Under the agreement, announced March 31 by President Ronald Reagan and French Prime Minister Jacques Chirac, the U.S. Department of Health and Human Services and France's Pasteur Institute will share the patent for blood test kits and each will donate 80 percent of the royalties to the foundation. Private funds will also be solicited to sponsor grants for AIDS research and education. At least 25 percent of the money will be earmarked for efforts in developing countries.
The market for diagnostic kits in the United States alone is roughly $50 million a year, said Jeffrey Swarz, a drug industry analyst at Goldman, Sachs and Co. "We predict it will reach $200 to $250 million by 1992, and that means a continuous rise in royalties for the foundation," he added. Patent royalties now go to the U.S. Treasury.
The U.S. government estimates that worldwide royalties will total $5 million in 1987, based on projected sales of $100 million and the invention-specific royalty rate of 5 percent. "This is a ballpark figure based on unaudited submissions," said Robert Charrow, HHS deputy general counsel. "We won't even know 1986 receipts for some time."
The government estimate "sounds reasonable," said George Gould, patent counsel at Hoffman-La Roche Inc. The idea of putting the profits back into research, he said, is more significant than the royalties' dollar amount.
Private Sector is The Key
The New York-based American Foundation for AIDS Research, which awarded $3 million in grants in 1986, is concerned about the new organization. "While the French-American agreement suggests new collaboration, it looks like we're getting ready to set up new competition in the private sector fund-raising effort, and that's puzzling to us," said program officer Terry Beirn. He added that groups such as his, which has recently been promoting international cooperation, could direct resources more efficiently and effectively than could a governmental organization.
"We question the idea of starting yet another foundation and yet another review process where people in the laboratory will have to drop what they are doing and write yet another proposal," he added. "We'd like an opportunity to collaborate with this new entity and share the resources we already have in place."
Officials decided to propose a foundation during a brainstorming session on how to use proceeds of the sale of test kits, said HHS's Charrow. "We saw it would give both parties the opportunity to be in on the ground floor of setting up an organization that would raise private funds as well," he said.
According to the settlement, the foundation will be run by a six-member board of trustees, three of whom are appointed by HHS. and three by the Pasteur Institute. A committee of "distinguished scientists" will evaluate the research proposals.
Renato Dulbecco, a virologist at the Salk Institute, said that AIDS research is being funded adequately and that the foundation could make its greatest contribution by promoting education on disease prevention. June Osborn, dean of the University of Michigan School of Public Health, agrees.
"Since that is the critical area for the next five years, I have trouble getting excited about the details of setting up a new mechanism to give out money for research. If money could solve the problem, we could do it without this new foundation," she said. Osborn was a member of the Institute of Medicine task force on AIDS research whose report last fall called for a $2 billion effort against the virus by 1990.
A site for the foundation has not yet been decided, but the Washington, D.C., area is a likely spot, said HHS spokesman Campbell Gardett. "What's out there now is just a framework," he said. "The whole proposal has to go through the courts and the patent office, and it will take at least a few months for something more concrete to emerge."