The last several months have seen the pharmaceutical industry and its primary regulator, the Food and Drug Administration, roiled by controversy over the safety of the painkillers Celebrex©, Bextra© and Vioxx©. Questions of user safety caused the withdrawal of these products from the market, dealing another blow to already beleaguered drug companies. At the same time, the FDA finds itself the subject of public criticism over the alleged failure to properly evaluate - and warn of - potentially lethal side effects of the drugs it approves. Responding to these concerns, the FDA has recently announced the creation of a board to advise the agency of drug complications and to make public its findings. To be sure, drug safety continues to be the big story and one can reasonably anticipate substantial changes in the pharmaceutical industry as a result.
However, other changes are afoot that may be transformative over the next two years. One relates to how, if at all, products known as "biologics" will be approved in their generic form and ultimately brought to market. Another one is the appropriate scope of the so-called "safe harbor" provision of the federal patent statute that allows researchers to use patented information in order to develop data for submission to the FDA for approval of a product. Resolution of these questions will have a big impact on how both "big-pharma" and smaller research organizations go about developing drug-based therapies in the future.
Approval Of Generic Biologics
The FDA is currently reviewing the approval process used for biologics, which are therapeutic products developed from living sources. Unlike traditional drugs made from synthetic small molecules and approved under New Drug Applications (NDAs), biologics are large complex molecules approved under Biologic License Applications (BLAs). When drug manufacturers move into the arena of generic drug approval, manufacturers of traditional drugs derived from synthetic sources can take advantage of the Abbreviated New Drug Application (ANDA) process. However, manufacturers of biologics do not have available to them a similar, abbreviated application process. As a consequence, biologics are among some of the most expensive products to develop and use. Mindful of this disparity, the FDA is leaning towards providing biologics with a generic route to market, the implementation of which will have a huge economic and legal impact on both biologic manufacturers and biologic consumers.
The pharmaceutical industry is already familiar with the issues that generic drugs present, including the delicate balance between providing incentives for innovator pharmaceutical companies to continue research and development while allowing generic drug makers a less expensive and less time consuming entrance into the market. In the traditional drug market, an innovator's product must proceed through years of animal research and clinical studies before gaining FDA approval. At the same time, U.S. patent law, as well as U.S. food and drug law, allows the innovator to exclusively market its product for a specified period of time as an "award" for its costly research and development efforts. Patent protection and marketing exclusivity are extremely valuable to the innovator company, as each additional day on the market without competition can generate millions of dollars.
Once the patent and exclusivity terms expire, or once the patents listed with the FDA as covering the innovator product are successfully challenged, a generic manufacturer need only show that its drug is the "same as" the innovators drug, and that its drug is "as safe" and "as effective" as the previously approved product to gain FDA approval. Because the generic manufacturer does not need to go through the extensive studies performed by the innovator, generic drugs are much cheaper to produce and can enter the market much faster than innovator drugs. In turn, consumers pay less for the product and the manufacturers see their returns much sooner than in the case of an innovator product.
This delicate balance is not yet in play in the world of biologics and there is no generic route to market available for biologic manufacturers. Instead, each biologic maker must go through all of the animal research and clinical trials required for approval of a full BLA. Patents procured on the innovator biologic can prevent competition, but additional marketing exclusivity is not yet available. In addition, there is no regulatory mechanism such as that provided under the ANDA provisions to challenge a patent listed with the FDA as covering the biologic. This means that any manufacturer wishing to market its own copy of an approved biologic must wait for the innovator's patents to expire and must then re-perform all of the studies relied upon by the innovator for approval. As such, biologics are very costly to produce, although biologic companies are often rewarded with large profits due to the long periods in which they enjoy a lack of competition. It has been estimated that by the year 2010, total sales of biologics will equal $100 billion. On the other hand, consumers in need of biologics have no choice but to pay high retail prices for their medicine. In fact, patients currently treated with biologics pay on average between $5,000 - $10,000 per year.
With approximately $10 billion worth of biologics set to go off-patent by the year 2006, it is no wonder that the FDA is currently exploring the possibility of implementing a generic pathway for biologics. Although the implementation of an abbreviated approval mechanism for generic biologics may in essence mirror that of synthetic drugs, there are many difficult hurdles the FDA must overcome before such a regulatory scheme is implemented. One debate that must be settled is whether FDA has the authority to implement generic biologic provisions on its own or whether Congress must grant FDA this authority.
Even if FDA currently has or is given the power to implement an abbreviated approval process, standards for generic approval need to be closely examined and determined. Because biologics are typically large complex molecules derived from living sources, the manufacturing process for biologics is more difficult and harder to reproduce than that of traditional drugs. Unlike synthetic drugs, biologics are not approved on the basis of safety and efficacy, but rather on the basis of purity, potency and identity.
In addition, small changes made during the manufacture of biologics can result in severe adverse events occurring in the individuals treated with them. For this reason, the innovator's manufacturing process is likely the most important aspect of producing a safe and effective biologic. Although manufacturing processes often do not qualify for patent protection, confidential information regarding the manufacturing processes is eligible for trade secret protection to provide the innovator with a means of protecting information of great commercial importance. However, it is also the examination of this confidential information that allows FDA to establish whether a biologic is ready for approval. One fear expressed by innovators is that FDA will not be able to determine whether a generic version is similar enough to the innovator biologic for approval without relying on trade secrets and other confidential information provided to FDA by the innovator company during the BLA process. Thus, safeguards and methods for protecting proprietary information will be under great scrutiny while FDA explores the implementation of a generic approval process for biologics.
Obviously the stakes are high for both innovator and potential generic biologic companies. Congress is likely to address the issue of generic biologics during its 2005 term, and FDA's progress in this area is certain to draw increased attention as steps are taken to strike the delicate balance with biological products that is already seen in the realm of synthetic drugs.
Exploring The Scope Of The Patent Infringement Research Exemption
On January 7, 2005, the U.S. Supreme Court granted certiorari in Integra LifeSciences I v. Merck KGaA, a case in which the Federal Circuit's ruling significantly narrowed the scope of the research exemption under 35 USC 271(e)(1). This research exemption provides a "safe harbor" against patent infringement for making, using, offering for sale, selling, or importing a patented invention "solely for uses reasonably related to the development and submission of information" to the FDA for approval of a product. The research exemption was statutorily created to allow FDA applicants to utilize patented inventions in compiling data for submission to FDA. Therefore, although production or commercialization of a patented invention would constitute patent infringement, use of the patented invention in performing research required for FDA approval would not. Without the exemption, the process for obtaining FDA approval of a competing product could not even begin until the patent of the pioneer product expired. Because FDA's approval process can take years to complete, the pioneer patent owner's patent rights were effectively extended well beyond the life of the patent.
The issue now before the Supreme Court is whether the Federal Circuit was correct in holding that the exemption only applies to clinical studies designed to actually provide information to FDA for product approval, or whether the exemption also applies to pre-clinical animal studies that may form a predicate for future clinical studies. Many see this judicially created distinction as a division between the product production stage and the research and development stage of product development. The majority opinion relied heavily on congressional intent, focusing on the idea that allowing one to use a patented general research tool to identify the direction of future research would essentially deprive the patentee of the benefits of patent protection. In contrast, the dissenting opinion supports an expanded interpretation of the research exemption, arguing that a broader approach to the use of patented inventions in research is needed to facilitate modern biotechnological research, and that preventing the research use of patented inventions would frustrate public policy and hinder scientific development.
Prior to Integra v. Merck, the scope of the research exemption was relatively broad, as use of patented materials need only be shown to be reasonably related to the production of information provided to FDA for approval. Thus, actions such as using patented compounds or devices to screen for potential drug candidates would have been covered by the research exemption, as these actions would have been considered early-stage research that will lead to the submission of information for FDA approval. With the tighter Federal Circuit holding, this is no longer the case, as the use of the patented compounds to simply identify a candidate would fall outside the parameters of generating information that will actually be provided to FDA for approval of the end product.
Certainly, the Supreme Court's ruling in Integra LifeSciences v. Merck KgaA will be of great importance to the pharmaceutical industry, as it is expected to clarify an important statutory provision while balancing the interests of patent owners with the need to foster the development of new and better therapeutic products.
Thomas F. Holt, Jr. is a Partner and Jennifer Grant Moitoso is an Associate in the Boston office of Kirkpatrick & Lockhart Nicholson Graham LLP. Mr. Holt concentrates in intellectual property law and litigation, and Ms. Moitoso concentrates in intellectual property law.