By Maggie Fox, Health and Science Editor

WASHINGTON, Oct 6 (Reuters) - The decision on Monday to award the Nobel Prize for Medicine to Luc Montagnier and Francoise Barre-Sinoussi for their discovery of the AIDS virus was a snub to U.S. virologist Dr. Robert Gallo, and reopened a bitter and painful dispute over the research.

From the beginning, Gallo and Montagnier were rivals who raced to discover the cause of a mysterious illness that was killing gay men and injecting drug users in the 1980s.

In the end, the Nobel committee had the final say on who deserved the most credit for the work.

"There was no doubt as to who made the fundamental discoveries," Nobel Assembly member Maria Masucci told Reuters.

Montagnier and Barre-Sinoussi were more generous, both giving Gallo credit.

"It is a conflict to be forgotten. It is also true that American teams were important in the discovery of the virus, and that should be recognized," Barre-Sinoussi said in a telephone interview with RTL radio.

Gallo was equally polite.

"I am pleased my long-time friend and colleague Dr. Luc Montagnier, as well as his colleague Francoise Barre-Sinoussi, have received this honor," he said in a statement. "I was gratified to read Dr. Montagnier's kind statement this morning expressing that I was equally deserving."

But National Cancer Institute director Dr. John Niederhuber noted that Gallo and Montagnier had shared credit for years.

PLEASED BUT DISAPPOINTED

"While we are pleased that two scientists who contributed so much to AIDS research were recognized today, I am extremely disappointed that the NCI and all of the resources it brought to bear on the discovery of the AIDS virus -- along with the technology to make blood banking safe and the drugs that have made AIDS a chronic disease -- weren't, in some fashion, recognized," Niederhuber said in a statement.

"Additionally, Dr. Gallo discovered the blood test for AIDS."

In the early 1980s, researchers around the world were trying to discover what was causing the mysterious and fatal disease that came to be known as acquired immune deficiency syndrome, or AIDS.

Gallo and Montagnier both homed in a possible retrovirus and exchanged samples.

Gallo, then at the National Cancer Institute, announced in April 1984 that he had discovered the virus that causes AIDS. He said the virus was different from one identified by the French researchers.

It turned out that Gallo was working with a sample contaminated in Montagnier's lab and it took years for the U.S. National Institutes of Health and France's Institut Pasteur to agree to split the credit and the royalties.

"I think Bob made a very, very important contribution to the field of HIV by making the strongest evidence for ... the virus, which was first identified by Montagnier, as the causative agent of HIV," Dr. Anthony Fauci, head of the U.S. National Institute of Allergy and Infectious Diseases, said in a telephone interview.

"It is unfortunate that the committee cannot give the award to more than three people," Fauci added. "If they could, then I am sure Bob would have been very, very deserving."

The third winner of the 2008 medicine prize was Dr. Harald zur Hausen of the University of Duesseldorf for his discovery that the human papillomavirus, or HPV, causes cervical cancer. (Editing by Will Dunham)

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