U.S. MAY YIELD ON AIDS ROYALTIES
Officials opening door to rewriting history of virus' discovery

By John Crewdson

Chicago Tribune 26 June 1994

Clinton administration officials have agreed to reopen discussions on an 8-year-old claim by a French research institute that U.S. scientists appropriated its discovery of the AIDS virus and its invention of the widely used AIDS blood test.

The willingness to consider the French claims was contained in a letter last week from Dr. Harold Varmus, director of the National Institutes of Health, to his French counterpart, Maxime Schwartz, who heads the Pasteur Institute of Paris.

The letter represents an unexpected change from the position Varmus expressed only two weeks ago, when he urged Pasteur to cease its appeals for a larger share of royalties produced by the U.S. patent on the AIDS test. The French are seeking to increase their share from $2 million to $4 million a year.

Varmus also appeared to open the door to revising the history of the discovery of the AIDS virus, telling Schwartz he was "entirely open to taking steps" toward a formal acknowledgment that the virus used by U.S. government scientists to develop the American AIDS test was the same one loaned to them by Pasteur in 1983.

As late as last Monday the U.S. position, according to a senior official of the Department of Health and Human Services, was that "the French knew what they were doing" when they agreed to settle the dispute in 1987 in return for a share of the patent royalties. HHS sources said Friday that position was no longer immutable.

The Tribune reported last Sunday that a two-year investigation by the HHS inspector general's office had found no evidence to support the government's longstanding claim that the AIDS test was invented at the NIH.

Among other things, the patent examiner who granted HHS the 1985 patent told investigators she would not have done so had she known that French scientists already had developed such a test.

An aide to Varmus said the director had not seen the inspector general's report before sending Schwartz the earlier letter, in which he said he had decided that "no alteration of our shared royalty arrangement is warranted."

Last Thursday, however, Varmus told Schwartz he had authorized the HHS general counsel, Harriet Rabb, to meet with Pasteur's attorneys, and indicated he was willing to reconsider the matter.

"Were I to be persuaded that a change in our current arrangement for distribution of royalties is warranted," Varmus wrote, "I would surely take steps to see that a change is made."

Pasteur lawyers said Friday they had been granted a meeting Tuesday with Rabb.

Varmus appeared to take yet another step toward the French position when he acknowledged to Schwartz that the French had developed an AIDS test independent of the one developed by NIH's AIDS researcher, Dr. Robert Gallo.

"I genuinely regret the inference permitted by the part of my June 8 letter," Varmus said, "that spoke of the test kit as if there were only one, not two kits."

The sale of the French and American AIDS tests produce combined royalties of about $6 million a year, of which HHS currently retains about $3 million and Pasteur about $2 million, with the remaining $1 million going to fund AIDS -related research.

Since the 1987 settlement, the U.S. has realized about $20 million from the test and the French about $14 million. HHS has paid Gallo more than $700,000 from its share of the royalties on top of his government salary.

The French have resisted taking the dispute back into court in hopes that, as new facts emerged, the U.S. would be willing, in their words, to "do the right thing" by changing the royalty allocation.

But Pasteur's lead U.S. counsel, Michael Epstein, said Friday that the French were now weighing "the option of litigation" in the event the new discussions proved unfruitful.

James B. Swire, a New York attorney who tried the original case on behalf of Pasteur, said Saturday that he had already drafted a complaint alleging that the patent had been obtained through fraud and was "against the public policy of the United States."

Pasteur's request that its annual share of the royalties be increased to $4 million would leave HHS with $1 million-a net transfer of about $2 million a year to the French.

Although the French maintain that more than money is at stake, they acknowledge that an additional $2 million a year is not insignificant for a research foundation that derives most of its financing from private donations.

"It's not a rounding-off error in their budget, the way it is for HHS," Epstein said.

An equally significant issue, the French told Varmus, is that the failure of the U.S. to act "sends a frightful message to the international scientific community: Don't cooperate and don't collaborate. By sharing one's discoveries, one runs the risk of appropriation."

The essence of the French position, which is supported by the inspector general's report, is that Pasteur scientists discovered the AIDS virus and used it to make the first diagnostic blood test for evidence of infection.

In 1983 the French sent Gallo a sample of their new virus, which his assistants then cultured and analyzed and used to develop their own AIDS blood test. Gallo later claimed credit both for the discovery of the virus and for the invention of the test.

Despite an earlier application by Pasteur, the Gallo AIDS test was awarded the U.S. patent. In 1985 the French took HHS to court, asserting that Gallo had used their virus sample to make his AIDS test.

With the backing of HHS and Justice Department lawyers, Gallo denied the allegations, claiming that his assistants had been unable to culture the French virus sample sufficiently to use it in their experiments.

Rather than face years of protracted litigation, and with assurances from HHS that Gallo had used an independently discovered virus to make his test, the French agreed to settle for a share of the patent royalties.

Not until May 1991-four years after the settlement-did Gallo finally acknowledge that he had indeed used the French virus to make the American AIDS test. He has said the usage was not intentional, but the result of an accidental laboratory contamination that he had only recently discovered.

Asserting that they had been misled by the Americans, Pasteur and the French government asked the Bush administration to revise the 1987 settlement by allocating them a greater share of the patent royalties. But no action was taken, despite a 1992 recommendation by Rabb's predecessor, Michael Astrue, "that the United States relinquish its share of future royalties" to Pasteur in the interests of international scientific cooperation.

The latest round of discussions began early this year, with a private meeting in February between Schwartz and the newly appointed Varmus, a Nobel laureate from the University of California. Varmus asked Schwartz to supply him with documentation supporting Pasteur's position.

Schwartz sent Varmus a thick compendium of documents, including some unearthed since the settlement by NIH and congressional investigators, which he said showed that "evidence did exist within HHS prior to 1987 supporting Pasteur's claims. These materials were kept from Pasteur, and emerged only after the settlement."

The French settled, Schwartz said, only because "senior officials of the Reagan administration repeatedly told us . . . that there was not a single document in their files which could remotely be construed as supporting the (French) position."

"You cannot now tell us," he said, "that we must abide by a sharing of royalties based on what would appear as a previous administration's deliberate fabrication."

Varmus told Schwartz on Thursday, however, that he disputed suggestions "that there has been deliberate U.S. government behavior to your institute's detriment," asserting that neither federal prosecutors nor the inspector general had "established the deliberateness that you assume."

As is usual in such federal investigations, the inspector general's inquiry reached no conclusions. The facts contained in its report, however, make clear that HHS officials and NIH scientists failed to advise the Patent Office that Pasteur scientists had already used the AIDS virus to make a blood test of their own.

The inspector general's report also notes that government lawyers, in briefs filed later with the Patent Office, dismissed the Pasteur virus sample as having held "no significance" for Gallo's research.

Federal prosecutors decided earlier this year not to bring criminal charges against Gallo, citing what the inspector general's summary calls "several obstacles, jurisdictional concerns and procedural rules governing criminal prosecution," including the five-year federal statute of limitations.

The prosecutors advised the inspector general, however, that their decision did not mean they believed Gallo should continue to receive his annual royalty payments from the AIDS test. *