Anderson, Christopher. "Scripps Backs Down on Controversial Sandoz Deal," Science 260 (25

Anderson, Christopher. "Scripps Backs Down on Controversial Sandoz Deal," Science 260 (25
June 1993), pp. 1872-1873.

The Scripps Research Institute and Sandoz Pharmaceuticals Corp. have succumbed to pressure
from Congress and the National Institutes of Health (NIH) to renegotiate a controversial
agreement that would have given the Swiss company first rights to nearly $1 billion in federally
funded research. The proposed agreement would have given Sandoz broad control over Scripps'
research and researchers and allowed the company to review the grant proposals and consulting
agreements of scientists at the institute.

Richard Lerner, president of the La Jolla, California, institute, told Science last week that the
offending language will be removed. But he said Sandoz still intends to invest a total of $300
million over 10 years, beginning in 1997, after a 10-year agreement between Scripps and Johnson
& Johnson expires.

The unprecedented agreement was attacked last week at a hearing conducted by Representative
Ron Wyden (D-OR) at which NIH Director Bernadine Healy called the agreement a "dangerous"
aberration. Healy said NIH has surveyed 375 university-industry agreements, and none of them
contains the most controversial provisions of the proposed Scripps-Sandoz deal. Nevertheless,
she said, NIH will develop guidelines for all universities negotiating such agreements with

The proposed contract, which Scripps announced last fall (Science, 4 December 1992, p. 1590),
had been expected to be signed formally by 1 July. But that was before Wyden, whose
investigations into the price of new drugs has led him to examine arrangements between
government-funded research institutions and industry, picked up on press reports criticizing the
unprecedented scope of the deal. In March, Wyden held a hearing on the agreement at which
Healy criticized it as potentially destructive and possibly illegal. At that time, Scripps defended
the contract and argued that NIH's lawyers had misinterpreted it.

Now, after 3 months of additional review, NIH has stepped up its criticisms. In a six-page letter
sent to Scripps on 11 June, NIH's legal advisor said the agency " concerned that the
agreement unduly restricts scientific research supported by the government, appears to be
contrary to the letter and spirit of the Bayh-Dole Act [a 1980 law that, for the first time, allowed
industry to acquire the rights to federally funded research and private research institutions], and
may impinge unreasonably upon scientific freedom..."

At last week's hearing, Healy told Wyden that she found it "not at all surprising that one
[newspaper] columnist called the agreement Ďa leveraged buyout' of a taxpayer-supported
institution." She called the proposed contract an "aberration, by virtually every measure" and a
"dangerous exception" to the standard arrangement with industry, adding that she was concerned
that the agreement may "tempt rash, wholesale indictments" of the otherwise productive system
in place to transfer federally funded technology.

Healy said that NIH was prepared to restrict all of Scripps' future NIH grants to retain
government co-ownership of technology, a step that would effectively scuttle the deal with
Sandoz. Scripps declined to testify, fearing what one official called a "witch-hunt." Instead, the
company said in a statement that its agreement is "not only completely consistent with the letter
and spirit of Bayh-Dole legislation, but also is in the best interests of science and the public."

Nevertheless, although Scripps still disagrees with much of NIH's interpretation of the contract,
Lerner told Science that the institute plans to delete or amend "each and every one" of the
elements that are controversial... "We never had any intention to do the kind of things that NIH
says the agreement permits," he says, but "we're happy to take out of the agreement anything that
NIH finds egregious."

Although the changes are expected to be worked out over the nest several months, Lerner says
that one major shift will be to eliminate the language giving Sandoz first rights to all research at
Scripps, leaving it with the rights only to the research it directly funds. Scripps is also expected to
remove clauses giving Sandoz representation on its board of trustees and control of a joint
Sandoz-Scripps scientific council. The council will be recast as a review panel, comparable to an
NIH study section, to which Scripps scientists would apply for funding. Lerner says that these
changes will not reduce Sandoz's financial contribution, which will be divided between a grants
program and a "no strings attached" general fund to support Scripps' infrastructure and
recruiting. When the contract was first drawn up last year, he says, the two parties had not yet
established a relationship of "trust" and the resulting language was conservative. "In the absence
of truth," he says, "it's an issue for the lawyers."

Wyden staffers and NIH officials said that they were encouraged by Scripps' promise to modify
the contract but withheld final judgment pending review of the revised agreement. Scripps gave
NIH a copy of the original contract only 2 days before the first Wyden hearing and declined to
make it publicly available. But last week, Scripps and Sandoz agreed to disclose it after removing
some financial details. They planned to deliver a copy to the Wyden committee early this week.

The flap has already led NIH to decide to make it policies on industry research agreements more
explicit. Healy announced at last week's hearing that a task force, created earlier this year to
review the commercialization of intellectual property rights from NIH-supported extramural
research, will draft guidelines for all such agreements.

The task force, composed of NIH scientists, program officers, technology-transfer specialists, and
lawyers, has already surveyed more that 100 institutions involved in research agreements with
industry. Its work, Healy said, will be published in the Federal Register "not as rules, but as
recommendations our grantees can consider when negotiating such agreements."

Learning from the Scripps-Sandoz ordeal and NIH's own painful experience in writing
conflict-of-interest guidelines, the task force will solicit public input before completing its work.