Amgen near accord with hospital over drug royalty

Amgen Inc. said it has agreed to settle a dispute with Massachusetts General Hospital over royalties it pays the hospital for helping to invent Enbrel, Amgen's highly profitable drug to treat rheumatoid arthritis.

Amgen chief executive Kevin Sharer said he met with Mass. General president Peter Slavin last year and that the two executives reached a verbal agreement under which the hospital would receive a lump sum instead of the annual royalty payments it now receives. Those payments amounted to about $41 million in 2004.

Neither Sharer nor Mass. General would disclose the size of the lump sum. ''We gave them a lot of money," Sharer said this week. Asked why Amgen chose to settle after initially challenging royalties, Sharer said, ''Why would we want to get into a dispute with a partner of ours and a big customer?"

The settlement would presumably allow Amgen to limit its obligations to Mass. General, which under the royalty arrangement have been growing rapidly as Amgen sells more Enbrel. Amgen sold $2.6 billion worth of Enbrel in 2005, up 35 percent from 2004.

Slavin confirmed that a settlement was close but said more work needed to be done. ''I have my fingers crossed that we're pretty close," he said.

The disagreement became public last year after Partners HealthCare, the parent corporation of Mass. General, said in a public filing that the two sides could be headed for litigation, jeopardizing an important revenue stream for the hospital. The Enbrel payments are by far the largest single source of licensing revenue for the hospital, representing about two-thirds of all licensing fees it received in 2004.

Amgen inherited the royalty arrangement in 2001 when it bought Immunex Corp., a Seattle company that developed Enbrel in the 1990s. Amgen's lawyers reviewed the contract Immunex negotiated with the hospital and found language they thought would support a challenge.

Enbrel reduces painful and often crippling rheumatoid arthritis inflammation by using decoy receptors to attract the body's immune response away from healthy cells. The techniques Immunex used to create the decoys were developed at Mass. General.

Christopher Rowland can be reached at crowland@globe.com.