as against the Government) rights to an invention are acquired by the contractor, the Government shall have the right to require the granting of a license to an applicant *** as may be necessary to fulfill health needs." To a Government contractor in our industry this would amount to a statement in advance that no matter how great the contractor's prior technical competence in the field; no matter how small the Government financial contribution to the making of the invention; no matter how great the investment of the contractor in clinical tests; in obtaining Food and Drug Administration clearance; and in introducing the new product to the physicians of the Nation; and no matter how faultless the use of the patent rights by the contractor might be, competitors incurring none of the expense and none of the risk would have access to the patented invention.

A related problem would arise with respect to section 1(a)(2) of the statement. This section provides that where "a principal purpose of the contract is for exploration into fields which directly concern the public health ***" the "Government shall normally acquire * * * the principal or exclusive rights *** to any inventions." This section would, under the interpretation mentioned, reflect the same fallacy as is incorporated in section 1(g).

The result of this view is that the statement would provide one rule applicable where health is involved and a different rule in other instances. The difficulty is compounded by the fact that both sections stand as advance notice to contractors with the Government, and in addition, are applicable unselectively with respect to the amount of the Government contribution and the actions of the contractor.

At a Government-industry meeting on patent policies sponsored by the U.S. Chamber of Commerce on February 14, 1964, attended by Dr. David Z. Beckler of your office and other Government representatives, who are members of the Patent Advisory Panel appointed under the Presidential memorandum, it was indicated that the October 10 memorandum precluded any negotiation between executive branches of the Government and industry concerning patent rights resulting from research financed to any extent with Government funds. It appeared to be the belief of panel representatives that the language of the memorandum would prohibit research cooperation between Government and industry in the public health field, except on a "Government take all" basis.

In our opinion there is no justification for differentiating between the products of the pharmaceutical industry or processes for making them and others inasmuch as the public welfare is involved in all cases where Government funds are expended to further the progress of science and technology.

The fact is that the public benefit is particularly great when health-related research is conducted creatively, vigorously and enthusiastically. In equal measure, the public benefit is particularly great when the resources of private enterprise are brought to bear in the high-risk activities of perfecting and marketing inventions relating to health. It follows that patent rights if such inventions should be enhanced, not limited, to the end that the public will gain maximum benefit from the inventions.

We believe that the expressed objectives of the October 10, 1963, statement can be best achieved by treating the pharmaceutical industry the same as other manufacturers of patentable products. We further believe that if separate Government agencies, such as the National Institutes of Health, under the Department of Health, Education, and Welfare, are permitted some freedom in construing the President's statement in developing agency patent policy, with the objective of preserving and encouraging private incentive and not as restrictive of the pharmaceutical industry, we see hope for greater cooperation and the better utilization of private facilities and personnel in the betterment of public healtha goal that has always been a sacred trust of the pharmaceutical industry. Dr. William Eaton, the Chairman of the Patent Advisory Panel, announced at the February 14 meeting that he has appointed a subcommittee of his panel to serve as liaison with industry, and that he is receptive to industry's views in interpreting the memorandum. Our association will be happy to cooperate with you and the members of your office, and with Dr. Eaton's panel in discussing the problems which have been created by the statement.

Sincerely yours,

C. JOSEPH STETLER.

Mr. C. JOSEPH STETLAR,

Executive Vice President and General Counsel,
Pharmaceutical Manufacturers Association,
Washington, D.O.

DEAR MR. STETLER: Thank you for expressing the views of the Pharmaceutical Manufacturers Association on the statement of Government patent policy of October 10, 1963.

As you know, a Patent Advisory Panel has been formed under the Federal Council for Science and Technology to develop common guidelines for the implementation of the policy. It will also encourage the acquisition of data on the disposition of patent rights to inventions resulting from federally financed research and on their use and practice, to serve as a basis for subsequent review of the policy.

With the foregoing in mind, I am referring your letter to the Patent Advisory Panel for its information and assessment. In view of the paucity of data on the nature of commercial use of inventions made under Government grants and contracts, your association might be of assistance in providing comparative data and experiences bearing on the exploitation of federally financed inventions by the pharmaceutical industry, both with and without the acquisition of exclusive commercial rights by industry.

With regard to your concern that the pharmaceutical industry is placed at a disadvantage under the terms of the statement of Government patent policy, compared to other industries, I would like to call your attention to section 1(a)(1) of the policy statement which states that the Government shall normally acquire the exclusive rights where a principal purpose of the contract is to create, develop or improve products, processes, or methods which are intended for commercial use by the general public. This is applicable to all contractors. The problems this may pose to cooperative research agreements between Government and industry will need to be studied by the Patent Advisory Panel.

In conclusion, I would like to underscore that we believe that the statement of Government patent policy and the accompanying Presidential memorandum provide for equitable and prudent disposition of rights to inventions made under Government contracts. At the same time, the memorandum states that the policy will be reviewed after a reasonable period of trial in light of the facts and experience accumulated.

Sincerely yours,

DONALD F. HORNIG.

Dr. DONALD F. HORNIG,

PHARMACEUTICAL MANUFACTURERS ASSOCIATION,
Washington, D.C., April 7, 1964.

Executive Office of the President,
Office of Science and Technology,

Washington, D.C.

DEAR DR. HORNIG: Please accept our association's thanks for referring our recent letter, relating to the statement of Government patent policy of October 10, 1963, to the Patent Advisory Panel. Further analysis of this situation by the panel is, in our opinion, quite desirable.

It seems clear that the statement of policy was intended to be fair and equitable, as well as to be flexible. Yet the language of section 1(a)(1) to which you refer as well as that of section 1(a)(2) is being subjected already to interpretations that are both divergent and inequitable. For example, the Department of Health, Education, and Welfare has, with respect to research activities, conducted jointly between university grantees of the National Institutes of Health and private industry, interpreted this language as precluding any sharing of patent rights between the Government and private industry regardless of the relative contributions of the parties.

On the other hand, the Bureau of the Budget in a letter addressed to Congressman Aspinall, chairman of the House Committee on Interior and Insular Affairs, has, with respect to the water resource research legislation provided in S. 2, 88th Congress, objected to patent language which would be consistent with HEW'S interpretation, on the ground that it would be in conflict with the policy statement, stating that—

"This policy recognized that obtaining the maximum advantage for the Government, while at the same time providing for fair treatment of Government contractors, requires flexibility between and within research programs as to the disposition of patent rights.

"As reported by your committee, the pertinent provisions of section 203 of 8. 2 would not permit this flexibility but would instead have the effect of denying patent rights to those conducting research in all cases.

"In our judgment, the provisions of section 203 relating to patents would inhibit the desirable flexibility of the administration's policy with respect to patent rights and we, therefore, recommend the deletion of those provisions from 8.2"

A third approach to this very same language of the policy statement was taken by the Department of Defense before the recent FDA-BNA Briefing Conference ou Government Contracts. In explaining the Department of Defense's interpretation of the patent policy, the spokesman for DOD stated as to section 1(a)(1)— "Here the DOD's thinking is toward making it clear that research and development work on the end item is meant."

With respect to section 1(a)(2), it was stated that DOD is interpreting this to apply where the principal purpose of the contract directly involves the public health or welfare.

These examples demonstrate that the language of the policy is not clear and may be subject to various interpretations.

It should be emphasized, apart from this problem, that the interpretation being followed by HEW risks serious impediment to research cooperation between private industry and other non-Government research institutions which may be receiving some form of Government support.

In view of the critical nature of this particular problem, it is our intention to write the Chairman of the Patent Advisory Panel for further clarification. Sincerely,

C. JOSEPH STETLER,

Executive Vice President and General Counsel.

EXHIBIT IV-CLINICAL INVESTIGATION and Drug SAFETY IN THE PHARMACEUTICAL

INDUSTRY

A Selective Bibliography from Medical Science Periodicals for the Year Ending May 1, 1964

Academic and Industrial Contributions to Drug Research. Ernst B. Chain, F. R. S. Nature, (London), 200: 441-451, Nov. 2, 1963. A study in depth by the professor of biochemistry, Imperial College of Science and Technology, London.

Adequacy of the Preclinical Safety Evaluation. Harold M. Peck, M.D. J.A.M.A., 187: 341-343, Feb. 1, 1961. The author is on the staff of the Merck Institute for Therapeutic Research.

Aspects of Development of New Drugs. Theodore G. Klumpp, M.D. Illinois Med. J., 124: 307-313, Oct. 1963. Forthright statement by Winthrop's president. Birth of a Drug: Research and Development in the Pharmaceutical Industry. The Pursuit of Happiness, Austin Smith, M.D.; Sources of Potential Drugs, Merrill E. Speeter, Ph. D.; Methods of Testing Drugs, E. Grunberg, Ph. D.; Testing Drugs for Pharmacologic Activity and Safety, Earl H. Dearborn, M.D., Ph. D.; Clinical Evaluation of Pharmacologically Active Compounds, Daniel L. Shaw, Jr., M.D.; Formulations Research and New Products Development, Thomas J. Macek, Ph. D.; The New Drug Application and Government Regulations, S. F. Kern, Ph. D.; Quality Control in the Manufacture of Drugs, Roderick S. Cowles; Biologic Products in the Drug Industry, Henry D. Piersma, Ph. D.; Economics of Pharmaceutical Research in the United States, L. Earle Arnow, M.D., Ph. D. Bio-Medical Purview, 3:1-83, Summer 1963. PMA's president and nine distinguished industry scientists are the authors of this notable symposium.

Blind Reaction. Theodore G. Klumpp, M.D. New Med. Materia, 5: 51, June 1963. The drug law "and the tough regulations • • • reflect as much public distruct of physicians as of scientists."

Can Drug Safety Be Legislated? Richmond Co. (Ga.) Med. Society Bulletin, 6: 17-19, July 1963. (Reprinted from Med. World News, Mar. 29, 1963.) Excerpts from the Fortune article that should be required reading.

Clinical Evaluation (Editorial). F. P. Rhoades, M.D. Michigan & Wayne Co. (Mich.) Academies General Practice Bulletin, 14: 3, Aug. 1963. "The new FDA rules, unless drastically modified, will increase drug prices, destroy the small pharmaceutical houses, hamper research, and thus greatly increase the number of untimely and unnecessary deaths."

Clinical Evaluation of Drugs. Dale G. Friend, M.D. J.A.M.A., 187: 348-351,
Feb. 1, 1964. The author is assistant professor of medicine at Harvard Medical
School and a staff member at Peter Bent Brigham Hospital.
Clinical Evaluation of Drugs Used in Premature Infants, Normal Infants, and
Children. Harry C. Shirkey, B.S., M.D. Southern Med. Bulletin, 51: 24–30,
Dec. 1963. The author is associate professor of pediatrics, Medical College
of Alabama.

Clinical Investigation of Drugs in University and Teaching Hospitals. L. T.
Coggeshall, M.D. Southern Med. Bulletin, 51: 16-21, Dec. 1963. The author
is vice president and Rawson Professor of Medicine, University of Chicago,
and chairman of the Commission on Drug Safety.
Clinical Testing of Drugs, The (Editorial).

Morris Fishbein, M.D. Postgraduate Med., 33: 621-622, June 1963. The editor expresses concern about the new FDA regulations and offers readers an informative booklet on the subject. Clinical Use Is Ultimate Test of Drug Toxicity, AMA Tells House Government Operations Subcommittee. J.A.M.A., 188: 57, 59, April 20, 1964. Report of Dr. Hugh H. Hussey's testimony before Fountain Subcommittee. Commission on Drug Safety (Editorial). J. Indiana State Med. Assn., 56: 899-900, July 1963. Excerpts from the March 1963 issue of the Commission's Bulletin.

Conference on Drug Safety (Editorial). R. H. Kampmeier, M.D. J. Tennessee Med. Assn., 56: 299-300, July 1963. The editor laments government control of clinical investigation of new drugs.

Cooperation for Drug Progress (Editorial). Thomas M. Durant, M.D. Med. Tribune, 4: 11, Aug. 9, 1963. The president-elect of the American College of Physicians describes the mission of the Greater Philadelphia Committee for Medical-Pharmaceutical Sciences.

Cornucopia of Science, The. Paul de Haen. Med. Science, 13; 814; 816-817; 820-824; 827, May 25, 1963. A summary of industry participation in the 1963 meeting of the Federation of American Societies for Experimental Biology. Drug Evaluation by Council on Drugs. John R. Lewis, Ph.D. J.A.M.A., 158: 256-258. July 27, 1963. The author is acting secretary of the AMA Council on Drugs.

Drug Safety Hysteria. William S. Apple. J. Am. Pharmaceutical Assn., N84: 212-216; 219, May 1964. APhA statement before House Subcommittee on Intergovernmental Relations, March 25, 1964.

Drug Safety Symposium: Introductory Remarks. Karl H. Beyer, Jr., Ph.D., M.D. J.A.M.A., 187: 340, Feb. 1, 1964. M.S. & D. Research Laboratories' vice president presides at meeting of AMA Section on Experimental Medicine and Therapeutics, Atlantic City, June 17, 1963.

Drugs Are Double-Edged Swords. Dale G. F. Friend, M.D. J. Am. Pharmaceutical Assn., NS4: 221-225, May 1964. Adapted from a presentation at the Federal Services Seminar, Washington, Nov. 7, 1903.

Early Life History of a New Drug, The. S. O. Waife, M.D. Southern Med. Bulletin, 51: 6-12 December 1963. The author is assistant director, Medical Research Division, Lilly Research Laboratories.

Effect of the Investigational Drug Regulations on Drug Research and Development. The. Augustus Gibson, M.D. Food Drug Cosmetic Law J., 19: 153–161, March 1964. Presentation by Schering's director of research and development to New York Bar Association's Section on Food, Drug and Cosmetic Law, Jan. 28, 1964.

Effect of the New Drug Amendments and Regulations Upon the Development of New Drugs, The. Austin Smith, M.D. Southern Med. Bulletin, 51: 39-44, Dec. 1963. Dr. Smith is president of the Pharmaceutical Manufacturers Association. Ethics of Clinical Trials (editorial). Med. Tribune, 4: 15, July 22, 1963. The editor tangles with the British Medical Journal.

Evaluation of Toxicity in Long-Term Clinical Trials. Edward D. Freis, M.D. J.A.M.A., 187: 352-355, Feb. 1, 1934. The author is a VA medical investigator and associate professor of medicine at Georgetown University.

Future Role of the American Drug Industry, The. C. Joseph Stetler. J. Omaha Mid-West Clinical Society, 25: 18-20, January 1964. Presentation of PMA's executive vice president and general counsel at Omaha Mid-West Clinical Society, October 31, 1963.

Government and Industry Relationships: Their New Impact on Medicine. John T. Connor. Military Med., 128: 510-515, June 1963. Address of Merck's president to Texas Medical Association, Jan. 19, 1963.

Health Industry, The: Eleven Years of Growth. Edmond Thayer, Jr. Health Industry, 1: 62, April 19, 1964. A marketing and research report. Impact of FDA Regulations on Psychopharmacology. James D. Gallagher, M.D. South Dakota J. Med. & Pharmacy, 17: 38-42, April 1964. Presentation by Lederle's director of medical research to American College of Neuropsychopharmacology, Washington, D.C., Jan. 16, 1964.

Impact of New Drug Regulations on Teaching and Research in Medical Schools. William M. M. Kirby, M.D. J. Med. Education, 39: 355-359, April 1964. Controversial presentation by the University of Washington professor of medicine and chairman of the AAMC Committee on Study of New Drugs at annual meeting of American Association of Medical Colleges (and elsewhere), Chicago, Oct. 28, 1963.

Introduction to Clinical Investigation, Kenneth G. Kohlstaedt, M.D. J.A.M.A., 187: 344-347, Feb. 1. 1964. The author is executive director, Lilly Research Laboratories.

Kefauver-Harris Amendments, the Pharmaceutical Industry, and the F.D.A., The. Med. Times, 92: 1–7, January 1964. The editor reports the answers he received to provocative questions, and calls for "mutual confidence and politeness" between industry and the FDA.

Legal Considerations in Drug Research. Austin Smith, M.D. Clinical Pharmacology & Therapeutics, 4: 704-708, Nov.-Dec. 1963. Presentation of PMA's president to American Therapeutic Society, Atlantic City, N.J., June 14, 1963. Liability in Use of Investigational Drugs. George E. Schreiner, M.D. J.A.M.A., 185: 259-263, July 27, 1963. This Georgetown University clinical investigator believes he and his colleagues, "once in a legal limbo" are "now out on a legal limb."

Living in a Glass House. Eugene N. Beesley. Texas State J. Med., 59: 937-938, October 1963. Address of Lilly's president at 1963 annual session of Texas Medica: Association.

Medical and Legal Responsibility in Clinical Research. William Furst, M.D., and William Furst, LL. B. J. Med. Society New Jersey, 60: 229–231, June 1963. A report presented at the 1960 meeting of the American Psychiatric Association.

Medical Care: Its Social and Organizational Aspects. Role of the Pharmaceutical Industry in Modern Medicine. Alfred E. Driscoll. New England J. Med., 270: 286-289, Feb. 6, 1964. A thoughtful article by the president of Warner-Lambert Pharmaceutical Company.

Medical Ethics and Controlled Trials. Austin Bradford Hill, C.B.E., F.R.S. British Med. J., No. 5337, pp. 1013-1019, April 20, 1963. A widely discussed lecture given by a University of London professor before the Royal College of Physicians.

Medical Liability in Drug Trials. Francis Boyer. New England J. Med., 270: 777-778, April 9, 1964. The author is chairman of the board, Smith Kline & French Laboratories.

New Dimensions of the Pharmaceutical Industry, The (editorial). Rowland B. Kennedy. J. Mississippi State Med. Assn., 5: 167-168, April 1964. The editor cites the de Haen report in Drug Trade News.

No Absolute Safety. Partial FDA statement before House Subcommittee on Intergovernmental Relations, March 24, 1964. George P. Larrick. J. Am. Pharmaceutical Assn., NS4: 217-220, May 1964.

One Hundred Years of Progress in the Drug Treatment of Disease. Cyril Keele, M.D. Royal Society Health J. (London), 83: 326-330, November-December 1963. The author is professor of pharmacology and therapeutics, Middlesex Hospital Medical School.

Pharmaceutical Industry, The: What it is and What it does. H. W. Palmer. Proceedings Royal Society Med., 56: 547-554, July 1963. The author is an executive of the Glaxco Group, Ltd., London.

Pharmaceutical Services, The: The Industry's Contribution. J. C. Hanbury, F.R.I.C. Royal Society Health J. (London), 83: 71-73, March-April 1963. The author is chairman of Allen and Hanburys, Ltd., a British drug company.