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What Are The Respective Roles Of The Public And Private Sectors In Pharmaceutical Innovation?



What are the respective roles of the public and private sectors in drug development? This question is at the heart of some policy proposals, such as those that would give the government a share of profits from drugs at least partly developed with federal research dollars. This paper provides empirical data on these issues, using information included in the patents on drugs approved between 1988 and 2005. Overall, we find that direct government funding is more important in the development of "priority-review" drugs-sometimes described as the most innovative new drugs-than it is for "standard-review" drugs. Government funding has played an indirect role-for example, by funding basic underlying research that is built on in the drug discovery process-in almost half of the drugs approved and in almost two-thirds of priority-review drugs. Our analyses should help inform thinking about the returns on public research funding-a topic of long-standing interest to economists, policy makers, and health advocates.
At the Intersection of Health, Health Care and Policy
doi: 10.1377/hlthaff.2009.0917
30, no.2 (2011):332-339Health Affairs
Pharmaceutical Innovation?
What Are The Respective Roles Of The Public And Private Sectors In
Bhaven N. Sampat and Frank R. Lichtenberg
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By Bhaven N. Sampat and Frank R. Lichtenberg
What Are The Respective Roles
Of The Public And Private Sectors
In Pharmaceutical Innovation?
What are the respective roles of the public and private sectors
in drug development? This question is at the heart of some policy
proposals, such as those that would give the government a share of
profits from drugs at least partly developed with federal research dollars.
This paper provides empirical data on these issues, using information
included in the patents on drugs approved between 1988 and 2005.
Overall, we find that direct government funding is more important in the
development of priority-reviewdrugssometimes described as the most
innovative new drugsthan it is for standard-reviewdrugs. Government
funding has played an indirect rolefor example, by funding basic
underlying research that is built on in the drug discovery processin
almost half of the drugs approved and in almost two-thirds of priority-
review drugs. Our analyses should help inform thinking about the
returns on public research fundinga topic of long-standing interest to
economists, policy makers, and health advocates.
The US public and private sectors are
both involved in producing innova-
tive drug products. Although indus-
try supplies the bulk of the funds
devoted to research and develop-
ment, the public sectorprimarily the National
Institutes of Health (NIH)supports most of the
nations basic biomedical research.1,2
The question of what roles the different sectors
play has recently become central to discussions
of pharmaceutical policy. Several recent books
and articles argue that the public sector is the
main source of innovative drugs.35The issue has
been the subject of congressional debate and
even made an appearance as a talking point dur-
ing the 2008 presidential campaign, when then-
candidate Hillary Clinton argued that various
proposals for regulating drug prices were rea-
sonable because ultimately, the American tax
payer pays for the development of a lot of these
drugs through NIH grants and other kinds of
research grants.6
Recoupment Of Royalties And March-In
Rights The belief that the public sector is respon-
sible for a large share of drug development has
fueled proposals to recoup profits from gov-
ernment-funded drugsthat is, to return to
government coffers a share of the profits from
drugs that have government-owned patents, or
from drugs developed under federally funded
research and development. Provisions to allow
the government to recoup profits from patented
drugs that are at least partly developed under
federally funded research and development were
considered in, but ultimately removed from, the
legislation governing public-sector patenting
known as the Bayh-Dole Act of 1980.7
But the idea has resurfaced periodically since
then, including in proposals in 2001 from Sen.
Ron Wyden (D-OR) and in 2003 from then-Rep.
Rahm Emanuel (D-IL).8And the director of the
NIH, Francis Collins, recently suggested explor-
ing licensing agreements that include payback
doi: 10.1377/hlthaff.2009.0917
NO. 2 (2011): 332339
©2011 Project HOPE
The People-to-People Health
Foundation, Inc.
Bhaven N. Sampat (bns3@ is an assistant
professor in the Department
of Health Policy and
Management, Mailman School
of Public Health, Columbia
University, in New York City.
Frank R. Lichtenberg is the
Courtney C. Brown Professor
of Business at the Columbia
University Graduate School of
332 Health Affairs February 2011 30:2
on February 21, 2017 by HW TeamHealth Affairs by from
terms for drugs that are developed based on NIH
technologies. Should these patented products
make any money, these arrangements would
steer a share of royalties back to the government
to help fund future research.9Congress has also
noted the public interest in securing an appro-
priate returnon NIH-funded drugs, in light of
the mounting concern over the cost to patients
of therapeutic drugs.10
In addition to proposing recoupment of roy-
alties, some advocates have urged the public sec-
tor to exercise its march-inrights to reduce
drug prices, which, they argue, would also ex-
pand access to medicines. The Bayh-Dole Act
established the governmentsmarch-inright,
saying, in part, that a government funding
agency can ignore the exclusivity of a drug patent
awarded under the terms of the act and grant
additional licenses to produce the drug if certain
criteria are met.
One of those criteria is the failure of the entity
that receives the patent to satisfy what section
203 of the act calls the health and safety needs
of consumers. Thus, scholars have urged the NIH
to use this march-inauthority to ensure that
generic versions of drugs are available when pa-
tented versions are not being sold at reasonable
prices.11 Health advocacy groups have filed peti-
tions requesting the NIH to do so for a number of
important drugs.12 To date, the NIH has not
granted any of these requests.
The basic argument for recoupment is that
private firms should not receive the bulk of the
profits from drugs that resulted in significant
part from public funding. Similarly, the logic
behind using the march-in authority is that tax-
payers should not have to pay twice for publicly
funded researchonce through taxes, and once
through monopoly prices or restricted access
to drugs.
Previous academic researchincluding case
studies,13 surveys,14,15 and bibliometric analy-
ses16which combine analyses of contents and
citationsprovide support for these arguments.
The results show that public-sector research has
an important impact on drug development.
Government reports also indicate that the public
sector has played a role in the development of
particular drugs.17 Other analyses relate varia-
tions in public-sector funding across classes of
drugs to patterns of Food and Drug Admin-
istration (FDA) approval of new drugs, with
medicines more likely to be approved if the
government supported their development.2,18
These previous studies generally focused on
the overall role of public-sector funding in drug
development, including both direct and indirect
Intellectual Property Rights For recoup-
ment and march-in proposals to be feasible, the
government must have intellectual property
rightsa form of ownershipto a drug. There
are two ways for this to happen.
The first is that the government agency in-
volvedtypically the NIHholds the patent.
This has happened on a few occasions, when
research conducted at the NIH has produced a
marketable drug. A second, more common sce-
nario is when the government funds external
researchersusually at a nonprofit research
organization, such as a universityand the pat-
ent on the resulting invention acknowledges
government support in what is called a
government interest statement.19
Government ownership of patents occurs
when the government directly supports the re-
search underlying these patents. Public-sector
research can also have important indirect effects
on drug development, including the creation of
research tools used in drug development and the
production of biological knowledge that helps
guide research toward productive pathways.
Even industry representatives agree with the
widely held belief that such informational results
of basic research are important for drug devel-
Scope Of Paper In this paper we provide new
data to assist policy makers who are considering
expanding recoupment or march-in measures.
Our analyses also should help inform thinking
about the returns on public research fundinga
topic of long-standing interest to economists,
policy makers, and health advocates. How large
is the governments direct impact on, and thus
the scope for, the recoupment and march-in pol-
icies discussed above? How does this direct im-
pact compare in magnitude to the governments
indirect impact? What roles do the public and
private sectors play in pharmaceutical innova-
tion? We examine these questions below, linking
data on drug approval, patents, and consumers
drug spending to information on publications
and patents emanating from public-sector re-
Study Data And Methods
Drug Data Our analysis brings together a range
of publicly available data from such federal agen-
cies as the Patent and Trademark Office,21 the
National Library of Medicine,22 the FDA,23,24
and the Agency for Healthcare Research and
Quality (AHRQ).25
We started with all new drugsin FDA par-
lance, new molecular entities (NMEs)ap-
proved between 1988 and 2005, using data from
the Drugs@FDA database.23 This resulted in a
sample of 478 newly approved drugs. We col-
February 2011 30:2 Health Affairs 333
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lected patent information for these drugs using
information from the FDAsOrange Book,24 in-
cluding hand-coded data from hard-copy ver-
sions of the book from 1988 to 2001 and infor-
mation from electronic versions thereafter.
Focusing on new drug applications allowed us
to capture most drugs approved over this period.
To our knowledge, ours is the most comprehen-
sive study to date of the public sectors role in
pharmaceutical innovation. However, the sam-
ple did exclude some large-molecule (biotech-
nology) drugs, for reasons we discuss below.
To examine potential differential roles of pub-
lic-sector patents across different types of drugs,
we also determined whether each of the new
drugs was given priority review”—which means
that the review takes less timeby the FDA. Pri-
ority review is given to drugs that offer major
advances in treatment, or provide a treatment
where no adequate therapy exists.26 One exam-
ple is imatinib (marketed as Gleevec), a cancer-
fighting drug, which was granted priority review
in 2002 to treat a form of leukemia. Experts such
as Michie Hunt have argued that priority-review
drugs represent higher levels of innovativeness
than other drugs.27
We also collected information on sales of the
drugs in 2006, using information from the Pre-
scribed Medicines File of the Medical Expendi-
ture Panel Survey (MEPS).25
Finally, because the policy discussion about
the roles of the public and private sectors in
pharmaceutical innovation has received special
attention in the context of HIV/AIDS drugs,28 we
flagged these drugs for separate analyses, using
information from the FDA to identify them.29
Of the 478 drugs in our sample, 379 were
covered by at least one patent.30 These 379 drugs
had 1,073 distinct patents associated with them.
Because our measures of public-sector influence
were based on information in the patents asso-
ciated with drugs, we focused our analyses on
these 379 drugs. For each of the patents on these
drugs, we collected information about the pri-
mary holder of the patent; information con-
tained in the government interest statements,
discussed in the following paragraph; and all
citations in these patents to previous patents
and scientific publications.
Indicators Of Public-Sector Involvement
We defined as public-sector patents all of those
that were assigned to a government agency
(which generally resulted from research con-
ducted inside that agency) and all of those with
government interest statements (most of which
came from academic laboratories that had re-
ceived government funding, generally through
extramural research grants). The recipients of
federal research grants are required to acknowl-
edge government funding in their patent appli-
cations. These public-sector patents are the tar-
get of the recoupment and march-in strategies
discussed above.
We used citation data in the patents associated
with approved drugs as a proxy for the indirect
impact of public-sector funding. Patent appli-
cants are required to disclose any previous pat-
ents and publications that are related to their
research. At least in theory, failure to do so
can result in strong penalties for the applicant
and his or her attorney, and invalidation of the
A number of previous studies have used cita-
tion data to measure intellectual influence or
knowledge flows between public- and private-
sector researchers.16,32,33 We discuss our citation
data in detail in the Appendix.34
Li mi tati on s
:Our reliance on drugs
with patent data in the Orange Book24 potentially
excluded some biotechnology drugs. Many of
these drugs receive biological licenses rather
than patents, so they are not subject to Orange
Book listing requirements.
To examine the extent of this underrepresen-
tation, we consulted a list of biotechnology drugs
approved between 1982 and 2005.35 Overall,
57 percent of the drugs on that list were the
subject of patents and thus would be included
in our sample. Biotechnology drugs are generally
believed to be more influenced by public-sector
research than traditional pharmaceuticals are.36
Thus, any exclusion of these drugs probably
understates the importance of the public sector.
Although we dont have data for the entire
period, in 200405the last two years covered
by our datathe FDA approved seven biological
licenses, compared to forty-nine licenses for new
molecular entities.
:Our assessment of
the governments indirect role in pharmaceuti-
cal innovation relies on patent citation data.
Although citation analyses have long been used
in policy and academic research, recently econ-
The indirect influence
of the public sector on
drug development was
much larger than the
direct effect.
334 Health Affairs February 2011 30:2
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omists have expressed two concerns: that not all
citations represent real knowledge flows,37 in
which case we would be overstating the indirect
public-sector role; and that not all real knowl-
edge flows are represented in citations,38 in
which case we would be understating it.
Strategic citationthat is, deliberately not cit-
ing prior art,or all public information relevant
to a patents claim of originalityis a particular
concern. Although strategic citation appears to
be less prevalent in drug research and develop-
ment than in other fieldssuch as information
technology31,39this practice could also under-
state the magnitude of the governments indirect
obtaining patents based on government funding
are required to acknowledge this support in the
government interest statement. This is the infor-
mation we used to identify patented drugs in
whose development the public sector had a direct
role. However, the Government Accountability
Office40 and others, including Peter Arno and
Michael Davis,11 suggest that many grantees do
not comply with this requirement, which would
mean that we underestimated the direct effect.
We attempted to address this issue though sup-
plementary analyses relying on another ap-
proach to identify public-sector patents.
Study Results
Drugs With Public-Sector Influence Exhibit 1
shows the different types of public-sector influ-
ence on the drugs in our sample. The drugs that
received a public-sector patent (34 out of 379)
are the ones in which the government could theo-
retically exercise march-in authority or use a re-
coupment policy.
The data reveal striking differences between
priority-review drugs and standard-review drugs
in terms of the proportion receiving a public-
sector patent. This direct government role is
much more pronounced for the most innovative
drugsthose receiving priority review.17
The data also show that the indirect impact of
government funding is much larger than the di-
rect effect. Although fewer than 10 percent of
drugs had a public-sector patent, far larger pro-
portions of drugs had patents that cited a public-
sector patent, a government publication, or
both. In all cases, the public-sector influence
was much greater on priority-review drugs than
on those receiving a standard review.41
The indirect public-sector effect also domi-
nated the direct effort when we examined the
sales of the drugs, as reported in MEPS.25 The
478 drugs in our sample were associated with
$132.7 billion in prescription drug sales in
2006. Drugs with public-sector patents ac-
counted for 2.5 percent of these sales, while
drugs whose applications cited federally funded
research and development or government pub-
lications accounted for 27 percent (data
not shown).
Exhibit 2 shows that the difference between
standard-review and priority-review drugs is not
limited to the proportion with public-sector pat-
ents. In their patents, priority-review drugs on
average cited more public-sector patents and
government publications.
nineteen HIV/AIDS drugs we studied were ex-
ceptional in terms of all our indicators of direct
or indirect government influence (Exhibit 3).
Nearly a third of these drugs had a public-sector
patent, and close to 95 percent cited gov-
ernment-funded research.
Robustness Of Analysis Above we noted
concerns about the possibility of serious under-
disclosure of government interests in patents.
Because our main indicator of government pat-
ent ownership relies on this information, under-
disclosure could affect our results. However, pre-
vious analyses of academic patentspatents
held by a US college, university, medical school,
Exhibit 1
New Drugs Approved By The Food And Drug Administration, 19882005, With Direct Or Indirect Public-Sector Support
drugs All drugs
Number of drugs 224 155 379
Had public-sector patent 3.1% 17.4% 9.0%
Patent cited at least one public-sector patent 15.6% 39.4% 25.3%
Patent cited at least one government publication 31.3% 56.1% 41.4%
Patent cited either a public-sector patent or a
government publication 36.2% 64.5% 47.8%
SOURCE Authorsanalyses of data from Notes 2124 in text. NOTE Government publicationmeans an article in PubMed
acknowledging support from a US government agency (see Note 21 in text).
February 2011 30:2 Health Affairs 335
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or funding agency, such as the NIH42show lev-
els and patterns of public-sector influence on
drug development similar to those we found.43
To test the robustness of our results, we also
used academic patentswhich would be unaf-
fected by underreporting in government interest
statementsas an indicator of public-sector in-
fluence on our sample of drugs. We found that
12.7 percent of approved drugs had an academic
patent, including 5.8 percent of standard-review
drugs and 22.6 percent of priority-review
drugs.44 Drugs with academic patents accounted
for $3.9 billion of sales reported in MEPS in
2006.25 Here again, the indirect effect was much
larger than the direct effect, with 23.7 percent of
standard-review drugs, 45.8 percent of priority-
review drugs, and 32.7 percent of all new drugs
citing an academic patent.
Policy Implications Previous research sug-
gests that the public sector plays an important
role in pharmaceutical innovation. However,
this scholarshipwith some exceptions11,15
has not generally drawn much of a distinction
between direct versus indirect roles. Using pat-
ent and bibliometric data, we found that the
indirect influence of the public sector on drug
development was much larger than the direct
effect. Both effects were much greater for prior-
ity-review than for standard-review drugs.
This analysis underscores why it is important
to distinguish between the direct and indirect
roles of government funding in pharmaceutical
innovation. For example, policies such as re-
coupment and march-in would apply only to
drugs in whose development the government
had played a direct role.
At least for the drugs in our sample, our esti-
mates suggest that this direct role was relatively
small, and the aggregate economic impact of
such policies would therefore be limited. To be
sure, there could be other arguments for these
policies beyond their economic impact. For ex-
ample, policy makers might want to curb the use
of patents to restrict patientsaccess to medi-
cines developed through taxpayer rather than
private-sector funding no matter how rare that
use is. These are, ultimately, ethical issues.
Finally, our analyses suggest the need to be
careful in generalizing from one drug class to
another. Our data suggest that the class of drugs
for HIV/AIDS is an outlier: Both the direct and
the indirect roles of the public sector were more
pronounced for this class than for others.45 This
may reflect the success of advocates for people
with HIV/AIDS in lobbying for NIH funding for
both basic and clinical research on HIV and
AIDS, and also in stimulating FDA approval of
drugs for HIV/AIDS.46
Exhibit 2
Drugs Whose Patents Cited Other Patents Or Publications Receiving Public Funds
Average number of patents cited 33.4 27.1
Average number of public-sector patents cited 1.4 2.5
Average percent of public-sector patents cited 2.6% 9.6%
Average number of publications cited 13.9 21.8
Average number of government publications cited 2.8 6.8
Average percent of government publications cited 19.0% 30.7%
SOURCE Authorsanalyses of data from Notes Notes 2124 in text. NOTES Government publicationmeans an article in PubMed
acknowledging support from a US government agency (see Note 21 in text). Average percent of public-sector patents cited was
computed for drugs whose patents cited at least one other patent. Average percent of government publications cited was
computed for drugs whose patents cited at least one publication.
Exhibit 3
Public-Sector Influence On HIV/AIDS Drugs Versus Other Drugs
Percent of publications cited
that were public sector
Percent covered by a
public-sector patent
Percent citing at least one
public-sector patent
Percent citing at least one
public-sector publication
Percent citing either a public-sector
patent or publication
Percent of patent citations
that were to public-sector patents
HIV/AIDS drugs
Other drugs
SOURCE Authorsanalyses of data from Notes 2124 in text. NOTE Therewere19HIV/AIDSdrugs
and 360 other drugs.
336 Health Affairs February 2011 30:2
on February 21, 2017 by HW TeamHealth Affairs by from
Conclusions Our work provides new evi-
dence for policy discussions about the roles of
the public and private sectors in pharmaceutical
innovation, although our findings are subject to
all of the caveats discussed above.
We found that government supportthrough
publicly funded researchhad a large indirect
impact on pharmaceutical innovation. The direct
effect of government supportthat is, cases
where the government owns the patents outright
or has claims on the intellectual property in-
volved in the drugsdevelopmentis more lim-
ited, but still large for the most innovative drugs,
those whose applications received priority re-
view by the FDA.
Future research should extend our analyses to
broader contexts, such as biotechnology drugs
and drugs currently under development; exam-
ine other channels of public-sector involvement,
including the funding of clinical trials; and com-
plement our quantitative results with small-
sample case studies.
This work was supported in part by an
unrestricted grant from the Merck
Foundation to the Columbia-Stanford
Consortium on Medical Innovation.
Bhaven Sampat also received financial
support from the Robert Wood Johnson
Foundations Investigator Award
Program and from the Ford Foundation.
Both authors were paid consultants on a
project for the Office of Science Policy
of the National Institutes of Health,
from which the idea for this paper
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accounted for only 5 percent of sales
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[Internet]. Washington (DC): BIO;
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36 Powell W, Koput K, Smith-Doerr L.
Interorganizational collaboration
and the locus of innovation: net-
works of learning in biotechnology.
Adm Sci Q. 1996;116(41):11645.
37 Alcácer J, Gittelman M, Sampat B.
Applicant and examiner citations in
US patents: an overview and analy-
sis. Res Policy. 2009;38(2):41527.
38 Roach M, Cohen W. Patent citations
as indicators of knowledge flows
from public research [Internet]. Pa-
per presented at: International
Schumpeter Society Conference on
Innovation, Organisation, Sustain-
ability, and Crises; 2010 Jun 2124;
Aalborg, Denmark. Available from:
39 Lampe R (DePaul University, College
of Commerce). Strategic citation
[Internet]. Rochester (NY): Social
Science Research Network; 2010 Jan
29 [cited 2011 Jan 18]. (Working
Paper Series; abstract only). Avail-
able from:
40 US Government Accountability Of-
fice. Technology transfer: reporting
requirements for federally spon-
sored inventions need revision [In-
ternet]. Washington (DC): GAO;
1999 Aug 12 [cited 2011 Jan 3].
Available from: http://www.gao
41 Many scholars, such as Carolyn
Asbury, believe that public-sector
research has traditionally played an
especially prominent role in the de-
velopment of orphan drugsdrugs
that target rare diseases. To investi-
gate this question, we looked sepa-
rately at drugs with and without or-
phan designations, as indicated at
Drugs@FDA. About 16 percent (59 of
379) of the drugs in our sample were
orphan drugs. These drugs were
more likely to have NIH patents than
nonorphans (24 percent versus
6 percent; p0:01) and more likely
to cite NIH patents or publications
(66 percent versus 44 percent;
p<0:01). Asbury CH. Orphan drugs:
medical versus market value.
Lexington (MA): Lexington
Books; 1985.
42 Azoulay P, Michigan R, Sampat B.
The anatomy of medical school pat-
enting. N Engl J Med. 2007;
43 Sampat B. Academic patents and
access to medicines in developing
countries. Am J Public Health.
44 Most of the drugs that we studied
(324 of 379) had neither academic
patents nor patents citing
government funding. A handful (7)
had NIH patents but not academic
patents. And some (21) had no pat-
ents indicating government funding
but did have academic patents.
45 When Salomeh Keyhani and col-
leagues examined data on NIH
funding of clinical trials, they found
that the NIH role was much stronger
with HIV drugs than other classes of
drugs. Keyhani S, Diener-West M,
Powe N. Do drug prices reflect de-
velopment time and government
investment? Med Care. 2005;
46 Epstein S. Impure science: AIDS,
activism, and the politics of knowl-
edge. Berkeley (CA): University of
California Press; 1996.
338 Health Affairs February 2011 30:2
on February 21, 2017 by HW TeamHealth Affairs by from
Bhaven N. Sampat
is an assistant
professor in the
Department of
Health Policy and
Management at
Mailman School of
Public Health.
Bhaven Sampat and Frank
Lichtenberg, both of Columbia
University, tackle a key question in
this paper: What are the respective
contributions of the government
and the private sector in research
and development of new
pharmaceutical drugs?
Drawing on information
contained in drug patents, among
other sources, they find that direct
government funding is important
in research and development for
the most innovative new drugs,
which typically proceed through
the Food and Drug Administra-
process for approval. Direct
government funding is less
important for research and
development on so-called standard-
review drugs that proceed through
the FDAs normal review process.
Their analysis can be helpful in
understanding the merits of
various policy proposals, the
authors saysuch as those that
would attempt to recapture a share
of drug profits and return them to
the government.
Frank R.
Lichtenberg is the
Courtney C. Brown
Professor of
Business at the
Columbia University
Graduate School of
Sampat is an assistant professor
in the Department of Health Policy
and Management at the Mailman
School of Public Health. His
coauthor, Lichtenberg, is the
Courtney C. Brown Professor of
Business at the Columbia
University Graduate School of
Business and a research associate
of the National Bureau of
Economic Research.
Both authors have a long-
standing interest in the economic
and health returns from biomedical
innovation, and in how public
policies affect the rate and
direction of innovation in
medicine. Their collaboration
began as they conducted research
on medical technologies under the
auspices of the Columbia-Stanford
Consortium on Medical Innovation,
funded by the Merck Foundations
Program on Policy Issues in the
Pharmaceutical Industry. The idea
for this paper crystallized after the
National Institutes of Health (NIH)
Office of Science Policy asked them
and other researchers to help think
about measuring the effects of the
research it funded. This office
provided a sounding board, Sampat
says, for our ideas about potential
measures and empirical
The authors note that although
they view their paper as a
comprehensive study, they take
seriously the caveats offered in the
paper that may contribute to an
underestimation of the public-
sector role. For instance, they ask,
does underreporting of government
interests lead to an understatement
of the public-sector role? The pair
say that they plan to continue to
collaborate on these issues.
Sampat earned all of his
undergraduate and graduate
degrees from Columbia University,
receiving a doctorate in economics
before returning to Columbia in
economics came from the
University of Pennsylvania. He won
the 2010 Garfield Economic Impact
award from Research!America for
research on how new cancer drugs
have affected cancer survival in the
United States.
February 2011 30:2 Health Affairs 339
on February 21, 2017 by HW TeamHealth Affairs by from
... There has been extensive discussion about the contribution of the pharmaceutical industry to resolving the coronavirus pandemic, with some critics arguing that industry has profited from the support of government [1][2][3][4]. This has galvanized an ongoing and age-old debate regarding how much drug development actually costs private industry versus the public, especially considering how much is attributable to public investment in early science [5][6][7][8][9][10][11][12][13][14][15]. Apologists for the industry have pointed to its key role in bringing together capital and expertise to bring vaccines through clinical trials, secure regulatory approvals, and operationalize the mass manufacturing [16][17][18]. ...
... For example, one study [12] found NIH funding could be linked directly or indirectly to all 210 new drugs without exception that the FDA had approved between 2010-2016. Other studies have identified a link to public sector funding for 50-75% of new drugs [10,[12][13] and that as many as half of all industry patents cite prior art from public institutions [12,14,15]. This is not to understate the critical and substantive role of industry which has been estimated to provide two-thirds of the total investment in life sciences in the United States [35], but rather to underscore the importance of the upstream public contribution to understanding and treating disease that undergirds commercial innovation. ...
Background: The private versus public contribution to developing new health knowledge and interventions is deeply contentious. Proponents of commercial innovation highlight its role in late-stage clinical trials, regulatory approval, and widespread distribution. Proponents of public innovation point out the role of public institutions in forming the foundational knowledge undergirding downstream innovation. The rapidly evolving COVID-19 situation has brought with it uniquely proactive public involvement to characterize, treat, and prevent this novel health treat. How has this affected the share of research by industry and public institutions, particularly compared to the experience of previous pandemics, Ebola, H1N1 and Zika? Methods: Using Embase, we categorized all publications for COVID-19, Ebola, H1N1 and Zika as having any author identified as affiliated with industry or not. We placed all disease areas on a common timeline of the number of days since the WHO had declared a Public Health Emergency of International Concern with a six-month lookback window. We plotted the number and proportion of publications over time using a smoothing function and plotted a rolling 30-day cumulative sum to illustrate the variability in publication outputs over time. Results: Industry-affiliated articles represented 2% (1,773 articles) of publications over the 14 months observed for COVID-19, 7% (278 articles) over 7.1 years observed for Ebola, 5% (350 articles) over 12.4 years observed for H1N1, and 3% (160 articles) over the 5.7 years observed for Zika. The proportion of industry-affiliated publications built steadily over the time observed, eventually plateauing around 7.5% for Ebola, 5.5% for H1H1, and 3.5% for Zika. In contrast, COVID-19's proportion oscillated from 1.4% to above 2.7% and then declined again to 1.7%. At this point in the pandemic (i.e., 14 months since the PHEIC), the proportion of industry-affiliated articles had been higher for the other three disease areas; for example, the proportion for H1N1 was twice as high. Conclusions: While the industry-affiliated contribution to the biomedical literature for COVID is extraordinary in its absolute number, its proportional share is unprecedentedly low currently. Nevertheless, the world has witnessed one of the most remarkable mobilizations of the biomedical innovation ecosystem in history.
... The pandemic has changed the distribution of labour in funding pharmaceutical innovation. The pre-pandemic structure involved significant public funding for basic science research combined with significant private funding to undertake clinical drug development and to scale-up manufacturing in order to translate new discoveries from the basic sciences into a marketable medical product [8,9]. The urgent global need for vaccines and treatments for COVID-19 disrupted this model. ...
... Bei der Erstellung des Datensatzes zu NME-Anmeldungen und den verknüpften Patenten folgen wir Sampat und Lichtenberg (2011). Aus dem Orange Book entnehmen wir die Verknüpfung der NME-Anmeldungen mit den Nummern der Patente, auf die sich die Zulassungen stützen. ...
Full-text available
Zusammenfassung Die Innovationskraft von Forschungsleistungen wird oft an Inputs wie Forschungsmitteln oder Outputs wie Patentanmeldungen gemessen. Hier wird ein neuartiger Indikator für pharmazeutische Innovationskraft vorgestellt, der sich auf die weltweiten medizinischen Durchbrüche und die assoziierten Patente konzentriert. Demnach sind US-Unternehmen von 2010 bis 2019 für 55 % der weltweiten medizinischen Durchbrüche verantwortlich, ihre deutschen Konkurrenten für rund 9 %. Bei den zugrundeliegenden Ankerpatenten ist die Dominanz der USA mit 62 % noch größer — aus Deutschland kommen nur 7 % der Ankerpatente. US-Universitäten halten 3,8 % aller Ankerpatente — deutsche Universitäten keine. Die Schwäche der deutschen Universitäten kann nicht durch die deutschen außeruniversitären Forschungsinstitute ausgeglichen werden.
Publicly funded research leads to the development of many new drugs, but the profits are largely reaped by big pharmaceutical companies through exclusive licensing deals, mergers and acquisitions, which can reduce competition and patients’ access to medicines.
We analyze the association that pharmaceutical innovation had with premature mortality from all diseases in Switzerland during the period 1996–2018, and its association with hospital utilization for all diseases in Switzerland during the period 2002–2019. The analysis is performed by investigating whether the diseases that experienced more pharmaceutical innovation had larger subsequent declines in premature mortality and hospitalization. Pharmaceutical innovation is measured by the growth in the number of drugs used to treat a disease ever registered in Switzerland. Utilization of a chemical substance reaches a peak 9–12 years after it was first launched, and then declines. Our estimates indicate that the number of years of potential life lost before ages 85, 75, and 65 is significantly inversely related to the number of chemical substances ever registered 6–9, 3–9, and 0–9 years earlier, respectively. The new chemical substances that were registered during the period 1990–2011 are associated with reductions in the number of years of potential life lost before ages 85, 75, and 65 in 2018 of 257 thousand, 163 thousand, and 102 thousand, respectively. The number of hospital days is significantly inversely related to the number of chemical substances ever registered 8–10 years earlier. The new chemical substances that were registered during the period 1994–2010 are associated with reductions in the number of hospital days in 2019 of 2.07 million. Average length of inpatient hospital stays is significantly inversely related to the number of chemical substances ever registered 2–10 years earlier. The new chemical substances that were registered during the period 1999–2015 are associated with reductions in the average length of stays in 2019 of 0.4 days. Under the assumption that pharmaceutical innovation is exogenous with respect to premature mortality and hospitalization, and that it is uncorrelated with other potential determinants of health outcomes, if we ignore the reduction in hospital utilization associated with previous pharmaceutical innovation, a rough estimate of the cost per life-year before age 85 gained in 2018 is € 14,310. However, about 85% of the 2018 expenditure on drugs registered during the period 1990–2011 may have been offset by the reduction in expenditure on inpatient curative and rehabilitative care. The net cost per life-year before age 85 gained in 2018 may therefore have been € 2201.
The relationships between innovation and firm misconduct have received little attention. We contribute to advancing understanding of misconduct in several ways. First, we find support for previous research on firm misconduct that finds that strain can contribute to unethical firm behavior. Theoretically, our contribution provides evidence in support of the novel idea that strain that results from innovation deficits promotes misconduct. We also contribute to the growing literature on ethical organizational cultures by providing evidence linking weak ethical cultures in the pharmaceutical industry with increased harm to patients. A large body of non-quantitative literature argues that many pharmaceutical firms engage in misconduct in order to promote sales and overcome innovation deficits. We find support for the conclusion that misconduct constitutes a substitute for all measurable categories of drug innovation.
When examining the prices of new medicines, the question of how much the private and public sectors have contributed to their R&D is often raised. Contributions can be assessed in terms of the investment, authorship of publications, marketing authorizations and intellectual property rights associated with biopharmaceutical R&D. This review of the empirical evidence underlines the complementary and interwoven nature of the private and public sectors in supporting biopharmaceutical R&D. Both sectors invest in and contribute to biopharmaceutical R&D, with the public sector predominantly focusing on basic research and the private sector mainly targeting medicine discovery and development. Public-sector investment generates additional private-sector investment.
Full-text available
Zusammenfassung Zusammenfassung Dieses Kapitel bietet eine Darstellung und Einordnung innovativer Lösungsvorschläge jenseits inkrementeller Ansätze zur Bezahlbarkeit von hochpreisigen, patentgeschützten Spezialpräparaten. Die Autor:innen diskutieren mögliche Maßnahmen zur Preissenkung durch Veränderung geistiger Eigentumsrechte und arzneimittelrechtlicher Schutzrechte, Anpassungen in der Preisbildung sowie Veränderungen im Forschungs- und Entwicklungssektor einschließlich etwaiger Evidenzen in deren Wirksamkeit. Schließlich werden Lösungsvorschläge hinsichtlich ihrer Realisierbarkeit und nötiger struktureller Systemveränderungen aus deutscher Perspektive erörtert.
Full-text available
We argue in this paper that when the knowledge base of an industry is both complex and expanding and the sources of expertise are widely dispersed, the locus of innovation will be found in networks of learning, rather than in individual firms. The large-scale reliance on interorganizational collaborations in the biotechnology industry reflects a fundamental and pervasive concern with access to knowledge. We develop a network approach to organizational learning and derive firm-level, longitudinal hypotheses that link research and development alliances, experience with managing interfirm relationships, network position, rates of growth, and portfolios of collaborative activities. We test these hypotheses on a sample of dedicated biotechnology firms in the years 1990-1994. Results from pooled, within-firm, time series analyses support a learning view and have broad implications for future theoretical and empirical research on organizational networks and strategic alliances.•.
Full-text available
Rising prescription drug prices have become a pressing national issue. Hidden from most public discussions is the nature of the public/private relationship when government funds part or all of the research costs. This relationship is inherently problematic, as it introduces conflicts of interest and tends to violate underlying beliefs about private enterprise, government industrial policies, and the market economy. A major part of all new drug development-and an even larger portion of those "blockbuster" developments which are truly innovative-is due to government, usually federal, subsidization. In part this relates to favorable tax treatment, but an even larger amount is the product of direct federal investment in research. Sometimes this research reaches patentable levels, and federal patents are made available to private industry through exclusive licenses.This defies the underlying basis for patent law that the resulting monopoly is a means of returning R & D costs, which in the case of federal patents, have not been borne by the licensee and therefore do not exist to be returned. Other times, federally-funded research enables recipients, including universities but also private enterprises, to obtain patents on their own. The Patent Law, through its "Bayh-Dole" provisions, 35 U.S.C. Section 209, requires such recipients to include in the patent itself, a legend that the invention was obtained with government funds. Such patents are subject to "march-in" rights, the most important of which is the right of the government to license the patent to others if the patentee does not make the invention available to the public on "reasonable terms." The language of the statute and its legislative history clearly indicate this means reasonable prices. Thus, present federal law includes a powerful price control provision. Since it was enacted in 1980, however, it has not been used by any administration, Republican or Democratic. Congressional reviews reveal massive noncompliance of Bayh-Dole by industry, and a willing ignorance by administrative agencies. Each administration has refused to enforce Bayh-Dole, and several have announced that, despite the clear dictates of the law, they do not intend to enforce it. Recognizing the conflicts underlying such federal/private relationships, and the failure of their regulating provisions, it is surely in the public interest to revisit such relationships and enforce this law.
"Why do life-saving prescription drugs cost so much? Drug companies insist that prices reflect the millions they invest in research and development. In this gripping exposé, Merrill Goozner contends that American taxpayers are in fact footing the bill twice: once by supporting government-funded research and again by paying astronomically high prices for prescription drugs. Goozner demonstrates that almost all the important new drugs of the past quarter-century actually originated from research at taxpayer-funded universities and at the National Institutes of Health. He reports that once the innovative work is over, the pharmaceutical industry often steps in to reap the profit. Goozner shows how drug innovation is driven by dedicated scientists intent on finding cures for diseases, not by pharmaceutical firms whose bottom line often takes precedence over the advance of medicine. A university biochemist who spent twenty years searching for a single blood protein that later became the best-selling biotech drug in the world, a government employee who discovered the causes for dozens of crippling genetic disorders, and the Department of Energy-funded research that made the Human Genome Project possible--these engrossing accounts illustrate how medical breakthroughs actually take place. The $800 Million Pill suggests ways that the government's role in testing new medicines could be expanded to eliminate the private sector waste driving up the cost of existing drugs. Pharmaceutical firms should be compelled to refocus their human and financial resources on true medical innovation, Goozner insists. This book is essential reading for everyone concerned about the politically charged topics of drug pricing, Medicare coverage, national health care, and the role of pharmaceutical companies in developing countries."
The recoupment measures to check the unfair pricing and federal research expenditures are discussed. The congress and health personnels have proposed legislative recoupment measures to place a regulation on the academic and other non profit research institutions by imposing levies on their royalty income streams. But these proposals are expected to be widely opposed mainly because of unfounded assumption of a casual relationship between industry pricing policies and academic institutions. The majority of the National Institute of Health (NIH) sponsered research and other federally funded scientific research generate a substantial social return on the investments.
There is concern that patent examiners lack the resources, capabilities, and incentives to properly identify the prior art against which patent applications are evaluated and that, as a result, they issue a large number of low-quality patents. In this context, the extent to which applicants have incentives to contribute prior art is an important question. This paper uses data on examiner and applicant citations in U.S. patents to examine this question. The data show that applicants contribute a surprisingly low share of citations to previous patents and routinely fail to identify even their own previous patents. However, there are also stark differences across fields. Within fields, and even within firms, there is self-sorting: applicants contribute more prior art for their more important inventions. The results suggest that incentives to search for prior art vary across industries and inventions, which reflects underlying differences in the strategic reasons for obtaining patent protection. (c) 2010 by The University of Chicago. All rights reserved..
Innovation and technological change, long recognized as the main drivers of long-term economic growth, are elusive notions that are difficult to conceptualize and even harder to measure in a consistent, systematic way. This book demonstrates the usefulness of patents and citations data as a window on the process of technological change and as a powerful tool for research on the economics of innovation. Patent records contain a wealth of information, including the inventors' identity, location, and employer, as well as the technological field of the invention. Patents also contain citation references to previous patents, which allow one to trace links across inventions. The book lays out the conceptual foundations for such research and provides a range of interesting applications, such as examining the geographic pattern of knowledge spillovers and evaluating the impact of university and government patenting. It also describes statistical tools designed to handle methodological problems raised by the patent and citation processes. The book includes a CD with complete data on 3 million patents with more than 16 million citations and a range of author-devised measures of the importance, generality, and originality of patented innovations.
In this paper, we use data from the Carnegie Mellon Survey on industrial R&D to evaluate for the U.S. manufacturing sector the influence of "public"(i.e., university and government R&D lab) research on industrial R&D, the role that public research plays in industrial R&D, and the pathways through which that effect is exercised. We find that public research is critical to industrial R&D in a small number of industries and importantly affects industrial R&D across much of the manufacturing sector. Contrary to the notion that university research largely generates new ideas for industrial R&D projects, the survey responses demonstrate that public research both suggests new R&D projects and contributes to the completion of existing projects in roughly equal measure overall. The results also indicate that the key channels through which university research impacts industrial R&D include published papers and reports, public conferences and meetings, informal information exchange, and consulting. We also finnd that, after controlling for industry, the influence of public research on industrial R&D is disproportionately greater for larger firms as well as start-ups.
Prior art patent citations have become a popular measure of patent quality and knowledge flow between firms. Interpreting these measurements is complicated, in some cases, because prior art citations are added by patent examiners as well as by patent applicants. The U.S. Patent and Trademark Office (USPTO) adopted new reporting procedures in 2001, making it possible to measure examiner and applicant citations separately for the first time. We analyzed prior art citations listed in all U.S. patents granted in 2001–2003, and found that examiners played a significant role in identifying prior art, adding 63% of citations on the average patent, and all citations on 40% of patents granted. An analysis of variance found that firm-specific variables explain most of the variation in examiner-citation shares. Using multivariate regression, we found that foreign applicants to the USPTO had the highest proportion of citations added by examiners. High-volume patent applicants had a greater proportion of examiner citations, and a substantial number of firms won patents without listing a single applicant citation. In terms of technology, we found higher examiner shares among patents in electronics, communications, and computer-related fields. Taken together, our findings suggest that firm-level patenting practices, particularly among high-volume applicants, have a strong influence on citation data and merit additional research.