Should NIH Researchers Receive Royalty Payments for Their Inventions?

By Chris Frew
January 27, 2023

The National Institutes of Health (NIH), based in Bethesda, Maryland, supports public health research projects conducted by nearly 6,000 scientists in its own laboratories, most of which are located here on its Maryland research campus. Since many of those scientists live and work in the Biohealth Capital Region, there is a lot to benefit from incentivizing the commercial impact of research and development at government labs like NIH. 

Streamlining tech transfer processes, improving local collaboration vehicles and even financially incentivizing technology transfer for researchers have all been suggested as opportunities to increase commercialization.  The question of whether government researchers should benefit from their inventions is a highly debated topic.

A report published by OpenTheBooks, the largest private database of public-sector expenditures, caused controversy last year for NIH as it raised similar questions about hidden royalty payments made to the National Institutes of Health (NIH), its leadership, and scientists.  

This is far from a new controversy, as it has been debated since back in 2003 when a front page article in the Los Angeles Times described how a small number of the institutes’ 17,000 employees had received millions of dollars of income from outside sources since 1995. Then again in 2005 when The Associated Press reported that two leading researchers, Anthony Fauci, then-head of the National Institute of Allergy and Infectious Diseases and his deputy, Clifford Lane, received payments relating to their development of interleukin 2 as a treatment for HIV/AIDS. 

In fact, just before leaving office in 2001, Donna Shalala, then secretary of the federal Department of Health and Human Services, issued a requirement that scientists disclose their financial interests. 20 years later, lack of transparency continues to be a topic of great concern that has yet to be addressed adequately.

The question of whether or not these royalty payments are a good thing is a complex and controversial one.

RELATED: The National Institutes of Health, a Technology Transfer Wellspring

On one hand, these payments can provide a financial incentive for researchers to conduct innovative and valuable research. They can also help to ensure that the fruits of taxpayer-funded research are commercialized and used to benefit the public, which is something that I think is of critical importance and requires much more attention.

However, on the other hand, these payments also create a financial incentive for researchers to prioritize the interests of the pharmaceutical industry over the public interest. This can lead to researchers conducting research in a direction that would be more profitable for the pharmaceutical companies rather than what would be more beneficial to the public.

Furthermore, transparency is a major concern when it comes to these royalty payments. The NIH has worked to keep the stream of these third-party royalties hidden from the public for years. Only recently and under court order has the NIH begun disclosing the amount of money changing hands with the private sector for these innovations. However, the NIH is redacting every individual payment amount, the identity of the payer, and the patent license numbers, making it difficult for the public to fully understand who is paying, at what amounts, and for which innovations.

The huge financial stakes make it critical for patients and the public to have full transparency from the NIH. People, the press, pundits, and watchdogs must be able to follow the money. But when NIH officials like Dr. Anthony Fauci are evasive and misleading in congressional hearings, it raises questions about what the NIH has to hide.

Moreover, it is important to consider the potential conflicts of interest that can arise from these royalty payments. In 2005, Dr. Fauci confirmed that the payments were a conflict of interest because the National Institute of Allergy and Infectious Diseases, the institute where Fauci was the director, was spending $36 million to test his invention on patients — the interleukin-2 experimental HIV/AIDS drug.

There are several arguments in favor of royalty payments to NIH researchers for their research

First, these payments provide a financial incentive for researchers to conduct innovative and valuable research. By providing a financial reward for their work, researchers may be more likely to undertake ambitious and groundbreaking projects, knowing that their efforts could lead to a significant financial return. This can help to ensure that the best and brightest scientists are working on the most important problems and that the fruits of taxpayer-funded research are used to benefit the public.

Second, royalty payments can help to ensure that the results of NIH-funded research are commercialized and used to benefit the public. This can occur when a medical innovation made as part of NIH research is used by the private sector and government employees are considered “co-inventors” on the patent. This can help to ensure that the research is put to practical use, rather than remaining locked away in a laboratory.

Third, royalty payments can also bring in additional funds to support further research. The money generated from royalties can be used to fund more research projects, meaning that more scientists can be employed and more research can be conducted. This can help to ensure that the NIH remains at the forefront of scientific research and that new innovations are continuously being developed.

Finally, it can also be argued that royalty payments can help to bridge the gap between academia and industry. By working closely with the private sector, researchers can gain a deeper understanding of the practical applications of their work, and can also benefit from the resources and expertise of the private sector. This can lead to more effective collaboration between academia and industry and can help to ensure that research is translated into real-world solutions more quickly.

It is crucial to consider the implications of NIH researchers accepting royalty payments and to ensure that the best interest of the public is protected. It’s worth noting that all these arguments are based on the premise that the NIH has policies in place to ensure that any financial interests held by NIH employees are managed in a way that minimizes potential conflicts of interest and that the NIH is transparent about these payments.