terests of the contributing parties can only be protected by a flexible policy. Senator MCCLELLAN. Very well, Dr. Moyer, thank you, sir. Senator SCOTT. Dr. Moyer, I would like to have you give me an answer to this. How can we best achieve the objective of preserving the team effort of the Government and private sectors in developing drugs and medicine? And I mention the alternative, by granting discretion to the Secretary of HEW to acquire or waive patent rights on a case-by-case basis, or by limiting the discretion in favor of granting exclusive rights to the private contractors, or by some other alternative. What is your conclusion as to what you believe would be the fairest solution? Dr. MOYER. If I understand you, Senator Scott, you gave me two alternatives. One of them Senator ScoTT. One is based on one bill before us and the other is based on the other bill; that is correct. Dr. MOYER. I do not mean to get into the technicalities of the bills, although I have read them very carefully-in my opinion, the law should be set up so that equitable rights of the participating parties can be honored, and I would see no reason, as of the moment, why the pharmaceutical firm in the development of new drugs would be any different than any other development-shall we say the development of hardware for computerization of research. On that basis, then, I would think that if the Government supported completely, for example, the research of a new drug for the treatment of hypertension, then they should own exclusive patent rights and handle them appropriately. On the other hand, if the Government supported a research area in part for basic research, and these people finally also participated in the development of a new use or a new agent but that work was entirely supported by industry, then industry supporting that project should have those exclusive patent rights. I don't know if that is Senator SCOTT. It is a difficult question to answer, in any event. I am trying to recall the testimony of Dr. Shannon as to the advisability of granting a period of exclusivity. Dr. MOYER. You mean insofar as the length of the patent right? Dr. Shannon said: One possible solution might be the granting of short periods of exclusivity in such situations As he was discussing that is where it is found to be necessary to develop an invention to the point of practical application and there is no other way to obtain the needed industry cooperation. Would you comment on that? Dr. MOYER. Well, I would think that this would be appropriate. For example, if the Government did support a new development, a new use, or a new agent, then I would think that they should have the patent rights and they should handle the situation as they can best develop the new drug. If this is an agent which does not have significant monetary return, then I should think that the Surgeon General, or an agent of the Government responsible for this, should set up exclusive patent rights for a company so that the company in question could get adequate return on their money for the development of this drug. The development of this drug may require a much greater financial outlay, according to our current Food and Drug Administration requirements, than they did in the past. For example, we may have a chemical agent which we could predict, having used in animals, that it has a certain use for the treatment of multiple sclerosis. If there was such a drug, it would have a limited application. We know that beforehand. So that we couldn't expect to sell this drug for use on millions and millions of patients as we could a drug for the treatment of heart failure. This would have to be recognized, and this would require, I think, some exclusive patent rights or licensing to an individual or company, if the manufacture of the drug were to be feasible. This feasibility, I think, could be financially calculated on the basis of, first, the use of the agent; second, its effectiveness; and third, how much more be required from the toxicity point of view to make this available for the treatment of patients with multiple sclerosis. With that information, then, you could calculate roughly what would be required, as far as exclusive patent rights are concerned, to let that drug go as an exclusive patent to a company for a limited period of time, say 3 to 5 years. Senator SCOTT. I gather you feel that unless there is an incentive to industry as contemplated by the patent system generally, it would be most difficult to persuade industry to cooperate in carrying out further development of new discoveries or improvements upon old discoveries? Dr. MOYER. I speak much as a layman here, Senator, but I can say one thing. If you don't have incentive, either to a group of individuals or to an individual himself, they aren't likely to do very much; is this not correct? Senator SCOTT. Well, I think it speaks for itself. Dr. MOYER. So that I think we have to recognize in our system that industry is set up to make money. The board of directors of a company, when they make investments as representatives of the stockholders, and they are obligated either directly or indirectly to take such steps as are needed to make money. Now, in a particular drug, for example, this drug may not itself reap a large financial return. But the company may have other objectives such as the broad spectrum of available drugs for a certain group of diseases which that company wants to become known for. If given some guarantee that they won't lose money, the company may take on the chore of developing a new drug even though the company knows it won't make much, either. I speak now of drugs with limited sales. Such a drug could be a life saving commodity, even though needed infrequently. Senator SCOTT. We lawyers have a phrase, where the property of a number of people has been mixed so that it can no longer be identified, we refer, for example, to wheat in the grain bin which belongs to a number of owners and you cannot tell which owner really has which grains of wheat, and that is known as fungible funds. Now, here the money contributions to research have in a sense become fungible. You can't really tell which contribution is from private industry, which by the Goverment, is being applied in exact proportion to fundamental research in the fundamental cause and cure of disease, let's say. It seems to me that is one of the most difficult problems to work out in legislation, and I belive you have expressed your views on it, and that is what concerns me just about as much as anything in the bill. Dr. MOYER. I am in complete agreement with what you said. I think there are two points that I might emphasize. One of them has to do with the current method of NIH support. They do require a breakdown of each basic research project, in which salaries are involved, and require an estimate of that portion of the salary being supported by the Government based on the percentage of time the individual spends on the project. So, if you participate in a research project 10 percent of your time, this is identifiable according to current support as 10 percent of the investigator's salary. Thus any individual receiving part of his salary for the conduction of a Government-supported research project does, in effect, become Government supported. Such an individual working part time for a drug house on a new drug would jeopardize the patent right for that company. As you can see, this would preclude any investigator who receives partial salary support from his Government research project from doing investigation on new drugs for private industry. Another point I would make is that there is no great difficulty, when you are supporting a specific research project, in identifying the priority of patent rights. But frequently from parent research projects come a number of throwoffs which are merely ideas, and I don't think you can ever corner the market on these. Just like I can't control your ideas and what you think about what I might present to you, so I don't think that you could ever confine by legislation the ideas and concepts of an investigator, irrespective of his support. Senator SCOTT. That is all. Thank you, Mr. Chairman. Senator MCCLELLAN. Senator Burdick? Senator BURDICK. Just one comment to make concerning your colloquy with Senator Scott. You say that the incentives of a group and the incentive of the individual himself is very important. Dr. MOYER. Yes, sir. Senator BURDICK. I noticed you have on your staff 37 salaried physicians, according to your statement on page 3. You must have a considerable number of scientists on your staff also. Dr. MOYER. I hope they are all scientists. Senator BURDICK. I mean you have some that are categorized as physicians that are probably Ph. D.'s in some field of science, too. Dr. MOYER. In that group I think there are only four or five Ph. D.'s. The others are M.D.'s, and I would say that all but two of these fellows participate in research projects. The reason those other two do not is their primary responsibilities are organizing our medical school teaching programs. Here you have a Senator BURDICK. This statement intrigues me. group of men who spend a large part of their lives in training their minds in this field. We talk about commingling Government money. We talk about commingling industry money. But we forget entirely about the human element here, the idea that comes out of that human mind. Dr. MOYER. Right. Senator BURDICK. Does your institution ever give any patent rights to that scientist who himself finds the discovery? Dr. MOYER. We have an arrangement with Research Corp. I can't give you the exact details, but it goes somewhat as follows: If the investigator gets an idea, and we have had three such cases occurring in my department in the last 4 years, if an investigator get a new idea which he thinks can be patentable, then he comes to me. Of course, not being knowledgeable in the details of these things, I send him up to President Cameron, who is responsible for this sort of thing, as far as our institution is concerned. The institution then has this reviewed by Research Corp., and, if it is decided by this more knowledgeable group that this indeed should be followed up, then an arrangement is made with Research Corp. in which they get a monetary return on the net proceeds; i.e., the royalties. The institution receives an amount, and they in turn can arrange with the individual investigator so that he receive some of the royalties. In fact, this happens to be President Cameron's policy. When an individual would, in fact, become responsible for the development of a new agent or a new use would come to fruition, then the individual would benefit in part from that development. Senator BURDICK. Have any of your doctors or professors benefited so far from your research contracts? Dr. MOYER. No, sir. There is one pending that could potentially develop. Senator BURDICK. But your opinion is that, if the project is identified as a Federal project totally, then the patent right should go to the Federal Government? Dr. MOYER. Yes, sir. I am removing the individual investigator, as referred to above, from consideration. Senator BURDICK. It is only in this case where the interests and efforts are mixed where you think there should be some equitable solution? Dr. MOYER. Yes, sir. Senator BURDICK. Thank you. Dr. MOYER. And I might add that I am particularly interested in our basic support. I mean I am particularly concerned that finances coming in for basic research, in which this comes into the same institution or same unit in the institution, the same department or even to the same individual who might also be working on developmental type research, that the fact that he receives support from the Government for his basic research does not prohibit his also participating in applied research; that is, the bringings of new drugs to fruition and use in the treatment of patients. Here I think is the real potential harm, because, while the Government itself is trying to develop clinical pharmacology units, I can see a barrier being set up in which, unless the whole industry was socialized, would block industry from having their drugs studied in any institution receiving this type of Government support. Senator BURDICK. Thank you. Senator MCCLELLAN. Thank you very much, Doctor. Dr. Sprowls and Dr. Bliven, will you come around, please? I believe you have a statement. Is it a joint prepared statement? STATEMENT OF JOSEPH B. SPROWLS, CHAIRMAN, EXECUTIVE COMMITTEE OF THE AMERICAN ASSOCIATION OF COLLEGES OF PHARMACY; ACCOMPANIED BY DR. CHARLES W. BLIVEN, EXECUTIVE SECRETARY Dr. SPROWLS. Sir, I have a statement which I am presenting for the Executive Committee of the American Association of Colleges of Pharmacy. Senator MCCLELLAN. Very well, you may each identify yourselves for the record, and then proceed. Dr. SPROWLS. I am Joseph B. Sprowls. I am professor of pharmacy and dean of the Temple University School of Pharmacy, and a registered pharmacist in Pennsylvania, Colorado, and New York. I have been a teacher of pharmacy for nearly 30 years and have held full-time faculty status in three universities: the Universities of Colorado, Buffalo, and Temple University. I appear here as the chairman of the executive committee of the American Association of Colleges of Pharmacy. This is an elective position. I have with me Dr. Charles W. Bliven, executive secretary for the association and formerly dean of the School of Pharmacy at George Washington University. Senator MCCLELLAN. That identifies both of you sufficiently. Dr. SPROWLS. All of our 74 member colleges are engaged in scientific research, much of which derives some support from Federal granting agencies and some of which derives support from private sources, including industrial laboratories. Our interest in patent legislation derives from the research efforts of our member institutions. We commend the Congress for its interest in new patent legislation, because certain clarifications are needed both for the protection of the proper interest of the public and for the clarification of the rights of inventors when public funds may have been involved in some phase of the development process. We believe that the protections afforded by the present patent system to the inventor or the primary developer of a new and useful concept are quite important both because they help to stimulate the investment of private capital which provides major and essential support for the research and development efforts in our country, and because they provide the incentive for the initial production and distribution, without which the benefits of invention can never reach the ultimate consumer. We submit that these incentives are important in furthering the development, testing, and production of pharmaceuticals as well as all other useful products. We feel, therefore, that the best |