Washington Report: Treating Patents

The Integra decision was the tip of the iceberg
Jul 31, 2005


Jill Wechsler
Patent issues have moved to center stage in Washington. In June, the Supreme Court ruled unanimously that pharma companies can do research on patented materials without infringing on intellectual property rights. Patent-extension proposals continue to pop up as incentives for desirable new drug research. Congress has launched a serious effort to overhaul the current US patent system and policies. And, somewhat ironically, industry strategies for transferring valuable patent rights to overseas subsidiaries put pharma companies in a prime position to benefit from a one-time tax break for companies that bring some of those foreign profits back to this country. (See "Bringing It All Back Home.")

Not Just for Generics


Bringing It All Back Home
It may seem unusual that a court ruling challenging patent protections is considered a victory for Big Pharma. But the decision was supported by pharmaceutical companies, along with the Justice Department, as a way to spur biomedical research and new-drug development. If there is any loser, it's small biotech companies, which may find it harder to negotiate licensing deals for patented compounds in early research stages. And it remains to be seen if, in the long run, the ruling undermines intellectual property protections on a broader basis.

In the Integra Lifesciences v. Merck KGaA decision, the court confirmed the status of the Bolar Amendment under the Hatch-Waxman Act of 1984, which sought to speed up the development of generic drugs by allowing generic makers to conduct tests on patented compounds prior to patent expiration. The decision makes it clear that innovator firms have a right to experiment with patented materials, so long as the activity is "reasonably related" to the development of a new medicine. The safe harbor created by Bolar isn't "limitless," according to the justices, and has to involve research likely to yield an application to FDA, but it isn't limited strictly to generic drugs. And the justices agreed that even though a research effort may fail ultimately to bring a new drug to market, that's not a reason to limit access to useful compounds and research tools.

Integra had sued Merck of Germany for conducting animal research involving its patented molecules and proteins. A lower court, taking a narrow view of Bolar's scope, agreed with Integra that this was infringement. The Supreme Court, however, decided that Bolar could be interpreted much more broadly to allow the use of patented compounds in early research.

Several pharma companies, as well as the Justice Department and consumer groups, filed amicus briefs urging the court to clarify what types of research are protected by Bolar. But many companies have had mixed feelings about the case. The court's broad interpretation of Bolar supports research activities by large pharma companies, but it also opens the door to greater use of compounded materials by all parties, which could erode intellectual property protections. Eventually, industry may call on Congress to clarify the scope of Bolar as it applies to research other than for generic drug development.

The ruling may lead to changes in the way pharma and biotech companies negotiate investments and partnerships. Small companies may find it more difficult to structure deals that offer up-front payments or royalties for access to compounds and tools. This may not be devastating over the long run because most pharma companies want to avoid court battles that could delay bringing a promising drug to market, and are thus likely to seek licensing arrangements once they move into more advanced development. But small research firms may find revenues from exploratory licensing deals drying up.

Eyeing Extensions

Meanwhile, policy makers continue to look at patent extensions as incentives to encourage research on certain kinds of medical products or products for certain patient populations. Patent extensions are the prime carrot in new legislation to boost research and development of vaccines and therapies to counter bioterrorism. And companies can win six-month patent extensions on drugs by conducting research that leads to pediatric labeling.