Following this discovery, the drug was developed  primarily through research funded by NIH, and then transferred to the  private sector and successfully commercialized by BMS. Public-Private Technology Transfer

The 1991 NIH-BMS CRADA was one of the first CRADAs to result in a  breakthrough drug. Specifically, the royalty payments can be used  to (1) reward employees of the laboratory, (2) further scientific exchange  among the laboratories of the agency, (3) educate and train employees of  the agency or laboratory, (4) support other activities that increase the  potential for transfer of the technology of the laboratories of the agency,  (5) pay expenses incidental to the administration and licensing of  intellectual property by the agency or laboratory, and (6) support scientific  research and development consistent with the research and development  missions and objectives of the laboratory. FDA’s approval of BMS’s NDA to market Taxol for the treatment of  ovarian cancer triggered a provision in federal law granting BMS 5 years of  marketing exclusivity for Taxol as a new chemical entity under the Drug  Price Competition and Patent Term Restoration Act of 1984. NIH-BMS Partnership Provided Research Results Critical to Developing Taxol’s Commercial Uses

The NIH-BMS collaboration provided BMS access to NIH research results  that were critical for BMS’s quick commercialization of Taxol. Prior to the signing of the  1991 CRADA, and during the first 2 years of the CRADA, NCI conducted  most of the clinical trials associated with paclitaxel. NIH Invested Heavily in Taxol-Related Research, but Federal Financial Benefits Have Been Limited

Although NIH estimates that it has invested heavily in research related to  paclitaxel, its financial benefits from the collaboration with BMS have not  been great in comparison to BMS’s revenue from the drug. For one portion of its investment in  Taxol, NIH estimates that its net cost for conducting clinical trials that  supported the development of Taxol through the 1991 CRADA was   $80 million—NIH estimates that it spent $96 million on the studies, and  this expense was offset by $16 million in financial support from BMS. We  estimate that the paclitaxel BMS supplied NIH through the CRADA had a  value of $92 million. In addition, NIH spent an additional $301 million on  paclitaxel-related research from 1998 through 2002, some of which  supported cancer research, bringing NIH’s total investment in paclitaxel- related research from 1977 to 2002 to $484 million. The federal government has been a major  payer for Taxol, primarily through Medicare. For example, Medicare  payments for Taxol totaled $687 million from 1994 through 1999. In 1996, when  BMS licensed from NIH three patents on methods for using Taxol in  cancer treatment, it negotiated its first and only license agreement with  NIH for Taxol, requiring BMS to pay royalties to NIH at a rate of 0.5  percent of its worldwide sales of Taxol. Worldwide Taxol sales totaled over $9 billion from 1993 through 2002. For example, BMS officials told us that the  company’s clinical trials had enrolled over 21,000 patients by 1997. The CRADA noted NIH’s concern that  “there be a reasonable relationship between the pricing of Taxol, the  public investment in Taxol research and development, and the health and  safety needs of the public.” BMS agreed in the 1991 CRADA that these  factors would be taken into account in establishing a fair market price. Several Factors Affected NIH’s Exercise of Its Broad Authority in Technology Transfer Activities Related to the Development of Taxol

Although NIH has broad authority under applicable statutes to negotiate  CRADAs and license agreements with outside partners, several factors  affected its exercise of that authority in the technology transfer activities  related to the development of Taxol. In the case of  Taxol, NIH’s ability to exercise its authority was limited because it did not  have a patent on paclitaxel and because its evaluation found that there  was a shortage of available, qualified alternative CRADA partners. With  regard to the license negotiations on the inventions resulting from the  CRADA, the setting of royalties was affected by the criteria that both NIH  and BMS used to help guide royalty negotiations. NIH’s goals in the technology transfer process emphasize public health  benefits over financial considerations. NIH made a  substantial investment in the development of Taxol. Agency and Bristol- Myers Squibb Company Comments and Our Evaluation

We provided a draft of this report to NIH and BMS for their review. In its  comments, NIH provided us with additional information about its  expenditures related to the 1991 NIH-BMS CRADA and BMS’s  contributions to NIH research under the CRADA, and also presented the  reasons that it did not patent paclitaxel. NIH begins to receive royalty payments from BMS.
Why GAO Did This Study

The transfer of technology from government-funded medical research laboratories to the private sector aims to have new pharmaceuticals brought to market more efficiently than would be possible for a federal agency acting alone. Much of the pharmaceutical-related technology transfer originates with research funded by the National Institutes of Health (NIH). GAO was asked to examine the legal and financial issues involved in technology transfers as illustrated by the research, development, and commercialization of Taxol. Taxol was developed through a cooperative research and development agreement (CRADA) between NIH and the Bristol-Meyers Squibb Company (BMS) and by 2001 had become the best-selling cancer drug in history. Specifically, GAO examined (1) how the technology transfer partnership affected the research and development of Taxol, (2) what NIH's financial investment was in Taxol-related research, and what the financial outcomes were of the technology transfer process related to Taxol, and (3) what factors influenced how NIH exercised its authority in Taxol-related technology transfer activities. GAO reviewed relevant materials and statutes governing technology transfer, reviewed the patent history of Taxol, interviewed NIH and BMS officials, and reviewed data on NIH's financial investment and drug pricing policies.

What GAO Found

The 1991 HIH-BMS CRADA was one of the first CRADAs to result in a major breakthrough drug. NIH's partnership with BMS provided the company with the research results that enabled Taxol to be commercialized quickly and made available as a treatment for cancer patients. Prior to the CRADA and during the first 2 years of the agreement, NIH conducted most of the clinical trials associated with the drug. The results of these trials were critical for BMS to secure FDA's approval in 1992 to market Taxol for the treatment of advanced ovarian cancer. As agreed in the CRADA, BMS supplied the drug to NIH researchers to overcome previous shortages. The additional supplies from BMS allowed NIH to increase the number of patients enrolled in NIH clinical trials for this drug from 500 patients by 1989 to nearly 29,000 patients over the course of the CRADA. NIH made substantial investments in the research related to Taxol, but its financial benefits from the collaboration with BMS have not been great in comparison to BMS's revenue from the drug. NIH estimates that it spent $183 million on all Taxol-related research from 1977 through the end of the CRADA's term in 1997. For one portion of its spending, NIH estimates that it spent $96 million to conduct clinical trials supporting the CRADA; this was offset by a $16 million payment from BMS. In addition, BMS supplied Taxol to NIH, the value of which GAO estimates to be $92 million. NIH spent an additional $301 million on Taxol-related research from 1998 through 2002, some of which was for cancer research, making NIH's total Taxol-related spending $484 million through 2002. BMS's sales of Taxol totaled over $9 billion from 1993 through 2002. BMS agreed to pay NIH royalties at a rate equal to 0.5 percent of worldwide sales of Taxol as part of a 1996 agreement to license three NIH Taxol-related inventions developed during the CRADA. Royalty payments to NIH have totaled $35 million. The federal government has been a major payer for Taxol, primarily through Medicare. For example, Medicare payments for Taxol totaled $687 million from 1994 through 1999. Several factors affected NIH's exercise of its broad authority in negotiating its Taxol-related technology transfer activities. First, NIH did not have a patent on Taxol and thus could not grant an exclusive patent license to a CRADA partner. Second, in NIH's evaluation, it was limited by a shortage of available, qualified alternative partners. Finally, the negotiation of royalties for NIH's Taxol-related inventions was affected by multiple considerations, including the priorities that both NIH and BMS assigned to different factors in the setting of royalties. These factors include the stage of development, the potential market value of the license, and the contribution to public health of making the product available. In commenting on a draft of this report, NIH provided additional information about its expenditures and the contributions of BMS, which GAO incorporated, and also discussed its evaluation of whether BMS's pricing of Taxol was reasonable.