NEW FIRST: More Foreign Companies Now Licensing American Medical Innovations, Including in China, Russia

OpenTheBooks.com caps a years-long NIH investigation with new findings, progress made and remaining questions.

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Sep 14, 2024

Since the Covid pandemic burst into public consciousness in 2020, no face has been more closely associated with the response than Dr. Anthony Fauci. And by extension, the National Institutes of Health received a nearly unprecedented amount of public scrutiny over the past few years.

After first taking a look at Fauci’s finances – he retired as the highest-paid federal bureaucrat ever, securing an annual pension that outstrips even the President! – OpenTheBooks.com began to take a closer look at the private royalties paid to NIH and its scientists from companies like pharmaceuticals. While Fauci was not among the top earners, by default he was the system’s most famous defender through several tense exchanges with Congress and the media.

What innovations were being licensed and sold in the private sector? Which scientists and subagencies were benefitting? And could any of the payments influence how the government directs its research funds or the public health recommendations it makes?

The result was a prolonged courtroom tug-of-war with the agency over records that were so redacted as to be useless for analysis. Slowly but surely, over years in court, and with the help of Judicial Watch as our counsel, we peeled back layers of the data.

THE BIG NUMBER

Our most recent reporting came amid the Covid Select Subcommittee hearings, which saw Fauci and others under heavy criticism for their decision making and secrecy. OpenTheBooks.com found private royalties paid to NIH scientists skyrocketed to $710 million during the Covid era. Combined with previous findings since 2009, that figure was a total of $1.036 billion for “inventors.” When including payments to the agencies themselves (funds are split among scientists and their NIH subagencies, such as Fauci’s National Institutes for Allergies and Infectious Disease, or the National Cancer Institute) the topline number came to a staggering $2.685 BILLION. The payments came from over 1,650 companies to over 2,600 scientists and their labs.

“One of the biggest concerns people had during the last couple years was, were they getting truthful information from their government? Could they trust what people were saying about the medicines? To me, that creates a very disturbing appearance….The idea that people have a financial benefit from certain research that’s been done and grants that were awarded— that to me is the height of the appearance of a conflict of interest… I think sooner rather than later, you should make that information public.” — Rep. John Moolenaar, House Appropriations Committee hearing, May 2022

A CAPSTONE REPORT

We’ve gathered all our findings over the years in a capstone report, available free for our users to download. It’s called “Corruption & Conflict: Exposing the Secret $2 Billion Big Pharma Kickback Complex at National Institutes of Health.”

DOWNLOAD YOUR COPY

Formal oversight reports serve as an exhaustive repository for past reporting on a subject, but also often contain new or additional findings that didn’t fit into previous updates. Below, we tackle two more important revelations, give an update on the impact this reporting has made, and identify remaining unanswered questions.

Why is our public health complex—meant for research, understanding and sharing knowledge – so determined to remain so secretive?

MORE FOREIGN LICENSEES LEVERAGE U.S. MEDICAL INVENTIONS THAN DOMESTIC COMPANIES — A FIRST IN 2023

Foreign companies linked to adversarial states are among the hundreds of institutions paying royalties to NIH scientists and institutes, raising questions about foreign influence on government scientists.

In 2023, foreign institutions licensing American technology surpassed American ones for the first time, according to data from an NIH website. There were 139 non-U.S. licensees versus 102 American ones. This should be particularly concerning for taxpayers in the wake of the EcoHealth Alliance’s funding of risky gain-of function research in Wuhan.

A survey of the data revealed at least 31 countries represented including: China, Russia, Belarus, Cayman Islands and Hong Kong, in addition to United Kingdom, Switzerland, Japan, Germany, France, Canada, India, Ireland, Singapore, Israel and many others.

A few worrisome examples:

RUSSIA: Pokrov Biologics Plant paid NIH 20 times to license technologies paid for by U.S. taxpayers. Pokrov is a vaccine company for farm animals that was an alleged front for bioweapons/ dangerous pathogens.

BELARUS: BelVituniPharm made 12 NIH royalty payments. This is an unstable veterinary company in a country with a reputation of rabid corruption.

CHINA: At least 39 Chinese companies that have licensed NIH technologies since 2010 including:

China National Biotec Group Company (107 payments) – A subsidiary of the state-owned pharmaceutical company Sinopharm. The company was formerly under direct management of the Chinese Ministry of Health and produced a controversial Covid-19 vaccine.

Wuhan Institute of Biological Products (70 payments) – This company is a subsidiary of the state-owned pharmaceutical company Sinopharm. In 2016, the company moved next to the Wuhan Institute of Virology to collaborate with them.

Yisheng Biopharma Holding (42 payments) – First based in Beijing, and then Hong Kong, and now has a U.S. subsidiary in Gaithersburg, Maryland and works with the U.S. Army on infectious disease research like Ebola.

WalVax BioTech (35 payments) – The company is engaged in research and development, manufacturing and distribution of -- they claim-- “safe and efficacious quality vaccines” in China with major investments from the Bill and Melinda Gates Foundation.

Guangzhou HeAn Biological (24 payments) – In 2017, the company made the FDA’s “top grossing license agreements” on their list of “technology transfer success stories.”

WuXi AppTec (97 payments) and the related WuXi Biologics (21 payments) are licensees that have recently come under intense scrutiny by Congress this year.

As the New York Times reported, WuXi AppTec produces materials for a vast array of pharmaceuticals used by Americans. Lawmakers are concerned about the company because of its supposed affiliation with the Chinese military and its access to American genetic information and intellectual property.

KEY QUOTE: “How many companies like WuXi are there, which agencies are paying them, and at what costs and risks to Americans?” – Sen. Joni Ernst & Adam Andrzejewski, New York Post Opinion

A Closer Look at WuXi App Tec Across Government

As the topic of foreign funding research has gained so much attention, so too have efforts to uncover and account for it – both its costs and its risks to our health and national security. That includes spending even outside of NIH.

In last year’s Pentagon funding bill, Sen. Joni Ernst included a requirement for the Inspector General to account for money it, too, has spent on potentially dangerous virological research in foreign countries. The DOD’s troubling response? The cash cannot be fully accounted for – but it, too, had paid WuXi App Tec potentially millions!

Sen. Rand Paul (R-Ky.) has moved to introduce the Risky Research Review act, which could curb some of this problem in the future. The bill requires the Executive Branch to field a Life Sciences Research Security Board. The independent board would review high-risk research (gain-of-function or other risky uses of dangerous pathogens) and consider potential threats to public health, safety and national security. They would be able to decide whether tax dollars are spent, rather than leaving the decisions to bureaucrats.

KEY QUOTE: “Senator Paul’s legislation would insulate self-interested parties from grantmaking decisions, and add impartial, scientific feedback to the proceedings. It’s also critical that we have a national security check on this cashflow, which this bill provides. We cannot afford to have another grantee like EcoHealth Alliance funding dangerous research in an adversarial nation without stakeholders fully understanding the implications. The public now understands the enormous health and economic consequences at stake.” – Adam Andrzejewski, Founder, OpenTheBooks.com.

In May Representatives Brad Wenstrup (R-Ohio) and Raja Krishnamoorthi (D-Ill.) introduced the BIOSECURE Act, which would prevent WuXi AppTec and another company, Beijing Genomics Institute, from accessing American patient data and tax dollars. In July House Speaker Mike Johnson (R-La.) announced that he would bring the bill to a vote on the House floor this Fall.

Neither of these bills, though, would put guardrails on foreign entities leveraging our medical innovations at the NIH through patent licensing. For that, more oversight and transparency over the royalties scheme is required.

NEW DETAILS ON RULES FOR ROYALTIES: MORE QUESTIONS THAN ANSWERS

The further researchers at OpenTheBooks.com have drilled down into the private royalties complex at the NIH, the more complicated and illusory the process becomes. It’s all governed by the Bayh-Dole Act, a decades-old patent law that has served as the go-to defense for public health officials. We’re following the law, they’ve repeated in lockstep.

A complicated formula governs the split between NIH inventors, according to the NIH website:

“Inventors receive the first $2,000 collected from a licensee. Next, they receive 15 percent of royalties above $2,000 and up to $50,000. Finally, they receive 25 percent of royalties in excess of the first $50,000 collected each year.”

Additionally, scientists cannot receive more than $150,000 per calendar year. Laws passed by Congress in the 1980s set these limits to reduce conflicts of interests between scientists and the companies licensing their inventions. Inventors continue to receive payments after they’ve left the agency, and their estates will receive payments after they die.

During the pandemic, recorded royalty payments to NIAID inventors in this time are so high, and the number of scientists receiving such payments are so low, that without such limit, some of the scientists would certainly be receiving far more than $150,000 per year.

Case in point, in FY 2022 the NIAID records $325 million worth of inventor awards to about 240 named scientists. Theoretically, if this funding were evenly distributed, each of those scientists would have received over $1.3 million.

But if scientists can only get $150,000 a year, where do the rest of the royalties go?

That answer is still unclear.

According to the NIH technology transfer website, if an inventor hits the $150,000 cap, funds are distributed to co-inventors until they also hit the $150,000 cap. When those caps are hit, the royalties go to the Institute or Center the inventors are affiliated with, with most meant to go to the specific laboratory where the invention occurred.

But inventors can make more than the $150,000 annual cap by another means: if they’re granted a Presidential award. It’s currently unknown if or how many scientists received such an award after hitting their royalty caps.

And what happens to excess royalties if no Presidential awards are given?

The law allows NIH laboratories to give “incentives, from royalties, or other payments” to employees who are not inventors, but who “substantially increased the technical value of such inventions.” In other words, decisionmakers at the labs and subagencies can use their own judgment to reward others.

Ultimately, the labs have two years to use their funds— whether it’s to reward employees further, or pay for professional development or other research. Royalties still left over after two fiscal years are turned over to the Treasury.

We asked both NIH and Treasury whether any funds were voluntarily returned after the two-year period; neither agency has responded.

In short, there are a multitude of ways for NIH to keep their vast royalty hauls in-house rather than pay down the national debt. There appears to be significant breathing room to spend two years rewarding scientists not on the patent; paying out other bonuses; and reupping funding for research that’s bearing financial reward.

They have yet to provide any evidence they’ve sent a dime back to the Treasury by choice.

What’s out of NIH’s hands: they must pay 75% of any royalties exceeding 5% of an agency’s budget back to Treasury. In practice, it’s less than you’d imagine.

The NIAID’s FY 2023 budget was over $6.52 billion. Five percent of that would be roughly $328 million—just a little under the $342 million in royalties to inventors passing through the NIAID during that year. That leaves a paltry $14 million headed back to Treasury by law.

Despite years of headlines about royalty payments at the agency, NIH appears content to keep the complex impossibly opaque. We simply do not know enough about the flow of money from licensee to NIH.

Remaining mysteries: How royalty funds are allocated among inventors, the lab, and the NIH agencies, and…
Why there are huge payments listed at amounts that would be well beyond the statutory $150,000 cap.

IMPACTS

Over the course of the pandemic response and its aftermath, public health officials have faced numerous adversarial exchanges in Congress and been asked repeatedly about their decision making – both during the pandemic and aside from it. Findings from OpenTheBooks.com have unlocked a major debate on Capitol Hill, and potential solutions are beginning to emerge.

During a budget hearing, Rep. John Moolenaar (R-Mich.) urged then-NIH Acting Director Lawrence Tabak to make royalties transparent to avoid the impression of conflicts of interest.

Rep. Nicole Malliotakis (R-N.Y.) held up a New York Post article with OpenTheBook’s royalties numbers during Dr. Fauci’s final Congressional hearing. She pressed him on whether he would support voluntarily revealing who pays whom for what technologies.

Most promising: Sen. Rand Paul (R-Ky.), who has often led the charge in questioning Dr. Fauci, has introduced the Royalty Transparency Act. It would improve America’s understanding of the financial stakes in play – from both sides. First, scientists and agencies would have to disclose their royalty payments,. Second, entities that apply for grants and contracts would need to disclose any related royalty payments sent to government scientists in the preceding ten years. Finally, members of various related advisory boards would need to begin publicly filing their financial disclosures.

FINE PRINT: Members of several national security-related entities would need to begin filing publicly, including those on the National Science Advisory Board for Biosecurity, the Advisory Committee on Immunization Practices, the Defense Science Board, the Homeland Security Science and Technology Advisory Committee, etc. The requirement would extend to any other federal advisory committee that GAO finds has issued public health recommendations that were adopted by an agency or the President in the last 10 years.

The Royalty Transparency Act would go a long way toward illuminating whether research grants ever get approvals because they’re more likely to be lucrative for Uncle Sam.

“I tell you this: when we get in charge, we’re going to change the rules and you will have to divulge where you get your royalties from — what companies — and if anybody on the committee has a conflict of interest, we’re going to learn about it. I promise you that.” - Sen. Rand Paul (R-Ky.), Senate HELP Committee with witness Dr. Anthony Fauci

CONCLUSION

While OpenTheBooks.com has made a tremendous effort to uncover many of the details of NIH’s royalty payments, too many questions remain. The government seems content to keep this system largely impenetrable for the average taxpayer.

As $30 billion go out the door every year to fund research in the medical community and billions have come back into government from private entities, OpenTheBooks will keep pressing for answers and solutions.

When Americans hear from a voice on TV about public health recommendations or even mandated treatments, they have a right to understand all the stakes involved in the most personal topic there is – our wellbeing.