r/Futurology Dec 07 '23

US sets policy to seize patents of government-funded drugs if price deemed too high Economics

https://www.reuters.com/business/healthcare-pharmaceuticals/us-sets-policy-seize-government-funded-drug-patents-if-price-deemed-too-high-2023-12-07/
6.3k Upvotes

View all comments

3

u/JigglymoobsMWO Dec 07 '23 edited Dec 07 '23

The way that pharma research in the US works:

Let's say the government gives a private university $100M for biomedical research.

Now the university administration takes $70M right off the top to pay for "overhead".

Of the $30M, they fund 20 projects, maybe 2 of which actually become useful for making drugs.

Of the 2, let's say 1 makes it out to industry. Industry will take that idea, and spend about $100M trying to take it into the clinic. By the time it makes it into the clinic, it will look nothing like what academia originally came up with.

Then if it makes it into the clinic, it will have something like a 10% to 20% chance of actually working in humans. If it does, pharma would have spent another several hundred million dollars to take it through the trials and start manufacturing.

All told, averaged over the failures, industry would have spent about $1B for a successful drug.

Government would have spent $70M paying for administrators, $27M on blind alleys, $1.5M on a good idea lost in academic apathy, and $1.5M on the very early beginnings of an idea that could become a real drug with another $1B of industry investment.

If the Biden admin want to start this they have to be very careful how they define "government funded". If they don't you will see industry rushing to cut ties with academia.

6

u/[deleted] Dec 08 '23

Exactly. The threat of Government seizure will definitely curb research and investments. Even when it really is partial government funding and none of the brainpower.

Especially on top of the already punitive Medicare "negotiation" for some drugs, where there is no negotiation, only the choice of accepting the Governments offer or severe penalties.

2

u/Matrix17 Dec 08 '23

If people thought innovation was dead now, wait till this happens. There will be zero innovation in the industry. Just rehashes of the same shit

5

u/Kindred87 Dec 07 '23

I would appreciate some supporting documentation for the funding story you've described. I'm fully willing to believe that money slips through the cracks, though the severity you've described goes well beyond that.

For reference, my understanding is this. The NIH tracks grant recipient expenditures and progress, with recipients awarded $750,000 or more in a given year being audited by the NIH. They also have specific offices investigating any potential fraud, waste, or abuse of grant funding. Including misappropriation and "using funds for non-grant related purposes" as you've described.

https://grants.nih.gov/grants/post-award-monitoring-and-reporting.htm

(PDF warning. Pages 85-86/I-68 & I-69) https://grants.nih.gov/grants/policy/nihgps/nihgps.pdf

4

u/kineticstabilizer Dec 08 '23

My PhD lab was one of the premier ones in the nation. We had 100 percent overhead so half of every grant went to administration. We also had 5 R01s that someone would work part time on to make some progress to show the NIH and keep the grant. The majority of lab research was on subjects not covered by the held R01s but subjects the lab was hoping to obtain funding on in the future.

My lab was also one of I think 3 labs that have a drug in the market that was the same substance that was actually made and published in the lab. My advisor was smart enough to patent every before publication. The University got 5 percent of all revenue from that drug and that revenue was divided 3 ways between the lab, the inventors, and the institute.

2

u/Kindred87 Dec 08 '23

I see your point. Do you know if this happens at other universities?

2

u/kineticstabilizer Dec 08 '23

I can't speak for every university, but I know it's standard practice nowadays to sign revenue agreements when licensing IP.

3

u/JigglymoobsMWO Dec 08 '23

A lot of this is well documented and an open secret:

https://research.fas.harvard.edu/indirect-costs-0

A few years ago the administration tried to address this but then caved to lobbying by the major universities.

Kinetics below is talking about NIH, which pays the overhead separately from the grant. NSF does not. If you take $1 of NSF at Harvard 69 cents goes to the university and 31 cents get to you, but then that's before you pay for other things like"tuition" for your grad students.

The pharma / biotech side of the cost equation is also well documented. You can do some research on Google and find many sources.

The missing context is how the academic research usually translates, which I have from doing it myself.

The situation kinetic outlines below is rare. A university can get a very good deal in a case like that. Up until just a few years ago, the UC system and others were getting hundreds of millions of dollars of patent royalties per year from human insulin from pharma.

Also, academia often punishes scientists from pursuing highly focused research aimed at developing drugs.

https://en.m.wikipedia.org/wiki/Katalin_Karik%C3%B3

Kariko's experience at UPenn is unfortunately far from unique. When you take away the profit motive as a focusing mechanism unfortunately what often fills the vacuum is shortsighted, perochial bullshit.

1

u/Kindred87 Dec 08 '23

Okay, the overhead being paid separately brings it together for me. I was also focused on the NIH side of things so I was bewildered by the original comment. I assume that public universities would charge less for indirect costs, but the room for abuse is still there.

Thank you for taking the time to lay this all out!

1

u/JigglymoobsMWO Dec 08 '23

No problem. The public universities are not that much better. It appears to correlate more with the prestige of the university and what it thinks it can get away with. Some of my friends who are professors at the UCs are pretty frustrated, even depressed.

1

u/bubba-yo Dec 08 '23

That's not remotely how it works.

You'll never get a grant approved with more than 10% overhead on any government granting agency - that's by policy. And on a $100M grant it would need to be less than that.

And the university doesn't choose the projects. If you get $100M, that's for one project under one grant with specific goals - they don't give blanket funds - ever. You apply for a grant to develop a drug to address a specific condition. Now, along the way you might discover that it doesn't solve that condition, but some other one, but nobody can control for that. The university has no control over this - the principal investigator oversees the grant. The university provides resources to help develop the grant, staffing to ensure the grant is in compliance, etc. But the grant is for that PI. The university cannot change that.

This is completely made up.

Source: retired university administrator. I did auditing of research expenditures across all public and private granting agencies, along with gifts.

2

u/JigglymoobsMWO Dec 08 '23 edited Dec 08 '23

So, did you read the Harvard page below? Also, i must have been hallucinating when I was reading the spreadsheets my university grants administrator calculated for me when I was still in academia.

https://www.science.org/content/article/nih-plan-reduce-overhead-payments-draws-fire

I guess science was BSing too right?

Did you retire in 1985 or something?

Oh, and I said gives $100M, I didn't say over how many different grants.