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9 Market Obstacles and Creating Incentives The disincentives to the pharmaceutical industry for the development of anti- addiction medications are formidable (Figure 9. 1~. The paucity of pharmacothera- pies for the treatment of drug dependence illustrates the point. Despite the recognized success of methadone and the promise of a longer-acting agent, levo- alpha-acetylmethadol (LAAM), in the treatment of opiate addiction, there have been no novel anti-opiate medications developed for 30 years,' and there is no medication specifically for the treatment of cocaine addiction. That this lack of success persists, despite the dire health, social, and economic consequences of drug addiction, further attests to the many barriers faced by the pharmaceutical industry. The committee believes, however, that many of the barriers can be overcome with changes in government policies and a full commitment of resources to this area of medications development. The committee aware of the disincentives to industry, yet cognizant of the need for pharmacotherapies, grappled with the issue of presenting extraordinary incentives to the pharmaceutical industry. Many of the issues and ideas were presented at the June 13, 1994, IOM workshop (Appendix F) by industry representatives and other concerned individuals and were discussed at great length by the committee. These include granting a patent extension on some other product marketed by a pharmaceutical company that developed an anti- addiction medication, removing the potential for price controls, allowing advance . 'With the exception of naltrexone, approved in 1984, for the treatment of opiate addiction. 187

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188 DEVELOPMENT OF MEDICATIONS special purchase of anti-addiction medications, and/or creating a prize or bounty to the first few companies that produce an approved anti-addiction medication. The committee could not adequately envision the implementation of those extraordinary incentives, arid they are not presented as committee recommenda- tions. However, a majority of the committee agreed that some of the incentives regarded as extraordinary should be deliberated by policy makers. Those issues that had majority support from committee members are presented later in the chapter, not as recommendations but as approaches for further consideration. A fundamental tenet of this report is that innovative pharmacotherapies for the treatment of drug addiction are most likely to be developed through an effective public-private sector partnership involving the National Institute on Drug Abuse (NIDA) and a limited number of committed pharmaceutical or biotechnology companies. That approach has been applied successfully by several of the National Institutes of Health (NIH) institutes to stimulate the development of new drugs, for example, in the fields of cancer, acquired immune deficiency syndrome (AIDS), and epilepsy (Appendix E); the Medications Development Division of NIDA was established to accomplish the same objective for drug dependence (Chapter 3~. However, a variety of reasons, including limited scientific understanding of the physiological bases of addiction, craving, and relapse, numerous marketing obstacles, and the failure to identify pharmaco- therapeutic research and pharmacotherapies as national priorities, have prevented NIDA from forming effective partnerships. The committee notes that any progress in attracting the private sector to the difficult task of developing new anti-addiction medications will require strong and sustained federal leadership and research support. Strong leadership is needed at the highest levels of the federal government to foster an environment that supports the treatment of drug dependence. The effectiveness and cost-effective- ness of pharmacotherapies need to be clearly articulated to the public, to involved government agencies, to the academic and treatment communities, and to industry. Sustained support for basic research in neuropharmacology (specifically the physiological bases of addiction, craving, and relapse) and continued support for clinical research by the executive branch and the Congress must be a priority. The committee believes that, at a minimum, strong federal leadership and research support are essential for progress to be made in attracting private-sector research and development in the area of anti-addiction medications. Without support for those two areas, incentives, no matter how attractive, will not be sufficient to attract the industry to this field of medications development.

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MARKET OBSTACLES AND CREA TING INCENTI VES Bias by sorry Learnt providers against pharmacologic treabrmnts Limited number of narcotic treatment programs Small Reign market _ Lack of traditional marketing to physicians - Varied stat~ocal approval processes Length of FDA ~ approval process Patient population perceived as difficult to study Complications of concomitant illness and polydrug use Lack of well-characterized animal models of cocaine addiction | Uncertain market L I environment I Uncertaintreabnent financing ~Treatment ~ ~ Varied state/local treatment regulations \`System J and financing mechanisms ~ ~ Stigma of drug-abuse Marketing Other Approval File NDA Clinical Studies File IND Discovery ~ Pricing clause in DHHS CRADAs Varied state and local regulations DEA review time ' State rescheduling ' Few clinical investigators ' DEA regulations _ Efficacy outcomes difficult to define or measure Limited basic science knowledge of addiction, craving, and relapse Limited number of researchers focusing on drug abuse _ (recision toinvestin Be| Lack offederalleadership | | R&D of new anti- J addiction medications ED FIGURE 9.1 Current problems in the development of anti-addiction medications. 189

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190 DEVELOPMENT OF MEDICATIONS MARKET OBSTACLES TO PRIVATE-SECTOR INVESTMENT To further identify the barriers to private-sector investment for the development and marketing of anti-addiction medications and to formulate viable policy options as possible solutions, the committee sought the opinions and suggestions of pharmaceutical industry executives, the scientific community, and federal and state government agency representatives (Annendix A). The ~ x- -r r committee conducted a survey of pharmaceutical companies (Appendix D), met with the Institute of Medicine (IOM) Forum on Drug Development, and held a Workshop on Policies to Stimulate Private Sector Development of Anti- Addiction Medications (Appendix F); which focused on marketing, regulatory, research and training, and treatment-financing issues. New products are developed by pharmaceutical companies for many reasons, the most important of which is to increase company sales in existing and new markets (Spilker, 1989~. Companies must examine many factors, including those listed below, and calculate the probabilities of an adequate return on their investment before deciding to enter a new area of drug development (Spilker, 1989~. In the field of developing anti-addiction medications, the overwhelming majority of the following factors are problematic. . the size of the market; the cost of developing and marketing a drug; the price of the drug; the length of time the drug will be protected with a patent; the social attitudes about the drug; the regulatory requirements for development and approval; the time required to develop the drug; clinical feasibility; medical value; commercial value; probability of achieving marketing success; legal considerations; and competitive value. Many of those issues have been discussed in the report, the remainder are discussed below. Nature and Size of the Market From the pharmaceutical industry's point of view the size of the potential market for determining investment in research and development (R&D), is not estimated simply from the absolute number of patients with a given condition.

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MARKET OBSTACLES AND CREATING INCENTIVES 191 For example, there are about 2.1 million cocaine-dependent individuals and 500,000 to 1 million opiate-dependent individuals in the United States (Hunt and Rhodes, 1992; Kreek, 1992~. Those numbers are high enough to be attractive from a marketing perspective, yet there is significantly more pharmaceutical activity in other areas with comparable or much smaller patient populations. Approximately 25,000 individuals have amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease), for which several pharmaceutical companies have compounds in various stages of clinical development (Samotin, 1994~. Similarly, the market for medications to treat the 2.1 million epilepsy patients is well established at $400 million to $500 million, and three new products have been or are about to be approved (Samotin, 1994~. The pharmaceutical industry appears willing to invest in R&D for markets that are smaller in size or approximately the same size as the number of cocaine-dependent individuals, yet reluctant to enter the field of anti-addiction products. There are several reasons for this apparent paradox. First, there is a perceived lack of a market, by the pharmaceutical industry, in terms of true medical demand, access to patients, and motivation of patients. It is believed that a portion of the population is either not interested in treatment or erratic in compliance. Second, one segment of treatment providers is committed to a "drug-free" concept. Third, any particular medication is likely to be useful for a particular indication (such as reducing the craving for cocaine) and not for treating the entire drug-dependent population. The result is greater uncertainty in predicting the demand or true market size for new anti-addiction medications than for drugs intended for more established markets (Samotin, 1994~. However, those niches represent opportunities, especially for small pharmaceutical companies, biotechnology companies, and those already involved in the development of central nervous system (CNS) compounds, that have not been fully explored by the industry. Furthermore, an uncharted market coupled with the limits in the basic science of addiction (Chapter 2) present a significant obstacle in the discovery and delivery of anti-addiction medications. For pharmaceutical companies making decisions about new areas for R&D, the factor of market size is interwoven with the issues of the costs of developing and marketing a new medication, pricing, and reimbursement because those factors determine the financial return on sales. To address the issue of return on investment, the committee has endorsed a host of recommendations throughout the report for the federal government to consider and offers additional recom- mendations in this chapter to offset the major obstacles. The Orphan Drug Act (Public Law 97-414) was enacted to stimulate the market in the development of medications for rare diseases by granting market exclusivity to companies who developed those compounds (Chapter 71. The standard for orphan status is whether a drug is intended to treat a disease or condition that affects fewer than 200,000 persons in the United States or that

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192 DEVELOPMENT OF MEDICATIONS affects more than 200,000 but for which there is no reasonable expectation of recovering development costs from sales in the United States. Since the passage of the Orphan Drug Act in 1983, the pharmaceutical industry has marketed 60 medications for orphan diseases, and the Food and Drug Administration (FDA) has granted 488 orphan drug designations (Sanders, 1993~. The Orphan Drug Act similarly could be used as a mechanism to provide market exclusivity to companies with FDA approved anti-addiction medications. The committee . believes that the FDA should consider the actual patient population likely to be treated, rather-than those potentially treatable, as there is probably a large segment of the drug-dependent population that will never present for pharmaco- therapy. It is illogical and counterproductive to the purposes of the Orphan Drug Act to count those patients against the 200,000 threshold. The committee recommends that FDA interpret the Orphan Drug Act broadly with the intent of granting orphan drug status to FDA- approved anti-addiction medications whose potential market can reasonably be judged to meet the 200,000 patient criterion stipulat- ed by law. Alternatively, new legislation similar to the Orphan Drug Act could be drafted specifically for FDA-approved anti-addiction medications. This is a more explicit recommendation than the one previously stated in the committee's preliminary report issued March 1994.2 The committee believes that the designation of orphan or orphanlike status for approved anti-addiction medications is necessary to stimulate market investment as financial return is limited, given the nature of the anti-addiction market. Drug Pricing and Intellectual Property Rights In 1986, Congress passed the Federal Technology and Transfer Act (P.L. 99- 502) to encourage private companies to commercialize federal inventions. The statute authorizes federal laboratories to enter into cooperative research and development agreements (CRADAs) with nonprofit institutions and private companies. CRADAs enable government agencies to negotiate exclusive commercialization licenses with industry partners. In 1989, NIH made an 2The March 1994 recommendation read as follows. "The committee recommends that further exploration of the possibility of special incentives similar to the Orphan Drug Act or other legislation for anti-addiction medications be considered."

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MARKET OBSTACLES AND CREATING INCENTIVES 193 administrative decision to adopt a reasonable (or fair) pricing clauses into its CRADAs in response to complaints about the introductory price of AZT (zidovudine), art AIDS medication, which was deemed excessive at $10,000 per patient per year. AZT was developed through a cooperative agreement. Such pricing provisions are included in NIH exclusive licensing agreements. The potential effect of CRADAs on pricing of products and on patent rights has been an important issue of concern for the pharmaceutical industry. Industry representatives have noted that the "reasonable pricing clause" is an important deterrent to a long-term, effective partnership between the government and the private sector. It views the provisions as too broad and too threatening to proprietary interests (Chapter 3; U.S. DHHS, 1993~. The committee also heard from industry that the CRADA process is lengthy and complex, often taking about a year for final approval and requiring many layers of review. Industry officials noted their frustration with the process required to establish a CRADA, which, rather than encourage innovative research, acts as another disincentive. NIH is fully aware of the controversy, and is currently reassessing its CRADA policy. There have been two public meetings (July 21 and September 8, 1994) on the issue. Inasmuch as the language of the reasonable pricing clause was adopted by administrative action within NIH, it is not required by law, and NIH could resolve the controversy by administrative action and at the same time protect the interests of the public. The committee recommends that administrative action be taken by NIH to resolve the issue of reasonable pricing in CRADAs. However, if NIH is unsuccessful in stimulating the industry to form cooperative agree ments, then the committee recommends legislative action to remove or modify the reasonable pricing clause.4 In the absence of a definition of a "fair or reasonable price" and in light of NIH's lack of expertise to undertake meaningful analyses of private-sector pricing decisions (OTA, 1993; U.S. DHHS, 1993), the committee believes that . 3 Section 8.3 of the NIH Patent Policy Board's Model CRADA states that the institutes' concern is that "there be a reasonable relationship between the pricing of a licensed product, the public investment in that product, and the health and safety needs of the public. Accordingly, exclusive commercialization licenses granted for NIH intellectual property rights may require that this relationship be supported by reasonable evidence." 4This recommendation is revised from the committee's preliminary report published In March 1994.

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194 D E V E L O P M E N T O F M E D I C A T I O N S this obstacle should be removed. Additionally, NIH should take steps to streamline the CRADA process. NIH could assign additional staff members or establish a centralized committee to eliminate the need for multiple levels of review and provide a single site for negotiating and approving CRADAs (IOM Workshop, June 13, 1994~. Societal Stigma The societal stigma of developing and marketing a medication for treating drug-dependent patients is a concern for pharmaceutical companies. They fear that, once a medication is approved for use in the treatment of drug addiction, the market for other indications will diminish or disappear. Eli Lilly's experience with methadone illustrates the point. Methadone was developed as an analgesic, but its use for pain relief significantly diminished once it became widely used as a treatment for heroin addiction. Patients, in general, do not want to take a medication associated with drug addiction. Thus, the pharmaceutical industry is understandably reluctant to develop compounds specifically for drug addiction, if other medical uses for the compounds are possible. There is no easy solution to the problem of stigma associated with drug addiction and its treatment. However, the committee stresses the need for national leadership in support of pharmacotherapy and continued emphasis on prevention and treatment. The sense of stigma is most likely to diminish as a result of public education and broader acceptance of addiction as a treatable disease. Clinical Research on Anti-Addiction Medications Clinical research in the drug-addicted population is inherently difficult. There are numerous problems in setting up clinical trials for drug-addicted patients, for example, there are relatively few experienced investigators (Chapter 6), patients are commonly unreliable and follow-up difficult, efficacy end points may be difficult to define or measure, safety evaluation is confounded by adverse events due to such concomitant illnesses as tuberculosis (TB) and AIDS, and studies can be difficult to control appropriately or to conduct on a blinded basis. In addition, if the drug under evaluation is a controlled substance, the regulatory requirements of the Drug Enforcement Administration (DEA) and of each state's narcotics-control agency must be met (Chapters 7 and 81. This daunting set of scientific and procedural barriers has discouraged most pharmaceutical companies from considering clinical studies in this field (Mossinghoff, 1989~.

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MARKET OBSTACLES AND CREATINGINCENTIVES 195 One ofthe major accomplishments ofthe Medications Development Division (MDD) in developing LAAM, as described in Chapter 3, was to cope successful- ly with those barriers. MDD organized successful multicenter clinical trials that included expedited FDA drug approval. In this accomplishment, MDD not only completed the development of LAAM but organized a network of clinics and investigators that could participate in future Phase III studies of other drugs. Such a network could be complemented by the existence of national drug-abuse research centers (Chapters 2 and 6~. Those centers could provide additional scientific expertise and facilities for conducting clinical research in clinical pharmacology and early efficacy studies on promising new drugs for the treatment of addiction. The pharmaceutical executives who met with the committee indicated that the centers (as proposed) plus a network of investigators, for Phase III studies, would be of great value in overcoming one of the important disincentives to the private sector in this field. Equally important, from their point of view, is the effective working relationship established between MDD and FDA, as a result of the LAAM experience. They emphasized that an MDD function of "honest broker" or "dispassionate scientific adviser" both to companies developing new drugs under investigational new drug applications (INDs) and to the FDA would be welcomed. The NIDA and FDA officials who met with the committee felt similarly, but they were concerned that resource constraints in the future might limit their ability to devote adequate attention to this function. The committee believes, however, that NIDA and FDA must continue to build on this relationship of trust, and it urges a formalization of the relationship between NIDA and FDA. The committee recommends a memorandum of understanding signed by both the director of NIH and the commissioner of FDA that would detail publicly the working relationship between NIDA and FDA. This relationship is an important long-term asset to both agencies. It can serve as the basis for continuing communication and productive effort in the development of anti-addiction medications while maintaining the scientific independence of NIDA and the regulatory role of FDA. Product Liability Product liability and the risk of lawsuits, as a result of unforeseen patient injury, are often cited by the industry as major uncertainties in the marketing of a new drug. In the case of drugs for addiction, especially for opiate and cocaine

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196 DEVELOPMENT OF MEDICATIONS addiction, this risk is thought to be particularly high in precisely the patients who, from a public-health standpoint, would need treatment the most, e.g., drug users who are pregnant, infected with human immunodeficiency virus (HIV) and/or infected with TB (Mossinghoff, 19891. Industry representatives pointed out that they are not aware of any drugs specifically approved by FDA for the treatment of associated illness in pregnant patients or labeled as safe for use in pregnancy (pregnancy category A in the package insert); this was confinned by FDA officials (R. Temple, personal communication). The reluctance to seek such approval stems largely from experience with Bendectin, a drug once marketed for nausea and vomiting of pregnancy that was withdrawn from the market by its manufacturer because of protracted litigation over a large number of product-liability lawsuits that alleged birth defects in spite of epidemiological evidence and failure of FDA reviews to confirm such toxicity (Sheffield and Batagol, 1985~. The lesson, as far as individual drug manufacturers are concerned, is that they cannot afford to market a drug specifically labeled for use in pregnancy. However, as the committee pursued this issue as an obstacle for the development of anti-addiction medica- tions, they discovered that it is of general concern for pharmaceutical companies and not isolated to the development of anti-addiction medications. NEED FOR FEDERAL LEADERSHIP The committee has considered and attempted to bring clarity to the multiple components involved in the development of anti-addiction medications. Such development depends critically on cooperation between the public and private sectors. Yet the number of federal agencies involved, current agency funding and staffing levels, regulatory requirements, remaining scientific questions, and other issues present difficult challenges to successful partnership and cooperation. Although many of the challenges are addressed in this report, it is important to recognize that government policies have not provided a strong emphasis on pharmacotherapy for the treatment of drug addiction. This lack of federal leadership represents an additional disincentive to industry, in that it affects the public sector's ability to establish clear guidelines, enhance interagency cooperation, and provide research programs with the stability necessary for medication discovery and development. In addition to its role in developing medications for drug addiction, the government is likely to be the major purchaser of those medications. Thus, government policies are critical in determining the environment in which such medications are developed and are necessary for supporting pharmacotherapy as an important and accepted form of treatment.

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MARKET OBSTACLES AND CREATING INCENTIVES 197 The committee applauds the current emphasis on treatment in the 1994 National Drug Control Strategy and suggests an additional action to underscore the importance of treatment and strengthen federal leadership. One option might be for the President to issue an executive order assigning a high priority to the development of medications for drug-abuse treatment. This, or some other explicit action, would enhance cooperation among the government agencies involved, focus their activities, and aid in the removal of existing institutional barriers. Explicit action at the Presidential or cabinet level would have the added benefit of signaling to the private sector that the development of anti-addiction medications is a matter of high national priority. The committee further believes that progress in this area should be monitored. Thus, any action taken should include a provision for reporting by the involved agencies regarding their efforts to coordinate with other agencies and remove barriers identified. Examples of specific ways in which cooperation could expedite development of anti-addiction medications are formalization of agreements between NIDA and the Department of Veterans Affairs (DVA) for support of clinical trials, and encouragement of all agencies to promote cooperation with the private sector. Other strategies, including the use of executive-level task forces and commissions, may also be options to strengthen federal leadership and give the issue high priority in the eyes of both the public and private sectors. CONCLUSIONS In reviewing the obstacles presented to the pharmaceutical industry (Figure 9.1) for the development of anti-addiction medications, it is clear that, the disincentives outweigh the incentives. The formidable scientific and marketing issues, regulatory complexities, and financial uncertainties add up to an unattractive picture to the pharmaceutical industry, which tends to enter R&D investment from a high risk-high reward perspective. Although it is possible to envision incentives that would interest some pharmaceutical companies (e.g., small pharmaceutical companies, biotechnology companies, or those companies already involved in the development of CNS compounds) without strong federal leadership, in establishing the role of pharmacotherapy and a long-term federal commitment to research, the committee believes all other efforts are likely to falter. As the federal government considers policies that will remove obstacles, the committee suggests a tiered approach of incentives, allowing each tier of incentives time to produce the desired effect. For

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198 DEVELOPMENT OF MEDICATIONS example, the first action may be the removal of disincentives, then the creation of modest incentives, and finally the development of extraordinary incentives. The removal of disincentives includes many of the committee's administra- tive recommendations: use of orphan drug and fast track mechanisms for anti- addiction compounds; removal of adverse effects on clinical research of Drug Enforcement Administration (DEA) requirements under the Controlled Substances Act; and counting DEA review time as part of the regulatory process for purposes of patent term extension for controlled substances. The creation of modest incentives should include broad interpretation of the Orphan Drug Act to include anti-addiction medications or similar legislation to stimulate the market in the development of anti-addiction medications; a strong federal leadership role in support of treatment of drug-dependent patients; funding of basic research and training; adequate funding of treatment; and a modification or elimination of the "reasonable pricing clause" in CRADAs. Finally, the committee considered two extraordinary incentives that the executive branch and the Congress may wish to consider. They are presented below as options for consideration, and they are not committee recommendations. OPTIONS FOR FURTHER CONSIDERATION The committee discussed whether the overall strategy (i.e., strong federal leadership regarding drug abuse treatment and support of research) coupled with removal of obstacles to anti-addiction medication R&D would be likely to result in activity by the pharmaceutical industry. Additionally, the committee considered whether a considerable economic incentive specifically intended to reward the development of new anti-addiction medications was needed. The Committee did not reach a consensus on that issue and has no formal recommen- dation for such an extraordinary incentive. Nevertheless, the Committee wishes to include in this report a brief description of two incentives that were supported by a majority of its members, recognizing that the committee has not provided details for implementation of those incentives. Both of the following proposals are limited to medications developed for cocaine addiction and are intended to create a guaranteed market in view of the limited potential for return on investment of anti-addiction medications as perceived by the pharmaceutical industry. Option I would offer developers of the first few (e.g., two or three) FDA- approved medications for the treatment of cocaine addiction for 3 years after approval a federal subsidy of a maximum of $50 million for purchase of the drug. The subsidy could be given, for example, through reimbursement of the copayment portion of medications for patients with health insurance and the full cost of medications for those patients without medical insurance.

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MARKET OBSTACLES AND CREATING INCENTIVES 199 Option 2 would allow for standing federal purchase orders for prearranged quantities and at an adequate price of one or more new cocaine treatment medications to begin at the time of FDA approval. The purchase orders would establish unambiguous confirmation of a market demand for those products, thereby stimulating investment and commercialization. The options presented above were favored by a majority of the committee. Most committee members also favored implementation of those extraordinary incentives only if the first two tiers of recommendations fail to stimulate progress in the ar~ti-addiction medications market. A majority of the committee agreed, however, that the above options should be deliberated by the executive branch and Congress as they develop policies to stimulate this area of research and development. REFERENCES Hunt DE, Rhodes W. 1992. Characteristics of Heavy Cocaine Users Including Polydrug Use, Criminal Activity, and Health Risks. Prepared for the Office of National Drug Control Policy by Abt Associates, Inc. Kreek MJ. 1992. Rationale for maintenance pharmacotherapy of opiate dependence. In: O'Brien CP, Jaffe JH, eds. Addictive States. New York: Raven Press. 205-230. Mossinghoff GJ. 1989. Letter to Senator Joseph R. Biden, Jr. re: PMA survey of research and development programs in the development of treatments for drug addiction. December 1, 1989. OTA (Office of Technology Assessment). 1993. Pharmaceutical R&D: Costs, Risks and Rewards. Washington, DC: Government Printing Office. OTA-H-522. Samotin S. 1994. Size of the Cocaine Market. Presentation to the IOM Workshop on Policies to Stimulate Private Sector Development of Anti-Addiction Medications. June 13, 1994. Washington, DC. National Academy of Sciences. Sanders CA. 1993. The Orphan Drug Act: should it be changed? Archives of Internal Medicine 153:2623-2625. Sheffield LJ, Batagol R. 1985. The creation of therapeutic orphans-or, what have we learnt from the Debendox fiasco? Medical Journal of Australia 143:143-7. Spilker B. 1989. Multinational Drug Companies: Issues in Drug Discovery and Development. New York: Raven Press. U.S. DHHS (U.S. Department of Health and Human Services), Office of Inspector General. 1993. Technology Transfer and the Public Interest: Cooperative Research and Development Agreements at NIH. OEI-01 -92-01100.

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