IN THE SEPT. 15 ARTICLE "AZT: THE FIRST AIDS DRUG," A SENTENCE ON THE DEVELOPMENT RATE OF NEW DRUGS SHOULD HAVE SAID THAT SINCE 1952, THERE HAVE ONLY BEEN TWO OR THREE IMPORTANT NEW DRUGS PER YEAR. (Published 9/22/87)

There is only one drug to treat AIDS -- not perfect, not a cure; but a drug that can extend life and make it a little more comfortable for those stricken with the disease.

For many AIDS patients, the drug AZT is a godsend.

For the estimated 1.5 million Americans infected with the virus, it is the first hope that the disease may be stopped.

For Burroughs Wellcome, the drug company that sells it to each patient at $10,000 a year, AZT is a superstar product.

For government officials who were passionately searching for a way to treat AIDS, the drug is a sweet triumph -- but with a bitter taste.

For the public, the story of AZT is a lesson in how the motives of research and profit can combine to create a difficult political issue along with a life-saving product.

But all this is hindsight.

In 1984, there were 3,000 active cases of AIDS in the United States, too few to be alarming to any but the most acutely sensitive observers. But by the middle of that year, Dr. Samuel Broder of the National Institutes of Health had already seen several hundred people with AIDS. For three years, they had been coming as patients to his clinic at the National Cancer Institute, passing through, dying there, reminding him daily of the horrors of a fatal disease too new to be understood.

As director of NCI's clinical oncology program, he wanted to mobilize the government to deal with what he and his colleagues knew was going to be a disease of epidemic size. He had support from Deputy Assistant Secretary of Health and Human Services Lowell T. Harmison and from other scientists and physicians who were also seeing what he was seeing.

They had a single objective: Find a way to treat AIDS. They wanted the participation not only of the federal government's health agencies but of all parts of the health care community, including the private sector.

So Broder and Harmison decided to use the government to stimulate the interest of reluctant drug companies to look for a drug. Burroughs Wellcome, the British multinational pharmaceutical company, stepped forward and in return received generous cooperation from NIH scientists, who tested the drug in the early stages.

Within 18 months, the company was able to bring to market azidothymidine, AZT, the first treatment for AIDS.

It was a spectacular success -- a triumph of public-private effort. But when Burroughs decided to charge $10,000 per year per patient, the highest price ever attached to a drug, a major controversy erupted -- one that raises powerful questions about the tangled relationship between government and industry:

What, for example, is owed to the public when it supports, through the government, development of a highly profitable product? And how can the government assure, when it cooperates with private enterprise, protection of the public's need for life-saving drugs at reasonable costs?

What's more, the story of AZT is only beginning. The drug is now being tested to see if it can prevent AIDS from developing in people infected with the virus. It is being tested in measured doses for the treatment of children with AIDS. It is being tested in combination with other drugs.

And the decision by Burroughs to charge such a high price for AZT has led to important changes in the way government now does business with drug companies.AZT's Early Days at NIH

Lowell T. Harmison, is the Gary Cooper of bureaucrats. He sits placidly in an office that seems incongruously cluttered and responds to questions by pausing, drawing his breath, smiling at himself and blowing carefully sculptured rhetorical smoke-rings.

Harmison is in his 20th year of government service. He talks cautiously: "It wasn't at first a question of rights and royalties." he says. "The No. 1 objective was to stimulate development of drugs for AIDS. Our responsibility was to use the federal government to take advantage of expertise in government, in universities, in industry, wherever we could find it."

Sam Broder doesn't talk like that. He is direct and blunt, willing even to be offensive if that will help his work. A cheerfully hyperkinetic man, he moves from chair to desk to blackboard, lecturing, waiting impatiently for the end of questions, reviewing telephone messages. He is edgy; he is wound.

"We can talk about the prices now. But in 1984 we were in the business of getting started. People were dying without intervention. More would die. Time was running out. No one was interested. AIDS was considered an untreatable disease."

Broder thought that the feeling that AIDS was a revival of the plague, a disease of doom, was discouraging progress. He wanted more than anything to show that something could be done. "We knew that if we could find a drug already in the marketplace we could get something very quickly and with little cost. We had to find a company that would find it in its interest to develop an AIDS drug."

Pharmaceutical companies were willing to submit drugs for testing but not to do much more. Broder recalls: "Most of them didn't see much commercial potential. There weren't many cases at the time, and there was a lot of bottom-line talk. 'We'd like to help, but are there enough cases?' " And there were risks involved with the research itself. Scientists would have to work with live AIDS viruses -- capable of causing disease if an accident were to occur in the laboratory.

Indeed, just last week, NIH announced that one worker in another lab had been accidentally infected with the AIDS virus.

"It would be fair to say," Broder says gently, bitterly, "that they weren't sure it would be worth the risk; they weren't sure that there would be a sustainable market for a new product that would justify the risks -- the financial risk and the risk of having live viruses around." Enter Burroughs Wellcome

It was at about this time that a scientist at Duke University in North Carolina who was also working on AIDS, suggested to the neighborhood drug company, Burroughs Wellcome, only a few miles from the campus, that it invite Broder and his colleague, Dr. Robert Gallo, for a visit. Gallo, chief of tumor cell biology of NCI, had codiscovered the AIDS virus.

"It was natural," says Dr. David Barry, vice president of research of Burroughs, and an ex-NIH researcher. "We had an active anti-viral program that went back to the Forties."

"I told them," says Broder of his visit, "about some of our preliminary data. I said. 'If you have products you want to develop, I'll put my entire lab at your disposal.' "

But Burroughs was lukewarm. Certainly it didn't want to have live AIDS viruses on its premises.

But then a week later Burroughs got back in touch with Broder. The company was interested in sending drugs to Broder for testing."I was surprised, but it was what I wanted," says Broder. Burroughs had a good track record for getting drugs to market. It had expertise in anti-viral agents; it developed and marketed acyclovir, the anti-herpes drug.

And Broder urgently needed a big drug company like Burroughs to get interested so that other companies would get on the AIDS bandwagon, too. "We needed companies to see that there was money to be made here," says Broder.

Burroughs began to send chemicals it took from its shelves to Broder's lab. Broder and his colleagues had worked out a system to determine a chemical's ability to protect white blood cells from the lethal action of the AIDS virus. He used the test to evaluate drugs from Burroughs and those solicited from other companies. In February of 1985, after several hundred compounds had been tested, one sample in a Burroughs batch showed promise. It was AZT.

Broder flew down again to talk to Burroughs. He wanted assurance once more that if the NCI made a commitment, the company would follow through too, and take the drug to market. Burroughs agreed.

In mid-1985, NCI began the first clinical trials on human patients. Doses of AZT were administered to patients who were already hospitalized at NIH.

In a short time, the results were so dramatic that they were hard to believe.

"I've developed a lot of drugs," says Burroughs' Barry, "and a minimum of four out of five that get to that {clinical testing} stage are failures.

"But all of Sam's patients were saying that they felt better. I doubted it. Maybe it was a placebo effect. But it was so consistent," he says. The Gamble

It was then that Burroughs made what Broder calls "a shrewd and aggressive decision."

Normally in the development of a drug, the agent would first be tested among patients with mild symptoms. Only after a positive effect was observed would the drug be tested on the sickest patients.

But Burroughs decided to test AZT in very sick patients; it decided to do a double-blind study, meaning that half the patients would get a placebo and the number of deaths in the treated and untreated groups would be the ultimate test of the drug.

As Barry says: "This drug was like nothing we had ever seen. We decided to take a gamble and bypass the conservative approach."

It was, Harmison adds, "the way the capitalist system is supposed to work."

It was also a decision criticized by many people, says Dr. Robert Yarchoan, who runs Broder's lab. Burroughs "picked a homogeneous population. They did their study at an advanced stage of the disease. And they went with the drama of a double-blind placebo-controlled study.

"They did that," says Yarchoan, "when, in general, drug companies would have been calling for additional Phase I testing. Burroughs deserves a lot of credit."

Broder, too, is full of praise for Burroughs. "People should appreciate the risk they took," he says. "If the drug had harmed people, Burroughs would have been criticized. But they were prepared to continue. It was a risk. But they understood that when dealing with a fatal disease, you must take a risk because the ultimate risk is doing nothing."

When the controversial trial began in February, 1986, Broder says, everyone was "living in mortal fear that we wouldn't watch closely enough, would fail to recognize success, would keep people on placebos and they would die."

By September, only two months after the last patient was admitted to the study, there was something to notice. Thirteen people had died, and others were improving visibly. When the test was decoded, the researchers found that all those who had died were receiving the placebo. Immediately, the test was ended, and the drug was rushed to the FDA to begin the approval process. In the end, AZT was approved within 18 months, the fastest FDA was able to approve any drug.

It was a time of jubilation. For Barry, the architect of Burroughs' high-risk effort, it was a reminder of what George Hitchings, founder of their labs, had said: "Work on what is scientifically and medically important. What is profitable often is in the hands of the gods."

For Harmison, Broder and their colleagues, the most important point had been established. "We now knew," says Broder, "that we could do something about AIDS."

The system had worked, Harmison says. "The interaction between industry and public health agencies had produced a drug." And Broder adds, "It wasn't perfect. It was toxic. It wasn't a cure. But it would save lives." The Price

Six months later, AZT had become a political issue that stemmed from the cost of being treated with the new drug.

"Why didn't you all set the price at $100,000 per patient?" Rep. Ron Wyden (D-Ore.) was asking about the price at a hearing before the House subcommittee on health and the environment.

"Well . . . how can I answer that question? I think it would have been completely out of the realm of anything reasonable at all . . . We are trying to set the price based on what we think is a reasonable price for this drug that is shown to be effective for this particular disease," answered T.E. Haigler Jr., president of Burroughs Wellcome.

"I just must tell you, I'm still unclear about how you arrived at $10,000, rather than $30,000 or $25,000," replied Wyden.

By March of 1987, a lot of people were asking questions about the high price Burroughs was charging for AZT. For many AIDS patients, $10,000 for a year's supply of the drug would be a bankrupting expense. Most health insurance policies do not cover drugs. Now public pressure was increasing on government and private medical programs to pick up the tab.

The controversy over AZT is in part explained by the public misconception of how drugs are developed. The popular image of scientists in corporate laboratories brewing up new magic compounds is vastly overrated, says Benjamin Gordon, former staff economist of the Senate Small Business Committee and now with the National Council of Senior Citizens.

There aren't very many new drugs, Gordon says. Most so-called new drugs are adaptations of old ones. Since 1952, there have only been two or three important new drugs, he says.

But azidothymidine was, indeed, a new drug that was synthesized in 1974 as a cancer treatment. But it lacked the toxicity necessary to kill cancers, was abandoned, and like all other drugs for which no particular use is found, had passed into the public domain.

Any drug company could have had AZT on its shelves, but it was Burroughs that sent the compound to the NCI for testing.

Broder understood that if any drug from Burroughs' shelves were found to be effective, Burroughs was going to apply for a patent, which would give the company exclusive rights to sell the drug. Broder didn't care about that; he had a different agenda.

Harmison cared. As the federal coordinator of the public-private research effort, he intended to apply on behalf of the government for a patent to use AZT against AIDS. If he had done so, the government would have been able to license the drug to a manufacturer who might have felt an obligation to let the government help set the price.

But Harmison was too late. By the time that the federal government made an official request to the patent office, a use patent that protected Burroughs' exclusive right to use AZT to treat AIDS had already been granted. "Burroughs got there first," he says.

The big surprise for Harmison and Broder came when Burroughs announced that its price for AZT would be between $7,000 and $10,000 per year per patient. The company, Harmison says, "gave an inadequate explanation to assure the confidence of all who participated in the development of the drug."

Broder is more direct: "We didn't pick up fast enough on the cost issue," he says. "The Burroughs Wellcome price was not something anyone could have anticipated."

But Ben Gordon says that's not right. "Drug companies charge what they can," he says. "Whatever the market will bear." Company risks

Burroughs defends the price, saying it took a significant monetary risk to develop AZT. It says it has committed $80 million to the production of the drug, and in a new and uncertain market, was entitled to recover its investment in short order.

Although the time between identification of the drug as an effective agent against AIDS and FDA approval of AZT was short, "we spent as much money to develop this drug as we have spent on any other," says Burroughs vice president Barry. "We did two years' worth of work in a few months. We had 100 people working on it before the FDA approved it for sale. Now we have 700 people, minimum, working on it."

But government officials say privately that Burroughs' handling of AZT raises many questions. The government, they say, contributed to Burroughs its entire stock of thymidine, the essential ingredient of AZT. Thymidine is both expensive to make and, early on, was in short supply, making it difficult for Burroughs to produce adequate amounts of AZT.

And, said the government officials, NCI did the early testing. NCI coordinated development of the major human study that proved the drug's effectiveness. When, last October and November, AZT was made available on an emergency basis to people who could benefit from it, the government spent $100,000 a month to distribute the drug. And the government made an incalculably valuable contribution in getting the drug approved quickly and alerting physicians that AZT was available.

What's more, there are questions about the $80 million that Burroughs says it invested in AZT. Thomas Kennedy, Burroughs' vice president for corporate affairs, explains that this is the money the company has set aside in its budget to spend on AZT. In fact, the company has invested so far probably about $30 million, not all of which has been actually spent. The remainder of the $30 million has been obligated in the form of contracts with suppliers.

The additional $50 million in the budget is based on what the company expects it will spend during the first year of the drug's production.

But Kennedy adds, "The profile of this drug is unknown. A drug usually takes six or seven years to develop from beginning to end. We have made all these commitments on patient data of one year. We hope that the ongoing clinical work will show the drug to be of considerable help, but we can't be sure."

Indeed, Burroughs makes the point that the entire enterprise is still a risky one. Haigler, the president, says, "The full usefulness of Retrovir (Burroughs' trade name for AZT) is unknown. Efficacy and speed of introduction of other therapies are unknown. Our financial returns are uncertain."

But a closer look at AZT's prospects suggests that Burroughs' argument -- that the high price is justified by the uncertainty of the market -- is unconvincing. First reports of the drug's effects, for example, published in the July 23, 1986, issue of the New England Journal of Medicine, show that the one-year mortality rate for people receiving AZT is 11 percent, while the death rate for those not taking it is 50 percent.

Nor is AZT likely to be replaced in the near future by another drug. Although another drug is being tested, and a third is on the way, it will be some time, two years perhaps, before those drugs can be brought to market, government reseachers say. And anyway, "new drugs," Broder says, "are extremely likely to be used in combination with AZT. We'll use combinations of drugs to the best effect, just as we do in other chemotherapies."

Moreover, the company has just begun a test of what AZT can do for people who, although infected with the virus, have not experienced symptoms. If the drug can forestall progress of the disease, its sales potential will be at least a million people in this country alone. Who Pays?

At present, 10,000 people are now taking AZT. Some number of those are receiving it free because they were in the original test group. But at $10,000 per patient per year, Burroughs Wellcome's revenue for the first year of sales will be on the order of $100 million, exceeding the $80 million it says it has invested.

"That," says one federal official, "isn't bad, is it? Even if you accept their $80 million figure, they're going to get it back in the first year."

The price, Burroughs responds, is not keeping the drug away from those who need it. Some states are paying for AZT through Medicaid. Private health insurers are beginning to pay for it. Congress has created a $30 million fund so that people who need it can get it. And the company donates it to those who participated in the tests and to "a limited number of others," perhaps 50, who receive it on a compassionate plea basis.

"We're dealing with an expensive compound," says Kennedy, "that is going to be in short supply for some time. Somewhere, society has a responsibility beyond Burroughs Wellcome to assist in the funding of care for AIDS patients because even if we did everything we could do, we would bankrupt the company."

Burroughs' justification for the price appears to run like this: Drug companies have a right to make profits. Burroughs was aggressive and got there first. It ought to be able to charge what it wants to charge. And if patients can't afford the drug, "society," as both Barry and Kennedy say -- by which they appear to mean governments -- should pay.

For many in the research and medical community, the price is offensive. Sam Broder is concerned about it, and wishes it were lower. He and Burroughs, he says, "have had several frank exchanges of views." But, he says, "a deal is a deal. It was right to have a drug company sponsor. The capitalist ethic did serve to get the drug to market. But we didn't put strings on at the beginning, and we couldn't do it at the end."

Harmison agrees, sadly. But he is determined that what happened in the case of AZT will not happen again. So he has been aggressively seeking patents on those drugs for which the government has a claim. And he has inserted into new requests for proposals to develop drugs specific language that will require companies "to package, market and distribute anti-viral pharmaceutical products in a nationwide marketing system at a reasonable price."

That language has now been attached to two requests for proposals, one of which led to an award to Hoffman-La Roche for production and testing of dideoxcytidine. The other bid, which is about to be awarded, is for the testing of dideoxyadenosine.

Harmison is also going around the country, talking with pharmaceutical companies about other drugs on which the government has a claim. In negotiating with them, he tells them simply that they must expect to pay royalties to the government if they sell drugs developed with government support. He nudges them to consider fairness when they price their products. In addition, he is helping to guide the government's implementation of the Technology Transfer Act, which will affect the marketing of all products developed with government participation.

"This is an effort," he says, "to give industry greater responsibility, of course, but with certain safeguards for the public interest. The government should create a level playing field."

Meanwhile, AZT's monopoly position is becoming stronger. In the next few weeks, the status of the drug will change when Burroughs will be able to produce enough AZT to supply all patients who need it.

There is a chance that as more drugs are developed to treat this disease, competition may lower the price of AZT. But it will be some time before a competitor drug is on the market. And besides, because of advertising and marketing costs, health officials don't count on lower costs for AIDS drugs in the future. As Ben Gordon observes, "competition in the pharmceutical industry often leads to higher prices, not lower ones." Mark H. Furstenberg is a Washington-based writer who specializes in manufacturing issues.