Taxpayers End Up Funding Drug Companies

W A S H I N G T O N, June 7 -- — A new report shows taxpayers often foot the bill to help develop new drugs, but it's private companies that reap the lion's share of profits.

In one case, the federal government spent $484 million developing the cancer drug Taxol — derived from the bark of Pacific yew trees — and it was marketed under an agreement with Bristol-Myers Squibb starting in 1993. The medical community called it a promising new drug in the fight against ovarian and breast cancer.

Since then, Bristol-Myers Squibb has sold $9 billion worth of Taxol worldwide, according the the General Accounting Office report released today.

The National Institutes of Health have received just $35 million in royalties from Bristol-Myers, however.

Bristol did not discover the drug. The federal government did — with taxpayer dollars — and then negotiated a licensing agreement with the pharmaceutical giant.

"The federal government repeatedly dropped the ball," said Sen. Ron Wyden, D-Ore. "Or they didn't realize they had the ball when it came to protecting the public's interest in Taxol."

Taxpayers Foot the Bill

So, taxpayers footed part of the original bill and now those who use Taxol are paying a second time.

The Medicare program alone paid nearly $700 million over a five-year period, to buy a drug the government helped develop.

"I think this system is dysfunctional," said Wyden, who sought the investigation. "How many times should the taxpayer pay again and again?"

NIH argue its mandate is public health — not recouping every dollar it spends. And the agency said that without Bristol-Myers to support large clinical trials, Taxol never would have reached cancer patients.

"We need each other," said Mark L. Rohrbaugh, the director of the Office of Technology Transfer (OTT) at NIH. OTT oversees the patenting and licensing of NIH inventions and helps develop technology transfer policy at NIH and the Department of Health and Human Services.

"They [Bristol-Meyers Squibb] contributed a lot in funds," Rohrbaugh said. "We couldn't do it — neither one of us could do it alone. They contributed a lot of funds, lot of their effort; we did too."

The Institutes' defenders also say that when NIH negotiates a royalty with a pharmaceutical, it never knows which drug will fail and which will be a success. It is a risk for each side.

Taxol has succeeded in treating cancer patients beyond anyone's expectations. But the definition of success may be questioned in terms of the taxpayers' investment.