KEI Appeals NIH/NCI Decision to Proceed with License of CD30 CAR T technology to Gilead/Kite

KEI has appealed the NIH/NCI decision to proceed with the proposed exclusive license of anti-CD30 CAR T to Gilead, following an email of January 25, 2018 from Dr. David Lambertson of NCI rejecting all of KEI’s substantive suggestions and objections.

KEI has asserted a right of appeal under 37 C.F.R. § 404.11(a)(3):

§ 404.11 Appeals.
(a) In accordance with procedures prescribed by the Federal agency, the following parties may appeal to the agency head or designee any decision or determination concerning the grant, denial, modification, or termination of a license:

(3) A person who timely filed a written objection in response to the notice required by §404.7(a)(1)(i) or § 404.7(b)(1)(i) and who can demonstrate to the satisfaction of the Federal agency that such person may be damaged by the agency action.

KEI sent an email to Dr. Lambertson and NIH Director Francis Collins on February 14, 2018, informing NIH/NCI of our intent to appeal, requesting a copy of the procedures prescribed by the NIH for such appeals as none was available on the NIH website as of that date, and stating clearly that we would follow up with the actual document of our appeal detailing our arguments.

Minutes before KEI submitted the appeal document, Dr. Lambertson responded to my previous email to say:

Dear Mr. Goldman:
Thank you for your email of February 14, 2018.
As you noted, 37 CFR 404.11 (a)(3) permits an appeal for a person who can demonstrate to the satisfaction of the agency that such person may be damaged by the action.
We have considered your objection and determined that there is no likelihood that KEI will be damaged by the agency action. Accordingly, we will not entertain an appeal of our decision.
Best regards,
David A. Lambertson, Ph.D.

A copy of Dr. Lambertson’s email is here.

We were surprised the NIH said it was refusing KEI a right to appeal prior to even seeing the appeal itself. We asked the NIH to reconsider the denial of our standing to file an appeal, and formally filed KEI’s appeal with the NIH minutes later. The NIH seems to be arguing that taxpayers and patient advocates have no standing to challenge the grant of an exclusive license, regardless of which statutes the NIH may have ignored, or the errors in policy that are involved.

In the KEI appeal of the proposal for an exclusive license to Gilead/Kite, we articulate KEI’s grounds for the appeal as a public interest organization that timely objected to the license and that represents taxpayers and patients, including cancer patients, who are likely to be damaged by an exclusive license of CAR T technology to Gilead without safeguards against excessive pricing or access barriers. We note the high prices of Novartis’s Kymriah ($475,000) and Gilead’s Yescarta ($373,000), the two CAR T products approved by the FDA in 2017.

NIH Arguments, and KEI Counterarguments

The appeal iterates concerns raised in our initial objection while additionally refuting some of the points made by Dr. Lambertson on behalf of NCI, which included assertions that (1) an exclusive license would not create a monopoly, (2) the license had to proceed immediately, prior to the NIH having any results from the Phase 1 trial the NIH is currently funding, because NIH/NCI did not have the budget to conduct Phase 2 and 3 clinical trials, (3) that safeguards against excessive pricing and access barriers would not be included because they have not been used by NIH for years, and (4) certain regulations prevent the NIH from requiring transparency of R&D costs.

The KEI appeal made a variety of counterarguments, including:

  • That it is useful to know the costs of clinical trials in order to evaluate the incentive needed to induce investments in Phase 2 or 3 trials, and that the NIH has refused to divulge its budget for the large Phase 1 clinical trial it is currently conducting.
  • Clinical trials for CAR T treatments Kymriah and Yescarta both involved relatively small numbers of patients, less than 70 patients for one approval, and just over 100 for the other.
  • The Bayh-Dole Act contains various provisions that the NIH seems to be ignoring, including the 35 USC § 209 requirement that NIH limit exclusivity to “what is reasonably necessary”; we cite, as an example, the case of the NIH licensing HIV drug ddI to Bristol-Myers Squibb, where the term of the license was shorter than the life of the patent and where the NIH exercised an option to make the license non-exclusive and enable competition before the patent expired in order to enhance the public health benfits of the invention. The NIH also capped the price that could be charged for ddI. In the case of the Gilead CD30 CAR T license, the NIH seems to be offering a life of patent license with no constraints on pricing at all, despite evidence of very high prices by Gilead for a CAR Treatment also licensed directly from the NIH.
  • The regulations pointed to by Dr. Lambertson do not present a general barrier to requiring the disclosure of actual R&D outlays; KEI cites the example of extensive disclosures of post-licensing development activities as relating to the drug Fabrazyme.

40 U.S.C. § 559 Issues

The appeal raises additional issues regarding the admitted refusal of NIH to adhere to 40 U.S.C. § 559, which requires that any federal agency disposing of federal property — including patents — must seek and obtain the antitrust advice of the Attorney General prior to the disposal to private interests. The statute is part of the Federal Property and Administrative Services Act, which governs government procurement, utilization and disposal of property.

40 U.S. Code § 559 – Advice of Attorney General with respect to antitrust law

(b)Advice Required.—
(1)In general.—
An executive agency shall not dispose of property to a private interest until the agency has received the advice of the Attorney General on whether the disposal to a private interest would tend to create or maintain a situation inconsistent with antitrust law.
(2)Exception.—This section does not apply to disposal of—
(A)real property, if the estimated fair market value is less than $3,000,000; or
(B)personal property (other than a patent, process, technique, or invention), if the estimated fair market value is less than $3,000,000.

(c)Notice to Attorney General.—
(1)In general.—
An executive agency that contemplates disposing of property to a private interest shall promptly transmit notice of the proposed disposal, including probable terms and conditions, to the Attorney General.
(2)Copy.—Except for the General Services Administration, an executive agency that transmits notice under paragraph (1) shall simultaneously transmit a copy of the notice to the Administrator of General Services.
(d)Advice From Attorney General.—
Within a reasonable time, not later than 60 days, after receipt of notice under subsection (c), the Attorney General shall advise the Administrator and any interested executive agency whether, so far as the Attorney General can determine, the proposed disposition would tend to create or maintain a situation inconsistent with antitrust law.
(e)Request for Information.—On request from the Attorney General, the head of an executive agency shall furnish information the agency possesses that the Attorney General determines is appropriate or necessary to—
(1) give advice required by this section; or
(2)determine whether any other disposition or proposed disposition of surplus property violates antitrust law.
(f)No Effect on Antitrust Law.—
This subtitle does not impair, amend, or modify antitrust law or limit or prevent application of antitrust law to a person acquiring property under this subtitle.

We had sent an email to Karen Rogers, acting director of NIH Office of Technology Transfer, and David Lambertson on February 13, 2018 asking if NIH follows 40 U.S.C. § 559, also noting that 41 CFR 102-75.270 clarifies the double negative of the statute to clearly implicate patents:

41 CFR 102-75.270 – Must antitrust laws be considered when disposing of property?
Yes, antitrust laws must be considered in any case in which there is contemplated a disposal to any private interest of –
(a) Real and related personal property that has an estimated fair market value of $3 million or more; or
(b) Patents, processes, techniques, or inventions, irrespective of cost.
Karen Rogers responded by claiming that the statute does not apply to NIH licensing practices:
When asked if she could direct us to authority that would support her position, she declined. As we noted in the appeal, the Bayh-Dole Act would seem to be compatible with and not override the FPASA:

35 U.S.C. § 209(a)(4) in fact creates an obligation that the licensing federal agency may only grant a license on a federally-owned invention if it, “will not tend to substantially lessen competition or create or maintain a violation of the Federal antitrust laws.” Logically, this suggests that the FPASA requirement applies; the NIH has abundant expertise in developing new medical technologies but does not have the antitrust expertise of the Attorney General.

Andrew Goldman