is telling academia what it wants scientists to work on: products that can be easily invented and easily sold, in volume.

Consider the case of Shiseido, a Japanese cosmetic firm, and Harvard’s Massachusetts General Hospital. Since 1989, Shiseido has given Mass General almost $200 million in order to secure first rights to discoveries by hospital dermatologists. The Shiseido/Harvard deal also included the formation of a joint company, the Cutaneous Biology Research Center, dedicated to dermatological research.

One cannot help but pause to wonder if Harvard, with all of its wealth (both in terms of dollars, and in human capital), might not fund biological research that is pointed  in a more useful direction. These days dermatology is without doubt, a profit center: baby-boomers want to look younger and better. But they face problems more serious than “barnacles of age”: Alzheimers, for instance, or acute macular degeneration, which is expected to become the leading cause of blindness among boomers.   

Nevertheless, Harvard took the $200 million and now must focus a considerable share of its energy and resources on dermatology. Without a shred of irony Shiseido’s website proudly touts the Biology Research Center as “an industrial-academic complex.”

This phrase, “industrial-academic complex"—or, as most people put it, the academia-industrial complex—is the perfect encapsulation of university and business links in a post-Bayh-Dole world. In the example above, it’s not a question of transferring technology, it’s a question of institutional collusion. In fact, it’s not just technology that’s being transferred to drug companies—it’s the entire research process, including the power to decide where to focus resources.

The Shiseido/Harvard example is by no means a rare case. Many of the nation’s top universities have close partnerships with drug companies. In 1998, pharmaceutical giant Novartis cut an unprecedented—and much criticized—deal with the University of California at Berkley. The company committed $25 million over five years to Berkley’s Department of Plant and Microbial Biology to support research in agricultural genomics. In return, states a ’98 Berkley press release, “Novartis scientists will work closely with UC Berkeley researchers, and the company will receive first rights to negotiate for [rights to] roughly 30-40 percent of the discoveries made in the department.” This proportion corresponds to the share of “the department's total research budget provided by Novartis, and will vary from year to year.”

Yes, you read that correctly. At one point, a multinational drug company underwrote forty percent of the budget for an entire university department at a top-flight institution. What happens to academic freedom when a department is so indebted to one company? What happens to a research scientist in that department who has made what looks like a breakthrough that is heading in a different, long-term direction? 

Novartis, like other major pharmaceutical companies, is more interested in short-term gains than long-term risks. Its shareholders want to see earnings growth—year after year. Does this mean that the next Jonas Salk will be told that he should get with the Novartis program—or forget about tenure?

Here again it’s clear that drug companies aren’t just waiting for breakthroughs to emerge. Rather, they’re trying to co-opt research agendas to direct them toward fields in which they have a commercial interest. (Novartis has an agribusiness wing called the Novartis Discovery Institute).

Sometimes the industry bias in guiding research agendas is simply stunning. In October 2007, Novartis struck again, this time brokering a $65 million dollar grant to MIT. The grant funds a partnership with the company to research new techniques for making drug manufacturing quicker and cheaper. It goes without saying that a more efficient, cost-effective drug manufacturing process would be a boon, first and foremost, for drug companies. And in true Bayh-Dole fashion, MIT and Novartis will jointly share the rights to any research they develop together –and both can generate revenue by licensing technology to other companies.

One important component of the Novartis/MIT deal is that academic and corporate researchers will regularly work side-by-side on common projects. This sort of cross-sector, on-the-ground collaboration is an increasingly important component of the academia-industrial complex. Earlier this year, Washington University in St. Louis announced a $25 million partnership with Pfizer to study immuno-inflammatory disorders such as arthritis and asthma. A university press release notes that this coupling is noteworthy because “[in] previous paradigms [of academia-industry collaboration] pharmaceutical companies have provided funding to academic institutions for research projects primarily conceived and conducted by university researchers. [But this] new model stresses equality in intellectual input, commitment and execution by both parties…” Now not only are drug companies funding self-serving research agendas and pre-paying for licensing rights; they’re also staffing the research teams. They are taking over medical research.

Such an intimate union between universities and drug companies raises concerns. The most obvious problem is basic conflict of interest: when a university gets millions of dollars from a drug company, it becomes obligated to its benefactor.  As Marcia Angell, a senior lecturer at Harvard Medical School, put it in a 2000 NEJM editorial, “close and remunerative collaboration with a company naturally creates goodwill on the part of researchers and the hope that the largesse will continue. This attitude can subtly influence scientific judgment in ways that may be difficult to discern.” Research has shown “that researchers with ties to drug companies are indeed more likely to report results that are favorable to the products of those companies than researchers without such ties.”

Unfortunately, today drug industry ties are endemic in medical academia, and not just at the institutional level. An October 2007 JAMA survey found that out of 459 department chairs at medical schools, 60 percent had some form of personal relationship with industry. These relationships included serving as a consultant (27%), as a member of a scientific advisory board (27%), as a paid speaker (14%), as an officer (7%), as a founder (9%), or as  member of the board of directors (11%). The same survey found that two-thirds of medical school departments had relationships with industry.

And just as drug companies are intervening in the research process earlier and earlier, they’re also reaching medical researchers in their formative years. A 2005 JAMA study found that the average exposure of a given third-year medical student to the drug industry was one gift or sponsored activity per week. Of 826 surveyed medical students, 93.2 percent were asked or required by a physician to attend at least one sponsored lunch over the course of the school year.

This is all troubling and it raises an important question. When universities are married to industry from the level of individual med students all the way up to the institution’s top scientists, who is left to engage in medical research that’s not tied to industry?

Think about it: if the medical research agenda is solely contoured to commercial interests, then we miss out on a lot of high-quality science. In 2001, Eric G. Campbell, a researcher at Massachusetts General Hospital's Institute for Health Policy, told The Boston Globe that “basic science [directed by curiosity and creativity, rather than practicality] is what fuels the next generation of clinical discoveries. And if we start focusing just on research that has an immediate commercial application, at some point in the future we're going to get a slowdown in clinical discoveries.'' When everyone is focused on synthesizing acne pills and streamlining drug manufacturing, no one is  left to patiently ponder our most difficult medical problems.

This isn’t just an abstract worry—data supports the notion that the commercialization of medical research has gone hand in hand with a slow-down in meaningful innovation. A 2006 GAO study found that the pharmaceutical industry increased its R & D budget, which often includes academic partnerships, from $16 billion in 1993 to $40 billion  in 2004 (after inflation). This was a 147 percent increase. Yet over this same period, the number of drugs classified as variations of existing medications (a.k.a. “me too drugs) submitted to the FDA increased at a rate of 38 percent.  Meanwhile, the number of brand-new drugs submitted to the FDA increased by just 7 percent over the eleven years in question. 

This is hardly commensurate with the industry’s 147 percent boost in R & D funding.  It seems that industry was using the bulk of  its R&D money to develop variations on products that we already have—i.e. yet another allergy medication. (Companies also frequently label some of the money that they spent courting  and “educating” doctors as “R&D.”)

More profit and less innovation; this is hardly what Bayh-Dole promised. But this perverse dynamic is actually built into a system of research centered on owning intellectual property and turning a profit on it. GAO reports that “companies can easily obtain new patents by making minor changes to existing products regardless of whether the drugs offer significant therapeutic advances.” This creates the incentive is to do just enough to make something patentable—without having to risk the manpower and money needed to create a real breakthrough.   Thus we get “line extension” as “new products [are derived from] existing compounds by making small changes to existing products…”

Bayh-Dole was not Washington’s only gift to the pharmaceutical industry. In 1984, Congress passed the Hatch-Waxman Act which allowed “pharmaceutical companies to develop new uses for previously approved drugs that have no patent protection and receive an additional three years of ‘market exclusivity.”’ At this point, companies became so protected against risk that they had no reason to take a risk:  all they had to do was to  come up with a new application for an existing drug and they could extend their monopoly. Yet true innovation is all about risk-taking.

Thus “technology transfer” pulls universities into a loop of mediocrity because it encourages them to perform research on drug company terms, and focus on short-term applications that are, above all else, commercially viable.  To be sure, universities aren’t victims here: every year they pull in $2 billion for academic research centers through patent licensing agreements. In fact, universities like Harvard and MIT actually lobbied Congress in support of Bayh-Dole way back when. Nor are schools doing all they can to protect research integrity: only about one-third of universities have institutional conflict of interest policies regarding their research investments.

In a post-Bayh-Dole world, knowledge is patented, monopolized, and commoditized. As a result collaboration between Professor or A at Harvard  and  Professor B  at Stanford becomes much, much less likely—but collaboration between Professor A and Big Pharma becomes almost a sure thing. And the big drug companies don’t share research—they compete, spending millions while working on parallel proprietary projects.

In Money-Driven Medicine, Genie Kleinerman, chief of pediatrics at Houston’s M.D. Anderson  Cancer Center, recalls a time when she was doing work on two drugs made by different companies. “Together, they seemed to do a better job of targeting malignant cells of osteosarcoma, a bone cancer that occurs in children. In the lab, we had shown that you could combine the two agents. Scientifically, it was fine but now we needed the companies to do clinical trials. My lab work was being provided free, but in order to get approval from the FDA, they needed to invest in trials and collect the data.

“But we just couldn’t get them to do it,” she recalls, reliving the frustration. “The lawyers for the two companies couldn’t come up with on an agreement on who would own the rights to the combination and who would pay for what.” That was a number of years ago. “Today it would be the same situation—or probably worse. The pharmaceutical industry has become so protective of who owns the intellectual property you probably couldn’t even get them to sit down at the same table.”

If this trend continues, expect to see fewer independent researchers and a growing neglect of long-term, visionary medicine in favor of immediate commercial opportunities.

Yet there are signs that  individuals within America’s ivory towers are deciding to put some distance between themselves and industry: Just last month, the New York Times reported that “a number of prominent academic scientists have made a decision that was until recently all but unheard of. They decided to stop accepting payments from food, drug and medical device companies. No longer will they be paid for speaking at meetings or for sitting on advisory boards. They may still work with companies. It is important, they say, for knowledgeable scientists to help companies draw up and interpret studies. But the work will be pro bono.”

This, of course, is not the same as institutions establishing an arms-length relationship with industry. But it does show a growing concern about entanglements with for-profit-companies that could compromise scientists—and science.

The times are changing. It’s no longer 1980.

Comments

[Gregory D. Pawelski]

Maggie, your comment about "only if there is a major change in attitude at CMS...CMS is loathe to do anything that would upset the drug industry" sends chills down my spine. I know you are working on a posting about the nursing home industry, so I'll wait until then to comment much further.

But the "CMS loathing to do anything" has hit home this week, in regards to the latest Pennsylvania Department of Health inspection by surveyors at a Manor Care nursing home in Sinking Springs, Pennsylvania.

CMS contracts out the oversight of each nursing home to each state's health department. Numerous reports have shown how corrupt the oversight system is, especially during this Administration.

Stealth moves - like putting out the word that surveyors shouldn't cite anything they don't absolutely have to, cutting or under-funding oversight budgets, look at self-reported not non-audited data, etc. With The Carlye Group take-over of Manor Care, this just got worse. Look forward to your future report on nursing homes.

[maggie mahar]

Barry, Robert, Dr. Rick,

Thanks for your comments.

Barry I ageee that refusing to cover "me too" drugs would have a chilling effect on their production. But Medicare will do that only if there is a major change in attitude at CMS. Right now, CMS is loathe to do anything that would upset the drug industry . . .but that could change, expecially as it becomes apparent that Medicare is running out of money.

My only question would be: "was Nexium good for some patinets who for some reason couldn't tolerate the less expensive drug?"

Often some of these drugs are useful for a small group of people, and sometimes when insurance companies decide not to cover something they don't take this into account. That's why I'd rather see these decisions made by independent boards of physicians who have no financial interest one way or the other and can approve coverage for the small group that needs it.

You're right that the for-profit hospital share has remained stuck at 15 percent. They've run into a lot of problems in terms of corruption: lying to Medicare, lying to private insurers, lying to shareholders, lying to patients, FBI raids and federal indictments.

As I say in the book, I think it's very v,ery hard to make a profit in the hospital business--just as in the airline business. (Though there seems to be much less corruption in the airline business--they just go broke.)

The hospital business is unpredictable and its labor intensive. Moreover, if you try to downsize, patients die.

Spending on hospitals in general has gone up steeply in large part because the cost of hospital equipment, medical devices and the drugs you receive in hospitals have risen sharply. Those costs are all in your hospital bill, and some of the most expensive drugs (chemo for cancer in particular) are usually administered in hospitals rather than bought retail.

I'd estimate drugs and devices now equal about 15% to 16% of health care spending: 11% --the drugs you and I buy retail at a pharmacy--another 2% or so--the drugs administered in a hospital or doctors' office, and another 2% to 3%-- the cost of devices.
The device sector is growing more rapidly than the drug sector as the number and types of devices proliferate: stents, artifical joints, defribillators etc. etc..
Finallly, nurses' salaries have gone up significantly. They really needed to be raised; nursing had become an underpaid "women's professoin."

But even with the raises, there is a shortage of nurses. The work is too hard and the pressure too intense for the salaries that many hospitals pay. . . Many nurses would rather work in a less chaotic setting.
Finally, you write: "Second, the NIH is free to do all the basic, blue sky research that it can get funding for. If it makes some worthwhile discoveries, it can license them to the drug companies too and capture that revenue for itself (and taxpayers) to fund further research."

This is the way it should work but unforunately NIH licenses its research to drug-makers at much less than market value. (The Congressmen who write the laws that govern NIH take hefty contributions from drug-makers.) Then the drug-maker overcharges for the drug--and government (taxpayers) wind up paying for it.

AZT, the first drug that really worked to treat AIDs, is a famous example, It was developed by govt' scientists, then industry licensed it, and sold it for over $6,000. Often, Medicaid wound up paying the $6,000. .

Moreover, and this is incredible--NIH refuses to disclose how much it receives in these licensing agreements--presumably because it doesn't want to disclose that taxpayers are being cheated. Here's the background to the case:
" In July 2000, Public Citizen Health Research Group filed a Freedom of Information Act (FOIA) lawsuit against the NIH seeking royalty figures (including percentage of sale royalties) identifiable by company for each license the NIH Office of Technology Transfer executed from 1986-1998. Historically, NIH has taken the position that such information is protected from release under the confidential commercial/financial provisions of Exemption 4 of the FOIA.Opinion: On March 12, 2002, Judge Colleen Kollar-Kotelly, United States District Court Judge, granted NIH’s Motion for Summary Judgment and denied Public Citizen’s Motion for Summary Judgment. The Court concluded that the NIH appropriately withheld the royalty information pursuant to Exemptions 3 and 4 of the FOIA."

Robert-- I don't think either Bayh or Dole intended all of the consequences of Bayh-Dole; they weren't as far to the right on these matters as some in the Reagan administration. But you're right, Bayh-Dole was part of the overall push by the Reagan administration to privatize everything (just as Thatcher was doing in the U.K.)
I do remember when Bell Labs was a hotbed of creativity. . . It's interesting to hear how much the military now controls or directs research. This is the "military-industrial complex" that Eisenhower tried to warn us about . .
I wouldn't be surprised if the cure for cancer finally comes out of someplace like China, (or India.) As Gregory said earlier in this thread, the fact that. cancer reserachers don't share information with each other, but work in their own silos has greatly slowed progress.
The next war could be over intellectual property--or water.

Dr. Rick--thank you.

Gregory--I'm afraid we have become that callous.
But perhaps we've reached such an extreme that we're ready for a pendulum swing. One can only hope so.

[Gregory D. Pawelski]

Has the U.S. become entirely callous about the impact its ill-conceived policies are having on the rest of the world?

FDA Scraps Helsinki Declaration on Protecting Human Subjects

http://www.gooznews.com:80/archives/001052.html

[Barry Carol]

Several thoughts on this.

First, the percentage of hospital beds controlled by for profit hospitals has been stuck at about 15 percent for the last two decades at least. Yet, hospital costs (both inpatient and outpatient) are the fastest rising segment within healthcare even though 85% of the beds are owned and controlled by non-profit institutions and even though the number of beds has been declining for 25 years or more.

Second, the NIH is free to do all the basic, blue sky research that it can get funding for. If it makes some worthwhile discoveries, it can license them to the drug companies too and capture that revenue for itself (and taxpayers) to fund further research. Besides, drugs only account for about 13%-14% of healthcare costs, and 65% of all prescriptions are now generics, though they account for only about 16% of the dollars spent on drugs according to IMS Health.

Third, I think there is a simple intermediate to longer term solution to the drug industry’s focus on developing “me too” drugs. If comparative effectiveness research shows that they are not as cost-effective as older drugs already on the market (including generics), don’t cover them! Last year, UnitedHealth Group, for example, stopped paying for Nexium because it was deemed no more effective than the older and much cheaper Prilosec and its generic equivalent. Savings to employer clients: $150 million per year.

[robertdfeinman]

To complete the picture it would be useful to see the level of funding for university and other non-profit institutions by government agencies over time.

I'm guessing that this has declined in inflation adjusted terms and that many labs have been forced to go to drug companies for funding to make up for the lack. I also think that the results of the Bayh-Dole bill were not as unanticipated as might be believed. I think it was yet another part of the privatization of everything that has been the theme in the US for the past 40 years.

[robertdfeinman]

My professional field was physics, but there has been a similar dynamic. It's not the for-profits who are collaborating with universities (although that has happened too), but that federal funding is used to force research into avenues favored by the government. In practice this has meant areas of (potential) use to the military.

No funding, no research. No research, no money for graduate students. No graduate students and the professor doesn't get tenure. The schools also benefit monetarily since they keep 25-40% of the grant for "overhead".

Basic research has also vanished from the industrial sector. The big private labs (Bell Labs, Sarnoff, IBM, etc.) have either been gutted or shifted into applied work and product development. The blue laser (used in the new DVD players) was invented in Japan.

I keep saying that one of these days a "cure" for cancer will be discovered in, say, China and they will figure out that this gives them an economic advantage (lower health costs) and refuse to share it. The US already does this, in effect, when local firms price their offering out of the reach of poor countries. The biggest scandal was over the HIV drugs, but there are others.

Perhaps the next "war" will be over intellectual property and not oil.

[Dr. Rick Lippin]

This is indeed a great American tragedy which as you say shows some signs of turning around.But sadly many individual and institutional reputations may never recover.

Thank you so much-Maggie and Niko- for deconstucting it and presenting it so well.

Dr. Rick Lippin
Southampton,PA
http://medicalcrises.blogspot.com

[Dr, Incognito]

Congrats Maggie & Niko!
Dr. Incognito chose this post for his weekly RedScrubs winner on redscrubs.com's weekly wrap-up. Each week's winner receives a free set of red scrubs (no catch). Email me if you want them so I can send the info.

Sincerely,
Dr. Incognito

[Gregory D. Pawelski]

The Bayh-Dole Act, by turning over research from the government to big pharma, and the shifting from the institution-based, inpatient setting to community-based, ambulatory sites for treating the majority of the nation's cancer patients, has turned cancer treatment back a whole generation.

There was a major downside from a scientific standpoint. Scientists were limited in how they could discuss things with their colleagues until intellectual property was protected by a patent. They were concerned about publishing articles and presenting in public. It was a major obstacle in terms of the way scientists operated. Scientists did the science and the business types translated their findings.

And by giving individual institutions the ownership rights to intellectual property and new technologies developed on campus, profits had to be protected. Clinical trials had private industry enter into the equation. For-profit companies take over the venture, doling out payments along the way, paying the university royalties. The business side of academia had exemplified the commercialization of publicly-funded research.

We have produced an entire generation of investigators in clinical oncology who believe that the only valid form of clinical research is to perfrom well-designed, prospective randomized trials in which patients are randomized to receive one empiric drug combination versus another empiric drug combination.

Prospective, randomized, controlled clinical trials cost millions of dollars, but the most promising non-conventional drugs may be public domain, non-proprietary technologies, and therefore unpatentable. No company will invest that much money for something that is difficult to patent. This prevents serendipitous and fortuitous discovery.

[Lisa Lindell]

Wow. Thanks Maggie.