Prescription for Worry? Drug Firms Outsource Research to Universities

How do research ideas in universities turn into products people use? This "ivory tower" is actually the Coit Tower, a tourist destination in San Francisco. CREDIT: Josh Bishop on Flickr View full size image

Few ivory tower ideas reach the world below. University research often looks too far in the future and is too removed from everyday life and things that people might use. Occasionally, however, a researcher will hit on an idea that has more immediate promise. The University of Colorado recently received $30 million from investment companies for a single invention by one of its faculty members: a new use for Botox that the researcher began developing in the 1990s. 

"That doesn't happen often," said David Allen, vice president at Colorado's technology transfer office. 

Tech transfer offices consider themselves "very successful" if they earn even $1 million on an idea generated by faculty, said Todd Sherer, president of the Association of University Technology Managers. The local paper the Daily Camera reported on the earnings March 24. 

The unusually high, but rare, single payout gives a glimpse into how university research gets turned into technology people use and money for inventors and their schools. Expect more such deals in the future, some experts say, as the drug companies and universities strengthen their early-stage research ties. Consequences might include cheaper drugs, but also create a need for more careful monitoring to ensure university research stays open and unbiased.

What happened in Colorado

In 1998, a member of the University of Colorado medical faculty came to the Technology Transfer Office with the idea to use Botox, best known for temporarily smoothing wrinkles, as a treatment for urinary incontinence in people with neurological conditions such as spinal cord injuries or multiple sclerosis. Botox relaxes the bladder muscles, helping those patients store urine for longer. 

Finding a new use for a drug that already exists is considered patentable, so Colorado's tech office helped the researcher usher the idea through the U.S. patenting process. They then licensed the patent to the medical company Allergan. Allergan and several other partners tested Botox for urinary incontinence in clinical trials around the world.

Last August, Allergan received U.S. Food and Drug Administration approval for this new use of Botox, which now tops the list on Botox's website. After receiving FDA approval, the tech transfer office arranged an auction to sell a portion of its future royalties to one of seven financial organizations that back new drugs. It was that auction that earned the university its millions. 

While all that may sound like a lot of steps, processes like these are the only direct conduit through which publicly funded basic research in a university ever turns into everyday products. In 1980, the passage of the Bayh-Dole Act  (sponsored by senators Birch Bayh, an Indiana Democrat, and Bob Dole, a Republican from Kansas) gave universities the rights to faculty inventions funded by government grants. Since then, tech transfer offices have worked to license patents, support startups and, when possible, earn funding for their schools. 

What happens to the money?

Different universities have slightly different policies about who gets how much from licensing and royalty deals. In the Colorado Botox case, the researcher who first developed the idea (and who is no longer with the university) will get 25 percent of the money. The tech transfer office will receive 35 percent and the professor's department, the medical campus, 40 percent.  

The payout is very large for university-held rights, though some of the largest university payouts are in the hundreds of millions, including two deals at Emory University in Atlanta, where Sherer serves in the tech transfer office. When asked what the average idea filed at a tech office earns, however, Sherer answered, "Yeah, zero." 

Generally less than 1 percent of the ideas filed with tech offices ever recoup the costs of supporting an invention through patenting and licensing, Sherer said. At the University of Colorado, among the ideas that earn anything, most receive less than $500,000, Allen said. 

The biggest earners for universities are drugs, but because many drugs that were promising in the lab won't work upon further testing, those patents are also the rarest. "The risks are much higher there and of course, the returns are much greater," Sherer said. 

The past and future of tech transfer

Sherer's own tech transfer office at Emory pioneered the auction process for drug royalties, which can be especially lucrative for universities. In 2005, Emory performed the world's first university royalty auction, on its future earnings for an HIV drug.  

"The market became more competitive post-Emory in terms of more people being interested and prices being paid for them got better," said John Gourary, a New York-based lawyer for Covington & Burlington LLP.  He advises universities, biotech companies and banks about acquisitions and royalty sales. The market for universities' and small biotech companies' royalties grew through 2007 until the economic collapse in the U.S. in 2008. Recently, such transfers have picked up again, Gourary said.

While the size of individual payouts has not necessarily grown since 2005, they are much more frequent now, Gourary said. The pharmaceutical industry's continued growth, with increasing numbers of clinical trials and FDA approvals of drugs, mean more opportunities for such deals. 

Though there's no data to confirm it, tech transfer experts also say they've seen pharmaceutical companies rely more than ever on universities to discover new drugs. (The only available data tabulate the overall amount of industry funding in academia, which has decreased since surveys in 1985 and 1995.) 

Traditionally, universities performed very early-stage, basic research and the drug industry took it from there. Now they're meeting more in the middle, said Sherer and Christopher Milne, associate director at the Tufts Center for the Study of Drug Development in Boston. 

Companies turn to universities for fresh thinking and to cut costs. University funds and government grants help pay for academic researchers' labs and salaries, so companies don't have to support those labs themselves. Universities, meanwhile, are making up for reduced federal and state funding with drug company support. 

"This is the way research is going to be done going forward," Milne said. "For better or worse, that's just the way it's going to be."

Consequences for consumers

Milne said he thinks the trend will reduce drug costs for patients because it reduces costs for drug companies, which will pass their savings on. He also thought the new collaborations are a good way to combine expertise and tackle difficult-to-conquer diseases, such as cancer. 

Researchers who study medical ethics stress that as with any collaboration, universities need to disclose and monitor any relationships they strike up with drug companies. 

Howard Brody, a physician and researcher at the University of Texas Medical Branch in Galveston, cautioned against creating a culture where scientists feel obligated toward drug companies for their financial support or even expect they'll reap the monetary benefits of a sold patent, rather than seeing royalties as a very rare surprise. "My concern is that when the bottom line is money," he said, "we're going to see too much tolerance" of known negative consequences of industry collaborations, including the suppression of papers that find the company's product doesn't work.

However, unlike the consulting and speakers' fees for doctors other news outlets have reported on, research collaborations make sense for universities, whose mission is to create new knowledge, said Eric Campbell, who studies doctors' conflicts of interest at Harvard University. One way of checking the appropriateness of  industry collaboration is to see if it creates new papers and patents, he said.   

"I think clearly we want [academia-industry] research relationships," he said. "Those relationships have been shown to be associated with new products and services." 

At the same time, he said, "The risks of all these kind of relationships are really important and they need to be managed."

This story was provided by InnovationNewsDaily, a sister site to LiveScience. You can follow InnovationNewsDaily staff writer Francie Diep on Twitter @franciediep. Follow InnovationNewsDaily on Twitter @News_Innovation, or on Facebook.