Share the fruits of state-funded research with taxpayers

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Wisconsin Technology Network

The following commentary by John M. Simpson, FTCR’s Stem Cell Policy Director, was published in the Wisconsin Technology Network on Saturday, August 11, 2007.

Santa Monica, CA — Faced with dwindling federal support for research, more and more states like Wisconsin are stepping up to fill the shortfall with state money. But as state commitments soar higher and higher, a basic question often is left unanswered.

Who should control, profit, and otherwise benefit from discoveries made in state-funded laboratories across Wisconsin? How you settle such matters are known as intellectual property policy, and like most states, Wisconsin apparently doesn’t have a coherent, across-the-board policy.

That’s not surprising. One reason is that for years the federal government funded most scientific research. But as states like Wisconsin have increasingly raised their contributions, appropriate policies and safeguards are essential at the state level. Otherwise, millions of dollars in public funds will only benefit big companies that will turn around and overcharge the public for the products their taxpayer dollars helped invent and develop in the first place.

Bayh-Dole model

Representatives of universities and industry will likely point to the federal Bayh-Dole Act as a model for state IP policies. But the fact is that the policy followed by the federal government for the past 25 years is flawed. It has given ownership of any discovery to the research institution where it is made, even though taxpayers paid for the research. The institution — usually a university — patents the discovery and then licenses it to a private company and receives royalties. There is no payback for the people who funded the research, the taxpayers.

Too often under Bayh-Dole, private drug companies have reaped huge profits while benefiting from taxpayer-funded research. Take the case of Xalatan, a blockbuster drug to fight glaucoma. Key research for the drug was done with a $4 million federal grant by a little-known science professor, Laszlo Z. Bito at Columbia University. His discovery was patented and licensed exclusively to Pharmacia Corp., now Pfizer, for less than $150,000.

Pharmacia made $507 million on Xalatan in 1999 alone, charging U.S. patients $50 a bottle for ingredients that cost only pennies to produce. The university received $20 million in royalties. Professor Bito’s share was one-fifth of that. U.S. taxpayers got nothing for their investment except a drug that’s twice as expensive as it is in Europe.

Or consider the California biotech company Genentech. It charged $100,000 a year for its cancer-fighting drug Avastin even though $44.6 million in federal funds from the National Cancer Institute went to develop it develop it.

Companies like Genentech act like committed socialists when it comes to taxpayers and the government bearing the risk of drug development. But they are greedy capitalists when it’s time to parcel out the profits.

Taxpayer expectations

When venture capitalists provide money to companies they require clearly spelled out conditions and expectations. There is no reason it should be any different when Wisconsin’s taxpayers put their hard-earned dollars on the line to fund research. They are entitled to insist upon maximum public benefit for their investment. Here are four principles that will ensure that:

– First, when a discovery has been funded by the public, it’s only fair that the public share in any profits. As an example, the recently enacted IP rules in California’s landmark $6 billion stem cell research initiative provide that if there is revenue to a research institution as the result of publicly funded research, 25 percent goes back to the state.

– Second, if the public has paid for key discoveries, then IP policies should guarantee affordable access to those discoveries. To ensure this, Wisconsin’s IP rules must enable the state to intervene if a drug or other invention developed with public funds is priced unreasonably.

– Third, if Wisconsin has funded an invention, but the patent holder does not commercialize it, Wisconsin should be able to license the invention to someone who will.

– Fourth, the results of all Wisconsin-funded research should be available to all researchers in Wisconsin — and any other researchers designated by the state — for further research without a licensing fee. Once taxpayers pay to develop a technology, researchers in the state ought to have free access to further research.

The premise of a sensible state IP policy is simple: The public should share equitably in the fruits of the research for which it paid.
John M. Simpson, a native of Madison, is stem cell project director for the Foundation for Taxpayer and Consumer Rights, a non-partisan, non-profit consumer advocacy organization based in Santa Monica, Calif. His e-mail is [email protected].

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