Senator MCCLELLAN. That deserves the closest attention and consideration of this committee. Mr. BARR. Thank you, sir. Senator MCCLELLAN. And of our Government, in trying to arrive at a patent policy in the public interest. Thank you very much. Dr. Suter and Dr. Maurice Seevers, if you would both come around, please, I think maybe we can hear both of you before we recess, and that will conclude the witnesses we have scheduled for today. Is Dr. Seevers here? All right, then we will proceed with you, Dr. Suter. STATEMENT OF DR. C. M. SUTER, DIRECTOR, STERLING-WINTHROP RESEARCH INSTITUTE Dr. SUTER. Mr. Chairman and members of the committee, this statement will be very brief. Senator MCCLELLAN. Very well, you may read it. Dr. SUTER. I am pleased at the opportunity to appear here today to comment on issues raised by S. 1809, the chairman's bill on Government patent policy. I am speaking on behalf of Sterling-Winthrop Research Institute, the pharmaceutical research division of Sterling Drug, Inc., a diversified drug company with over 40,000 stockholders and 13,000 employees here and abroad. My name is Chester M. Suter. My graduate scientific education was in organic chemistry with an M.S. and Ph. D. from the University of Kansas followed by a postdoctorate fellowship at Yale University. Following this I was on the faculty of Northwestern University, Evanston, Ill., for 14 years, where my time was divided about equally between teaching of premedical and advanced chemistry students and doing research mostly in areas of medicinal interest. When I left Northwestern I was chairman of the department of chemistry. I resigned to go to Winthrop in Rensselaer, N.Y., to organize a drug research facility on behalf of Winthrop and for Sterling Drug as a whole. Starting from scratch we now have a total staff, scientists and supporting personnel, of about 600. My publication and editorial experience includes numerous research papers, patents, and books. In recent years my work has been as much administrative as scientific. More information on qualifications would probably bore you, but are available in "American Men of Science." As a director of medicinal research I am concerned about section 4, subsection (a)2, page 4, of S. 1809. This subsection has already been put into effect by NIH in its grants to universities and other nonprofit research groups. This policy has largely blocked collaboration between scientists of these groups and the pharmacologists in industrial laboratories. These biologists could determine whether the compounds made under NIH grants have the potential for practical value. The industrial people cannot logically invest in this effort because all results which might lead to a useful product are subject to confiscation by the NIH without recompense. I might add at this point that we are continually deluged with other important problems, so it isn't a question of doing a project here or not doing anything at all. But it is a question of doing something else which may appear to be almost equally important. Senator MCCLELLAN. Tell me how this policy now is detrimental to the public interest, the policy now in effect which you said I believe S. 1809 involves. Dr. SUTER. As will appear later on here Senator MCCLELLAN. All right. Dr. SUTER. All right, I will go ahead, Sentor. It is not always realized that the cost of biological testing and development of a new product is much more expensive than the original invention. An actual experience may emphasize this. This happened to come across my desk just at the time I was getting ready to come down here. Recently we obtained an exclusive license to an invention for a new product which may represent an advance in a certain area. The preliminary work on the invention by the outside party represented only a modest monetary expense. I think it would be very comparable to a grant such as NIH might give to a university. For us to get a suitable formulation ready for its first clinical study has cost us $281,000 during a 3-year period. Our expenses furthermore has just begun because at this point we would turn the product over to Dr. Moyer, for example, in accord with his earlier statement, for his work in clinical pharmacology. This represents the expense up to that point, because ahead of us are extensive clinical studies and further more detailed animal studies prior to submission of a new drug application. Without an exclusive right to market the product we could not afford to be interested in it. A similar invention, therefore, made under an NIH grant would go undeveloped. This, I urge, is not good national policy. The taxpayers may not get full benefit from $1 billion spent in grants in research aid under these circumstances. Ι When the NIH policy first went into effect I received a long letter from a university scientist asking about our testing NIH grant compounds. I had to turn him down as I could not run the risk of losing stockholders' money when other attractive work was at hand. In effect the NIH was trying to take over $100 worth of results after spending $10 or less. No private firm can take part in such a program, so testing of NIH-financed compounds has largely stopped. Contamination of a research program with a minor amount of Government money crowds the title to the rights on new products under present circumstances. Senator MCCLELLAN. You make a statement here which I would like to emphasize: No private firm can take part in such a program, so testing of NIH-financed compounds has largely stopped. Dr. SUTER. That is certainly true in our place. Senator MCCLELLAN. You are talking about Dr. SUTER. That is our reaction to it, and I think it is never 100 percent true because there are always unusual circumstances, but I do have the Senator MCCLELLAN. You say since the incentive has been cut off your institution is not interested? Dr. SUTER. For the pharmaceutical industry as a whole, the R. & D. tab of $310 million, 96 percent is company money now, so that this indicates to me a break between the collaboration that might occur, you see, between the NIH and the pharmaceutical industry. Senator MCCLELLAN. All right. Dr. SUTER. I might elaborate on that point. This does not mean that we never take small NIH grants. There are occasionally projects which are not likely to lead to inventions, which are done purely on a package basis, and now and then as a matter of accommodation, so to speak, we have taken small grants in that area, although we do not have one at the present time. This situation can be remedied by suitable modification of section 4, subsection (a)2, so that medicinal inventions are accorded the same treatment as other inventions now receive and would receive under the proposed S. 1809. Until this is done an industrial research laboratory will rarely be interested in becoming involved in a Governmentsubsidized program where inventions are likely to occur. This applies to participating in the programs of others at company expense or seeking direct grants from Government agencies. I would regret seeing the present NIH policy continued and extended as a permanent program. A good analysis of the problem and a suggested alternative solution has been developed by the American Patent Law Association. This is published in the June 1965 bulletin of this association, pages 327-333, and, I believe, has already been given by W. Brown Morton as testimony before this subcommittee. He was scheduled, I know, on July 7. A more concise statement of the changes in S. 1809 that seem to us to be desirable are given in appendix A of the testimony by Dr. Austin Smith before this subcommittee on June 1, 1965, on behalf of the PMA. The point of view expressed by the American Council of Education in their excellent statement of July 20, 1965, is reasonable and covers a section of the area under discussion. And I might add that I am very much pleased, and enthused, by the statement made this morning by Dean Barr, who gave his testimony just before I came up here. It is just a coincidence that we both happen to be from Northwestern. I have never seen him before. But we feel that his approach to this situation, whereby the university as a nonprofit institution acts on behalf of the public, is a very good approach to the matter of handling Government grants. It might be pointed out that the Federal Government and the people of this country both share under any circumstances in any success that a company may have in developing a new medicinal product, spending some scientific work in a university. Physicians have at their disposal a superior new product prescribed for their patient, and the Government gets about half of the profits, if any. If royalties on any such invention could go to universities, medical schools, or other nonprofit institutions, to strengthen their facilities, this would be a suitable and desirable consequence of the original grant I think from the Government to the university. That concludes my statement. Senator MCCLELLAN. Thank you very much. The letters to which you refer are attached? Dr. SUTER. Yes. Senator MCCLELLAN. They will be published in the record at the conclusion of your statement. (The letters referred to follow :). Dr. C. M. SUTER, STANFORD UNIVERSITY, DEPARTMENT OF CHEMISTRY, Stanford, Calif., August 9, 1962. Director, Sterling-Winthrop Research Institutes, DEAR DR. SUTER: I am writing this letter to you at the suggestion of Prof. W. S. Johnson, chairman of our chemistry department. Recently we submitted to the National Institutes of Health a research proposal entitled "Amino Sugars of Potential Pharmacological Utility." The main portion of this proposal involved specific reactions in the aminosugar series, with emphasis on neighboring group participation, direct replacement reactions and reactions of aminosugar derivatives with organometallic compounds. In view of the pharmacological importance of the aminosugars, we also suggested that the substances prepared in connection with the above studies might be subjected to screening tests for pharmacological activity at any one of several companies who perform such tests. Since such compounds are indeed apt to have pharmacological characteristics of interest, it seems quite to the point to mention this possibility in connection with our proposed studies. In the past, both the Abbott Laboratories and Merck, Sharp & Dohme have conducted routine screening tests in connection with compounds which we have prepared in some of our studies. Accordingly, we approached these companies before seeking collaboration elsewhere. In view of the agreements required by the NIH, however both of these companies regretfully expressed a lack of interest in screening the compounds to be produced from our researches in this area. Accordingly, at the suggestion of Professor Johnson, I am writing to you to ask if your laboratories would be interested in collaboration with regard to routine screening of compounds in this class. In order that you know the requirements which the NIH would impose upon such collaboration, I am including herewith a copy of the NIH patent agreement recently forwarded to me by Dr. Helen Jeffrey, of the NIH. I would be most interested to hear from you at your early convenience regarding the possibilities of conducting such screening tests in your laboratories, and in particular as to whether the details of the patent agreement, etc., required by the NIH are agreeable to your company in connection with the conducting of such tests. Hoping to hear from you at your early convenience in regard to the above matters, I am Yours very sincerely, WILLIAM A. BONNER, STERLING-WINTHROP RESEARCH INSTITUTE, Prof. WILLIAM A. BONNER, Stanford University. DEAR DR. BONNER: Your recent letter regarding the possibility of our testing certain amino sugars for pharmacological action has now been considered by several of us here. Although we recognize that there might be some interest in screening these compounds in several tests we think this is outweighed by the complications which would arise if a useful action were found. We are already involved with so many complicated Government regulations and restrictions that we are unwilling to take on a project of this sort. I am personally sorry to react in this way, but we feel there is not much alternative under the circumstances. Sincerely yours, C. M. SUTER, Director. Dr. SUTER. As you may gather, I called the professor at Stanford regarding this letter, and he said he would be glad to have this included and attached to my statement. Senator MCCLELLAN. Very well. I regret that the other witness is not here. He had a right to anticipate that he wouldn't be called until this afternoon. Dr. SUTER. Thank you, Senator Senator MCCLELLAN. Thank you very much. The testimony this morning has been very helpful I think. From it the committee will get some better understanding maybe than it has had heretofore of what can happen if we legislate a bad policy of Government in this field. Certainly, if the Government makes an investment that results in an invention, that invention is taken by the Government to patent, and it is just put on the shelf and it is never developed, no one benefits from it, and the indications here are that in some instances inventions that could prove very beneficial to the public might never be developed and put on the market. So this subcommittee has a very difficult task of trying to unravel this problem and get some legislation that will be in the national interest. I regret the other witness is not here, but he had a right to expect to testify this afternoon. Since we will not be able to hold hearings this afternoon, we will try to hear Dr. Seevers Thursday morning. Tomorrow the subcommittee will hold hearings on copyright legislation. We had it scheduled that way. And Thursday morning at 9:30 the committee will resume hearings on the patent bills. Senator Morse is scheduled to testify on Thursday morning, at 9:30 and immediately after that we will try to hear Dr. Seevers. We are beginning early Thursday morning so as to accommodate Senator Morse. The committee will stand in recess until Thursday morning on the patent hearings, and until tomorrow morning at 10 o'clock for copyright hearings. (Whereupon, at 12:35 o'clock p.m., the subcommittee recessed, to reconvene at 9:30 o'clock a.m., Thursday, August 19, 1965.) |