As the number of government-held patents soared, companies sought legislation encouraging commercialization of federally funded inventions. The proponents said the changes also would make U.S. firms more competitive with foreign companies whose research and development programs were subsidized by their governments.
Laws enacted in the 1980s for the first time authorized formal research collaborations between companies and scientific arms of the government, including the NIH. Starting in late 1986, in-house researchers at the NIH were permitted to arrange cooperative research agreements with companies. The agreements were intended to benefit both sides while advancing scientific discovery.
Other changes in law permitted the government agencies, and the researchers, to share in future patent royalties for inventions.
The new laws said nothing about government employees being hired by the companies.
Yet by the end of the 1980s, more companies were putting NIH researchers on their payrolls, albeit within limits imposed by the NIH.
Agency leaders in the 1990s began weakening those restrictions.
In November 1995, then-NIH Director Harold E. Varmus wrote to all institute and center directors, rescinding "immediately" a policy that had barred them from accepting consulting fees and payments of stock from companies.
The changes, he wrote, would bring the NIH ethics rules more in line with new, less stringent, executive branch standards. Loosening of restrictions on employees' outside pursuits was occurring throughout the government. And with biomedical companies ready to hire, few were better positioned to benefit than employees at the NIH.
Varmus' memo -- which until now has not been made public -- scuttled other restraints affecting all employees, including a $25,000 annual limit on outside income, a prohibition on accepting company stock as payment and a limit of 500 hours a year on outside activities.
His memo also offered a narrowed definition of conflict of interest:
Employees had been barred from consulting for any company that collaborated with their NIH lab or branch. But Varmus said the ban would be applied only if the researcher was personally involved in the company's collaboration with the agency.
Furberg, the former NIH official, said Varmus' actions invited, at minimum, appearances of conflict of interest.
