and other resources, but not funds, to nonfederal organizations for the conduct of specific research and development projects. These organizations can contribute similar resources as well as funds, and in return the government can agree in advance to grant them exclusive patent rights to inventions arising from the collaborative research, including inventions made by federal employees working under the agreement (who receive compensation through royalties and cash awards programs). The CRADA also offers government agencies an option to negotiate an exclusive commercialization license with industrial partners.9 These statutes enhanced research collaborations among industry, government, and universities10 and facilitated the discovery and development (and ultimate marketing) of many important new drugs—such as Taxol, didanosine (ddI), dideoxycytidine, trimetrexate, and fludarabine in the fields of cancer and AIDS treatment.

Some consumer and congressional representatives have criticized the private commercialization of government-sponsored inventions. They argue that, at a minimum, the government should exercise some control over the price of drugs whose development has been supported by federal funds. A turning point in the public debate occurred in 1987, when consumer advocates and some government representatives claimed that the introductory price ($10,000 per patient per year) for the AIDS drug zidovudine (AZT) was excessively high, and therefore would prevent the drug from reaching many individuals who needed it or would create a significant financial burden for government when paying for the drug under programs such as Medicaid. These concerns were addressed in a widely publicized March 1987 hearing of the House Subcommittee on Health and the Environment, chaired by Representative Henry Waxman.

Responding to this criticism about drug prices, NIH made an administrative decision in March 1989 to adopt a policy of inserting a “reasonable (or fair) pricing” clause into its CRADAs with private organizations. Although the clause includes no specific reference to “reasonable pricing,” the adoption of this policy was clearly intended by this clause (Article 8.3 of the Model PHS CRADA), which states: “NIH has a concern that there be a reasonable relationship between


Article 8.1 of the Model Public Health Service CRADA states: “With respect to Government intellectual property (IP) rights to any Subject Invention not made solely by the Collaborator's employees for which a patent or other IP application is filed, NIH hereby grants to the Collaborator an option to negotiate, in good faith, the terms of an exclusive or nonexclusive commercialization license that fairly reflect the relative contributions of the Parties to the invention and the CRADA, the risks incurred by the Collaborator, and the costs of subsequent research and development needed to bring the invention to the marketplace.”


U.S. General Accounting Office, Universities' Research Efforts Under Public Law 96-517, GAO Report B-207939, April 4, 1986.

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