Monday, June 27, 2005

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Guest Commentary: Merck decision promotes development, but will not reduce costs

By George A. Xixis

In its recent decision in Merck KGAA v. Integra Lifesciences, the Supreme Court attempts to promote the development of safe, effective, new drugs by correcting a lower court decision that had effectively limited the federal exemption for using patented compounds in drug development to their use in clinical studies. At the same time, the court has injected new uncertainty into the drug discovery and development process by failing to draw a bright line as to how far back in the process the exemption extends, all but ensuring additional litigation.

Section 271(e)(1) of the U.S. Patent Act states that it is not an act of patent infringement to use a patented invention "solely for uses reasonably related to the development and submission of information" to the U.S. Food and Drug Administration (FDA). The statute creates a "safe harbor" or exemption for companies to use patented technologies in the process of developing new drugs. Merck had petitioned the Supreme Court to overturn a ruling of the Court of Appeals for the Federal Circuit which determined that Merck was guilty of patent infringement when it used Integra's patented technology in identifying a new cancer drug.

The Supreme Court's decision was hardly surprising. Prior to the Appeals Court's Merck decision, it was generally acknowledged that the exemption applied to any work that might be included in a regulatory submission and was not limited to clinical studies using human subjects. The Court of Appeals for the Federal Circuit effectively limited the exemption to any work that was actually included in a regulatory filing and implied that only human clinical trials should be exempt from patent infringement. By so limiting the exemption, the Appeals Court potentially excluded many types of pre-clinical studies that would be relevant to the FDA's consideration of the safety and effectiveness of a drug.

As the Supreme Court found, an Investigational New Drug (IND) application - seeking approval to conduct human clinical trials - by definition must include data derived from in vitro and animal studies, including "summaries of the pharmacological, toxicological, pharmacokinetic, and biological qualities of the drug." A new drug application (NDA) to obtain FDA authorization to market a new drug "must include all clinical studies, as well as pre-clinical studies related to a drug's efficacy, toxicity, and pharmacological properties."

Further, the Appeals Court decision was not informed by an adequate appreciation for the complexity of the drug development process and of the trial-and-error nature of the enterprise. By seemingly limiting the exemption "only to uses of a compound for which FDA approval eventually is sought," (amicus brief of the American Intellectual Property Law Association) the Appeals Court effectively provides no safe harbor at all. Pharmaceutical companies do not know ahead of time which compounds will prove safe and effective; indeed that is why they conduct tests. And there are many cases where studies prove to be "false starts" that do not lead to FDA applications.

While the Supreme Court took adequate account of the vagaries of drug development, it failed to qualify which stages of drug development are "reasonably related" to an FDA submission. The Supreme Court concurred with the appellate opinion that the exemption "does not globally embrace all experimental activity that at some point, however attenuated, may lead to an FDA approval process."

However, except for eliminating the most basic research from the protection of the safe harbor, the Court does not clarify how far back in the lengthy chain of drug development the exemption extends. In fact, the Supreme Court's opinion could be read as extending the exemption to all drug development activities except the most basic scientific research.

However, in the initial stages of drug development, researchers often have little idea which compounds will produce the types of biological effects they seek. Researchers employ advanced techniques, such as high-throughput screening, which permit them to test thousands of compounds simultaneously, in an almost random process of identification. Under the Court's interpretation, this and similar types of activities, which are a long way from even pre-clinical testing, could be interpreted as contributing to understanding a drug's "mechanism of action", and hence fall under the exemption of 271(e)(1).

By largely embracing Merck's expansive conception of the exemption, the Court encourages pharmaceutical companies to assert overbroad rights to use patented technologies and invites further suits to clarify the outer reaches of the safe harbor. The irony is that in adopting Merck's position, the Court enhances uncertainty, thus driving up risks and costs of drugs in the process.

George Xixis is a partner in the Intellectual Property Group of the Boston law firm of Nutter McClennen & Fish LLP. He is also a member of the Life Sciences Practice Group, with an emphasis on biotechnology and pharmaceuticals. He can be reached at gxixis@nutter.com.