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NIH Drops ‘Reasonable Price’ Clause for Drug Company Collaboration

April 11, 1995 GMT

WASHINGTON (AP) _ The government will no longer make pharmaceutical companies agree to set ``reasonable″ prices for new drugs they develop from research agreements with the National Institutes of Health.

The NIH announced the elimination of the ``reasonable pricing″ clause Tuesday, saying it didn’t protect consumers but did deter the industry from collaborating with federal scientists.

``Eliminating the clause will promote research that can enhance the health of the American people,″ NIH Director Harold Varmus said.

But a lawmaker said the move could hurt consumers, and pledged to battle any price gouging of drugs that result from NIH collaborations.

``Certainly if drug and device companies see the government is asleep and try to take advantage of consumers, Congress can step back in,″ warned Rep. Ron Wyden, D-Ore., who had urged the NIH to strengthen the pricing clause. ``There’s a new burden of proof on the part of government and private sector partners to show that taxpayers and consumers get a fair shake.″

The drug industry spent last year lobbying hard for the move.

The clause was ``a significant stumbling block for ... biotechnology companies that must spend millions of dollars in private capital to commercialize NIH’s basic research to bring new drugs to patients,″ said Carl Feldbaum, president of the Biotechnology Industry Organization.

But consumer advocates argued that Americans pay twice for many drugs: first with taxes and then at the pharmacy.

For example, Taxol, the breast cancer drug discovered by NIH, costs 25 cents a milligram to make but sells for $4.87, the Taxpayer Assets Project told Congress last summer. Levamisole, into which the NIH poured $11 million, costs $6 a pill to treat colon cancer, but 6 cents a pill to deworm sheep, the group said.

The ``reasonable-price″ clause was enacted because of furor over AZT, the first AIDS drug to hit the market in 1987. Although developed by federal scientists, it cost patients $8,000 to $10,000 a year.

Since then, no drug has fallen under the very narrow type of collaborating agreement that would trigger the fair-pricing clause, Varmus said Tuesday. Yet the clause deterred many companies from collaborating with NIH at all for fear of losing profits, he said.

``NIH shares the concern ... about potential inaccessibility of such products due to cost,″ the agency said in a statement. But ``NIH’s primary programmatic mission ... is in biomedical research, not in product pricing.″