[Ip-health] Dr. Elias Zerhouni defends Sanofi/Army proposed license on Zika patents, and KEI responds

Zack Struver zack.struver at keionline.org
Wed Mar 22 09:07:07 PDT 2017


​Dr. Elias Zerhouni defends Sanofi/Army proposed license on Zika patents,
and KEI responds​

​Submitted by James Love on 22. March 2017 - 9:42

On March 21, 2017, the New York Times published a letter signed by Dr.
Elias Zerhouni, defending the proposed Sanofi monopoly on the US Army
patents to the Zika virus. The letter is available from the NYT from the
following link, and also reprinted here, followed by commentary.


To the Editor:

Re “Trump Should Avoid a Bad Zika Deal” (Op-Ed, March 11):

Bernie Sanders, in our view, doesn’t seem to recognize the importance of
government-industry partnerships in protecting the public from potentially
devastating infectious diseases. Vaccine development entails tremendous
costs and risks, especially for an emerging and poorly understood epidemic
like Zika.

To tackle the problem, the United States government is working with a
number of different manufacturers who are competing to develop a potential
Zika vaccine.

As part of this process, the Walter Reed Army Institute of Research has
publicly offered its own vaccine candidate for licensing. Under the license
agreement — and assuming the vaccine succeeds — my company, Sanofi, would
make significant milestone and royalty payments to Walter Reed, allowing
the United States government to recoup its investment.

Our work on the Zika vaccine will be led by Sanofi scientists based in the
United States, where we employ some 15,000 people.

Sanofi has decades of experience in vaccine development and manufacturing.
We have partnered with governments and N.G.O.s around the world, ensuring
access to lifesaving vaccines at reasonable prices, and we are proud of our
continued efforts to do so.


The writer, president of global research and development for Sanofi, a drug
company, is a former director of the National Institutes of Health.

As the letter indicates, Dr. Zerhouni is the former head of the U.S.
National Institutes of Health (NIH), and he is now working for Sanofi, a
Paris-based pharmaceutical company with a current market value of $115
billion. There are several things one can say about the Zerhouni letter.

First, Zerhouni asserts that Sanofi would make "significant milestone and
royalty payments to Walter Reed, allowing the United States government to
recoup its investment." Of course, the Army has refused to say what the
royalty and milestone obligations would be, and perhaps Sanofi can put that
in the record, since the Army won't. But, we can look at the NIH to see how
this might play out. In 2015, the NIH budget was $30.4 billion. The
combined revenue from all licensing activities was $147 million, or less
than 0.5-percent of the NIH budget. The milestone portion of the $147
million was tiny [1], by the way. If the Army wanted to get back the
risk-adjusted costs of its investments, it is doubtful that would happen.
Most NIH and Army licenses are royalty bearing, in the single digits.
Typical licensing terms would probably be royalties in the 3 to 7 percent
range, but who knows about this case, since it's a state secret, so far,
being negotiated with a former U.S. government employee, now representing a
foreign drug company.

Also relevant is the fact that the government can and does get royalties
and milestone payments from non-exclusive licenses as well. No one objects
to Sanofi getting a non-exclusive license for the Zika patents. Zerhouni
and Sanofi want an exclusive, a monopoly. Note that in 2015, the NIH issued
275 licenses, and only 13 were exclusive [2], so it's certainly not only
possible to use non-exclusive licenses, but it happens an average of 5
times every week at the NIH, as compared to once every 4 weeks for an
exclusive license.

One of the reasons for using a non-exclusive license, and indeed a reason
directly addressed by 35 U.S.C. § 209(a), is that Sanofi does not need an
exclusive license to induce investment in the vaccine. In this case, the
U.S. government is paying Sanofi directly for the development of the
vaccine, and the U.S. government is itself conducting the clinical trials
for the vaccine. Zerhouni does not mention that Sanofi is paid for its work
on Zika, so they aren't spending their money, they are spending our money
to develop the vaccine.

Zerhouni mentions that Sanofi has 15,000 U.S. employees. He does not
mention that Sanofi has 95,000 employees working outside the United States,
or that most of the U.S. employees are involved in selling the drugs, not
conducting R&D.

Zerhouni claims that Sanofi has "partnered with governments and N.G.O.s
around the world, ensuring access to lifesaving vaccines at reasonable
prices." I'm sure they can come up with a few examples, but that ignores
plenty of examples, indeed the more common examples, where Sanofi has been
aggressive on pricing, and discriminated against U.S. citizens on pricing
and access.

In 2012, Sanofi put the colon cancer drug Zaltrap on the US market at a
price of $11,000 per month. Doctors at Sloan Kettering refused to give the
drug to patients [3] because it was too expensive, forcing Sanofi [4] to
cut the price. In 2014, NICE rejected Zaltrap as being too expensive [5].

In 2014, Sanofi put Cerdelgat, a new drug for Gaucher disease, on the
market at a price of $310,250 per year. The key patent for this drug was
6,916,802, and was licensed from the University of Michigan. According to
the patent:

The present invention was supported by grant nos. R01 DK41487, R01 DK69255
and RO139255 from the National Institutes of Health, contract R43 CA 58159
from the National Cancer Institute, grant GM 35712 from the National
Institute of General Medical Sciences, and by the University of Michigan
Comprehensive Cancer Center grant 2P30 CA 46592 from the National Cancer
Institute, U.S. Public Health Service, DHHS. Grant number for Merit Award
from Veteran's Administration.

Note that Cerdelgat would have competed against Ceredase, another very
expensive government funded drug for Gaucher disease, except that Sanofi
sells both products.

When Sanofi faced a critical manufacturing problem for Fabrazyme, a drug
that can cost one million dollars in four years, the company rationed
Americans, but not Europeans, in order to protect its market share in
Europe, where Sanofi faced competition from Shire. And, Sanofi also
benefited from a very suspicious patent licensing agreement with Shire that
was immediately preceded by an agreement with Shire to withdraw an
application to sell its competing product in the Untied States, protecting
the Sanofi monopoly in the United States. Fabrazyme was also a government
funded invention. See: FTC Urged to Probe Shire, Sanofi & Icahn Med School
Over A ‘Conspiracy’ [6], WSJ, Jul 15, 2014, and "KEI asks FTC to
investigate Shire decision to abandon efforts to compete in US market for
Fabry’s disease treatments [7]," July 15, 2014.

Praluent, Sanofi's cholesterol drug, sells for an average retail price of
around $1,262.08 per two pens of 75 mg each in the United States [8],
around half that price in Denmark [9] ($695.45), and one-third of that
price in Sweden [10] ($430.03)​.

More on the NIH licensing metrics here: https://www.ott.nih.gov/tt-metrics

Dr. Zerhouni spoke with Bloomberg on drug pricing [12] in January, 2017.

[1] https://www.ott.nih.gov/tt-metrics/royalty-income-type
[2] https://www.ott.nih.gov/sites/default/files/documents/pdfs/AR2015.pdf
[7] http://keionline.org/node/2055
[8] https://www.goodrx.com/praluent
[9] http://www.medicinpriser.dk/Default.aspx?id=15&vnr=108413
[11] https://www.ott.nih.gov/tt-metrics

Zack Struver, Communications and Research Associate
Knowledge Ecology International
zack.struver at keionline.org
Twitter: @zstruver <https://twitter.com/zstruver>
Office: +1 (202) 332-2670 Cell: +1 (914) 582-1428

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