Importance of Intellectual Property to Biopharmaceutical Companies

Patent law, one of the most important intellectual property rights for biopharmaceutical companies, attempts to strike a balance between creating incentives to innovate, on the one hand, and promoting the free exchange of ideas, on the other. That balance is achieved by giving the patent owner a 20-year right to exclude others from making, using, selling, or offering for sale in the US or importing into the US, the patented invention, and by requiring the patent owner to reveal the specifics of the invention in the patent application that becomes public 18 months after it is filed. This balance between encouraging both innovation and public disclosure is important for biopharmaceutical companies. For example, the Pharmaceutical Research and Manufacturers of America (PhRMA) notes that the cost of launching a new drug has increased from $138 million in the 1970s to more than $800 million today.⁸ Once the initial research, development, and regulatory approval process has been completed, the actual cost of manufacturing therapeutic products is minimal. Patent protection is critical for prevention of counterfeiting and free-riding. If drugs could be freely copied by those who made no investment in research or development, then pharmaceutical innovators would not be able to recoup their substantial investment in research and development. Patents also encourage the public sharing of ideas by requiring patent owners to make their inventions known to the public in exchange for monopoly protection provided for the exploitation of the invention for 20 years.

The expansion of the market for generic drugs and for generic biopharmaceuticals in particular is another issue confronting biopharmaceutical companies. Generic drugs typically provide affordability to consumers, because competition in the market increases once patents on the drug — typically held by an innovator company — have expired. The passage of the Hatch-Waxman Act in 1984 provided a framework for generic drug makers to obtain approval of bioequivalent drugs through the Abbreviated New Drug Application (ANDA) process; however, the regulatory process for approval of generic biologics is still uncertain.⁹ For example, some biologics are regulated by the Federal Food, Drug, and Cosmetic Act, while others are governed by the Public Health Services Act. In a February 26, 2005 speech before the Generic Pharmaceutical Association, Lester M. Crawford, the Acting Commissioner of the Food and Drug Administration (FDA), noted that guidance and information about the FDA's policies for follow-on biologicals will be released in coming months.¹⁰

While the intersection between patent and regulatory law has long been one of the top issues affecting biopharmaceutical companies, biopharmaceuticals are also pushing the boundaries of traditional intellectual property law. The articles in this primer will discuss, in depth, some of the intellectual property issues facing pharmaceutical companies. In particular, these articles will focus on current issues in each of the following areas of intellectual property.

Domestic Patents

A patent provides an inventor with a temporary monopoly on an invention in exchange for full disclosure of the subject matter of the invention. At the end of the monopoly term others are allowed to enter the market in competition. Drug manufacturers, however, face unique problems, such as the need to obtain government approval before marketing a product, the regulatory and legal maze surrounding ANDA applications, and the uncertain scope of various special infringement exceptions. For example, in the ongoing litigation between Merck KgaA and Integra Life Sciences I, Ltd., the Supreme Court recently reviewed whether otherwise infringing activities fall within the regulatory testing and approval safe-harbor exemption from patent infringement provided by 35 USC Section 271(e)(1). In an opinion written by Justice Antonin Scalia, the Court determined that "§271(e)(1)'s exemption from infringement extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the [Food, Drug & Cosmetic Act]." However, the Court declined to address whether Section 271(e)(1) exempts from infringement the use of "research tools in the development of information for the regulatory process. As a result, the case law covering the use of research tools remains uncertain.¹¹

Copyrights and Trademarks

Copyright protection may be important to biopharmaceutical companies in order to obtain intellectual property protection for items not covered by patent protection. For example, a biotech company that has developed proprietary software tools for research purposes may wish to seek copyright protection for the underlying code.