California Pacific Currents 2001
Technology Transfer in Action: From Patents to Patients
David R. Fielder
For two decades now, the U.S. government has encouraged medical researchers who receive government funding to seek industry support for their projects. The encouragement takes the form of “technology transfer” legislation that allows universities and other research groups to license their best ideas to private companies.
The companies may acquire exclusive rights to develop and market new drugs, devices, and processes. In exchange, the scientists and institutions get funding for their work—usually fees, annual payments, or royalties on sales.
The Rationale for the Bayh-Dole Act
Under old laws, the government owned all rights to any new technology emerging from projects funded by groups such as the National Institutes of Health (NIH). The problem with this old arrangement was the slow commercialization of the technology. In fact, only about 10 percent of patents ever made the leap from university to industry. Potential therapies languished, unavailable to patients in need. And the tech-driven U.S. economy sputtered.
Since the passage of the Bayh-Dole Act in 1980, however, the transfer of technology from the lab to the hospital and clinic has expanded greatly. Every year, U.S. researchers now file thousands of patents to protect their ideas and they negotiate about 3,500 transfers (usually called “licenses” or “options”) to industry. In just the past 10 years, the percentage of licensing activity has doubled, and the U.S. has entered a golden age of medical research.
But who's getting the gold? Are universities, researchers, and corporations getting rich off of government-funded research? That's just one of the sticky issues confronting research groups using tech transfer to supplement diminishing government support.
“When I first heard about Bayh-Dole, I couldn't believe it,” says David Fielder, vice president, California Pacific Medical Center Research Institute. “I asked myself, ‘Why should the taxpayers and the NIH pay for these inventions but then not directly benefit?'”
“However, the potential benefits soon became clear,” observes Mr. Fielder. “Before the legis-lation, industry had no incentive to touch these inventions because they weren't being patented. But now these ideas are being commercialized and made available to patients much more rapidly. Coupled with the biotechnology breakthroughs, medical research has been burgeoning.”
But because so few good ideas ever blossom into real products—that's the nature of research—nonprofit research groups and the researchers themselves are hardly reaping windfalls from taxpayer-supported research. On a national basis, technology transfer accounts for only about three percent of all the funding for laboratory research in universities. And while a few university researchers have become wealthy from their inventions, the fact is that most technologies don't get patented or licensed, the few that do generate little revenue, and the average royalty rate is about two percent. Mr. Fielder points out that about three-quarters of the Research Institute's funds come from the NIH, nonprofit foundations, and private gifts. Clinical trials, primarily industry supported and mandated by the U.S. Food and Drug Administration (FDA) to ensure the safety and efficacy of new drugs and devices, make up about 25 percent of the research budget. Less than one percent of the Research Institute's funds are generated through the tech transfer process. Such a funding base, he asserts, ensures that research is guided by scientific inquiry rather than profit.
A Balance of Interests
Tension between nonprofit research and for-profit industry is natural and, unquestionably, must be maintained. “In particular,” says Warren Browner, MD, MPH, scientific director of the Research Institute, “the potential conflicts of interest arising from researcher ties to industry must be managed with strict disclosure rules. To me, it seems counterproductive to forbid investigators to have a stake in what they're developing. But it's imperative that everyone know exactly what that stake is.”
Thus, on the whole, the actual benefits of technology transfer seem to outweigh the potential threats to the independence of nonprofit research. In addition to boosting the national economy with jobs and taxes generated by the new wave of products and services, all patients are benefiting from speedier development of innovative treatments. Dr. Browner points out that the current laws also encourage investigators to look for more practical applications for their work. The relationship will require constant vigilance and fine-tuning to maintain the balance of powerful interests.
The Research Institute Approach
Many universities today employ an entire staff of attorneys and experts to file patents and strike deals with industry. The volume of technology transfer activity at the Research Institute is relatively low and is managed directly by Mr. Fielder, with support from a legal firm specializing in patent law and biotechnology.
“We need to be very selective in deciding which invention disclosures we pursue patent applications for,” explains Mr. Fielder. “You'll typically only get one winner out of a hundred patents filed,” he says. “If you're at UCSF or Stanford receiving 600 invention disclosures per year, then you'll likely have a couple of winners each year that will pay for all of your administrative expenses plus get new research funds.” But if you're receiving only 5-10 disclosures for new inventions each year, as is the case here, selectivity in backing projects is critical. It can be years before overhead costs for patents and negotiations are recouped.
“I'm always asking, ‘Is this a winner?'” says Mr. Fielder. “Just because you're doing high-quality research doesn't mean you have patentable ideas or that anyone will see marketable value in your work.”
An Elaborate Dance
As the Research Institute's Li-Xi Yang, MD, PhD, has learned, the show-and-tell with industry involves a careful dance. Researchers must reveal enough of their ideas to garner interest but not enough to give away any real secrets. The dance begins with a formal invitation when a terse layman's abstract of the research is issued to appropriate companies. Responding companies are treated to a slightly more in-depth descrip-tion and then—if they sign a confidentiality agreement—an even more revealing glimpse
at the data.
Dr. Yang says he often contacts potential bidders at this point. “Just like a salesman,” he says, “I contact them and describe my technology. They always ask for more and more information. The more, the better. But we need to be very careful. For instance, in our documents we use codes instead of the chemical structures.”
The dance continues when just a few potential bidders sign a material transfer agreement (MTA) and receive trace amounts of the chemical—just enough to run their own laboratory tests to confirm activity. After getting this taste of the real goods, says Dr. Yang, most companies know if they will bid on the technology.
One novel class of antimicrobial compounds discovered by Dr. Yang has already run through the entire patenting and negotiation process and has been optioned to a biotechnology firm with several other companies expressing interest. Presumably, one of these firms will have the first right to negotiate a full license for clinical testing and, potentially, sales of the agent.
The Long View
“You need to be very patient,” explains Dr. Yang. “We already receive payments for scale-up development, and there may be fees in the future if a firm reaches milestones such as phase I, II, and III clinical trials or a New Drug Application. And then if it's approved by the FDA, we may even see some royalties. But this takes many years.” Meanwhile, Dr. Yang is now working with the Research Institute's technology transfer team to patent several other of his chemotherapeutic, chemosensitizing, and radiosensitizing agents. “We're very excited about these compounds,” says Mr. Fielder. “We already have about a dozen companies expressing an interest.”
“The companies are already pushing,” says Dr. Yang. “They are calling and e-mailing me, and they come to my office. They want to know when we're filing our patent applications and when they can start to negotiate potential licenses.”
The dance of the deal…the transfer of techno-logy…the business of research…it may all seem far removed from finding a better treatment for a loved one in the hospital. But in today's complex mix of science, society, and business, technology transfer seems to be delivering on its promise of better treatments, sooner, for more patients. The Research Institute, like all research groups across the country, continues to seek appropriate
opportunities to tap this imperfect but necessary source of nongovernmental support for medical research. At the same time, all involved in technology transfer carefully protect the researcher's right to publish as well as the Research Institute's nonprofit status.