Technology Transfer for Health and Economic Development

Lita Nelsen

Massachusetts Institute of

Technology

Rio de Janeiro

August, 2006

Agenda

1. What is Tech Transfer?

2. Why does a Research Institution want to do it?

3. Expectations (based on 25 years of US experience)

4. Advantages to the economy

5. The special issue of Global Health and new medicines for the poor in developing countries

Technology Transfer: What is it?

• Purposeful transfer of the results of fundamental research from universities and research institutions into the economy – Often, Intellectual Property (mostly

patents) is the currency of exchange between the research institution and industry— through licensing

[short interruption for vocabulary]

• “University”—includes both universities and other government and non-profit research institutions

• “Intellectual Property” (IP)—usually referring to patents, although the term includes copyright, know-how, etc.

Why does a university want to do technology transfer?

Research Invention (and IP) Development Innovation

Public Benefit• New products (and especially medicines) • Bring new technology into industry for

economic competitiveness• Encourage entrepreneurship for local and

national economic development

What about revenue for the university from technology transfer?

[to be discussed later, but….]

Technology transfer is usually not a substantial source of revenue for the university

– And usually needs some governmental or other support for up to a decade or more

Why should a university want to do technology transfer?

Research Invention (and IP) Development Innovation

A short history of university technology transfer

• 1960-1980 Some patent licensing in US and UK universities; not widespread

• 1980: Bayh-Dole Act in US begins acceleration of tech transfer, and competence builds in tech transfer offices

• Early 1990’s: Many US universities acquire competence; emphasis on spinouts begin; UK government begins increased emphasis on technology transfer, particularly spinouts

• Late 1990’s: Japan and Taiwan pass “Bayh-Dole-like” Acts. Singapore, Hong Kong, Germany, Finland, Brazil, China, South Africa, and many other countries begin or strengthen their systems for technology transfer from their universities and research institutes.

• 2000-2006: Interest in technology transfer is global. Countries beginning to look to technologies developed at their universities for economic development in the “Knowledge Economy.” Intense interest in developing technology transfer capabilities.

U.S. Bayh-Dole Act 1980

• >90 % of U.S. University research is funded by the U.S. government under competitive grants

• Thus, Federal Government policy on invention ownership dominates university technology transfer

What the Bayh-Dole Act did…

Gave universities title to their patents from federally funded research

• Allowed universities to grant licenses– enabling tech transfer at the local level!

• Allowed exclusive licenses

• Allowed universities to take royalties (and legislated sharing of royalties with inventors.)

Why Bayh-Dole Law was Needed

• University technology is embryonic—neither its feasibility nor market is known

• Development will require high risk investment by industry

• Exclusive licenses to intellectual property provide an incentive to make high risk investment– motivating the “first mover” by protecting

against later competitors

IP protection is particularly critical for development of new medicines

• Development of a new therapeutic or vaccine product is a particularly high risk activity– Time frames are long– Financial investment is very high – Clinical trials are very difficult– Probability of failure is high

• IP protection of the final product is necessary before industry will take the risk and make the investment

Government’s Purpose in Bayh Dole

Seeking concrete benefits from Federally Funded research:

• Private investment to develop new technology

• New products (and particularly new cures)• Jobs• Economic development

U.S. University Motivations for Tech Transfer

• Bring fruits of university research to the public (“Get the technology developed” and “give the public the benefit of the research they fund”)

• Allow investigators to “make their findings real”• Bring real world problems into the laboratory• Opportunities for graduates

But what about the money?

Financial Motivations for US Technology Transfer

1. Bring industry support of research into the university

2. Revenues from licensing and spin-outs

3. Economic development, locally and nationally

Does it work?

25 years after Bayh-Dole, US Tech Transfer has matured: Fiscal Year 2004 results

• New Issued US Patents: > 4000

• New Licenses Agreements: >4900

• Total Active License Agreements: >28,000

• New Startup Companies: >470

• Total Startups since 1980: >5000

Direct financial income is still limited: FY 2004

• Licensing revenue from 200 research institutions, FY 2004: $1.4 Billion (U.S.)

• BUT…this is on a research base of: $ 41 Billion

• Thus, Licensing revenue, after 25 years of experience averages

only 3.4% of research expenditures

The Societal Impact is much Larger!

• More than 4000 new companies formed from US university intellectual property

• Estimate over 500,000 jobs in development and production of new products based on university licenses

• Significant tax returns to the government• Many new medicines developed based on

patents from university research

• Significant number of new startups have developed into large, successful companies (e.g. Google! from Stanford)

• Biotech and IT clusters in a number of cities with large research universities (Boston, San Francisco, San Diego, North Carolina, etc.)– (BUT: warning: clusters take decades to

build!)

Technology transfer at research institutions is a long-term investment• Investment is required to build an IP portfolio and

to build technology transfer competence and contacts

• Direct financial returns to the university are likely to be limited

• U.S. experience shows financial “breakeven” by the university only after 8-10 years

• Governments or other entities must invest and sustain investment to realize economic benefits

Technology Transfer must be seen not primarily as a revenue generator for the university-- but as a societal investment

• Jobs/economic development

• Education of entrepreneurs

• Acceleration of investment in new technologies to bring new products to the public– Critically important: investment to produce new

medicines at accessible prices

Impact on Entrepreneurship Awareness and Education is Great

• Awareness of spin-outs is now pervasive in many U.S. and U.K. universities—both in the science and engineering schools and the business schools

• Many successful role models on campus• Business school curriculum changes• Business plan contests, venture clubs, etc.

Students graduate with a different view of technology and different ambitions for their future

The premise of tech transfer in Health R&D:

• Government funds most of the basic research—in universities and research institutes

• But: research-stage “inventions” are a long way from product

• Development requires industry investment• But Development of university-stage inventions is

very expensive—and very risky• Patents can provide incentive for industry to

participate

Using Intellectual Property and Technology Transfer to Accelerate Access to New

Medicines and Vaccines for Global Health

The Paradox of Patents and Access to Medicines (some simplified statements)

IF all the drugs and vaccines that were needed for disease existed today:– Patents should disappear– All medicines would be generic, produced

anywhere in the world– Prices would fall because of worldwide

competition– Medicines would be more affordable

BUT…• Medicines and vaccines for many diseases

do not yet exist– the need is particularly critical for tropical

diseases

• Although governments and NGO’s may fund the early research, we need to engage the talents and resources of industry to develop and manufacture new drugs and vaccines

Thus: patents and tech transfer

• Patents can protect the investing company from competitors who would come in to copy the successful projects

• Large pharma will not invest in development of a drug without patents

• Without patents, investors will not start up biotech companies with platform technologies for drug discovery and development

And patents from university research are important “transaction currency” in

partnerships • Between companies and universities in sponsored

research and licensing (“Non-Profit to Profit Sector”)• Between biotech companies and Big Pharma (“Profit

Sector” to “Profit Sector”)• Between University and PDP funders and then to

industry (“Non-Profit” to “Non-Profit” to “Profit Sector”)

• Between university and non-profit developers (e.g. license to One World Health from U of Washington and Yale for Chagas therapy)

US Technology Transfer for Health Research—is it working?

It’s working:• Researchers increasingly conscious: “How do I get

this finding developed into something useful?”• Potential venture investors and companies

“shopping” at universities for new opportunities• Hundreds of new biotech companies pushing the

frontier of drug development (not the “me too” products dominating big Pharma investment.)

• Hundreds of licenses to new therapies and vaccines—and each license means investment in development

• Some very important new therapies, vaccines and diagnostics currently in use, based on university licenses

Using Patents and Tech Transfer Licenses Wisely to Assure Access

• Patents owned by research institutions can be used to promote access for the poor to new medicines

• Several objectives:– To assure that new drugs and particularly new

vaccines are distributed promptly to developing countries (not years after first-world countries get them)

– To assure price accessibility for the poor in developing countries

License agreements are a tool for assuring access

• In return for an exclusive license to develop a drug, the company is asked to agree to contractual provisions that assure access

But negotiating access provisions is not easy

– Company wishes to maximize profits (and maximize flexibility for development)

– Research institution wishes to maximize access for the poor

– Often only ONE company interested– If no agreement is reached, the medicine may

not get developed at all!

A few examples of patent and licensing terms for assuring access

for the poor

“Diligence Terms”: assuring that development is taking place

• Commitments ($ invested, level of effort, etc.) that company must make to develop product

• Milestones (e.g., deadlines to begin clinical trials, to set up full-scale manufacturing, etc)

• Others

Diligence terms are critical in exclusive licenses, but the earlier the stage of technology, the more difficult they are to define and enforce!

Differential pricingFor products that have markets in both developed and developing countries (possible example: HIV vaccine):

• Company charges “market price” in developed countries—in which most of the profit (and return on investment) is made

• Company agrees to provide product to public sector of developing countries at/near marginal cost of manufacture

It’s not the full solution: some problems with differential pricing

• Only works if there is a large “first world” market for the product

• License must assure that company commits to produce volume sufficient for developing country needs (in spite of minimal profit)

• Some legislatures in developed countries resent “higher prices for us”—and threaten uniform-price legislation

• Companies fear cross-border shipping of cheaper products into developed countries

Another tool: Geographically limited exclusivity

• Exclusive license in developed world• Non-exclusive license in developing world

– Additional licenses may be granted to developing world manufacturers

– competition from developing world manufacturers will presumably lead to lower price

– Original company can still sell product in developing countries IF it can deliver product at a price competitive with local manufacture

– May encourage alliances with local drug companies

And, of course, some problems with geographically limited exclusivity

• Still relies on “first world market” for profitability

• Developing-world manufacturers may need “know how” from original company

• Requires capital investment in developing country

• Still some worry about “grey market” import into developed world from developing world

And still another alternative: Geographically limited patenting

Strategy: File patents ONLY in developed world (and forbid company licensee to file in additional developing world countries)

• Advantage: Keeps criticism away from the university

• Disadvantages:– May discourage investment in manufacturing in

developing countries because of unlimited competition– Quality may deteriorate if too much competition forces

prices too low

Assuring Access

• Many potential mechanisms for assuring access

• None are perfect

• Every situation is different; simple rules can harm more than hurt

University tech transfer offices must develop awareness and skills—and share them widely

– Awareness of potential need to address access in all health-related technology transfer

– Thoughtfulness in “business negotiations” to assure access

– Development and dissemination of useful strategies and model license clauses

MIHR: the Centre for Management of Intellectual Property in Health Research and

Development• Founded through the Rockefeller

Foundation• “Capacity building” in technology transfer

in developing country research institutions– Handbook of technology transfer– Seminars and workshops

• Studies in IP and health research for neglected diseas

• Raising awareness in first-world tech transfer offices (Technology Managers for Global Health)– The need to consider access– Model clauses and other tools for licensing to

assure access

• “Sister Institution Project”: Matching tech transfer offices in “first world” and developing world research institutions– Pilot program between FIOCRUZ and MIT

Encouraging signs in U.S. and U.K. tech transfer to assure access

• Universities are becoming conscious of the “proper use of exclusive licenses” and modifying practices– Limiting fields of use– Limiting geographical exclusivity, where

appropriate– “Carve outs” for developing countries– “Special deals” for non-profits and developing

country licenses

more….

• Funding agencies are requiring some core “research tools” (e.g. pathway targets) be put in the public domain– e.g., NIH-funded Genome Project

• Other funding agencies (e.g. Gates Foundation) are requiring development plans and/or commitment to developing country access before funding

and still more….

• A number of different organizations developing awareness campaigns, educational materials, sample clauses, etc. to help university technology managers “do it right”– Association of University Technology Managers

– MIHR

– Ad hoc working groups involving scholars, lawyers, and working practitioners

Conclusion

• Intellectual Property in health research is like a hammer:– Properly used, they can do great good (build a

house, encourage development of a vaccine)– Improperly used, they can kill people

• It takes skill, wisdom and commitment to make sure that they are used properly

Thank you!