Healthy Skepticism Library item: 2737

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Publication type: news

Robins J.
Defensive medicine
lawgazette.com.uk 2005 Nov 3
http://www.lawgazette.co.uk/features/view=feature.law?FEATUREID=257241

Notes:

Ralph Faggotter’s Comments:

Next time you hear a pharmaceutical industry spokesperson saying that they need to charge higher prices for their products in order to generate dollars for research, remember this article and this quote from it- “Pharmaceutical companies spend more on legal services than any other sector…”

Full text: Defensive medicine Thursday 03 November 2005

Pharmaceutical companies spend more on legal services than any other sector, as patents are threatened by generic drugs. Jon Robins finds out what is keeping lawyers in this field so busy

The UK pharmaceutical giant AstraZeneca had nearly £1 billion wiped off its market value last month after Ranbaxy Laboratories, India’s biggest generic drugs maker, applied to US regulators to make a version of its best-selling drug for ulcers. Nexium made AstraZeneca £2.3 billion last year and the Mumbai-based company has challenged the patents on the medicine – the last one expires in 2018.

‘If you look at the patent courts over the last five years, the biggest single class of cases have been those between the research-based pharmaceutical companies and the generic companies trying to get on to the market as soon as possible,’ says Rowan Freeland, a partner in City firm Simmons & Simmons’ pharmaceutical and biotechnology group. ‘We are seeing the generic companies attacking patents earlier and earlier in their life.’

Shortly before this, the patent-busting activities of the increasingly aggressive Ranbaxy were temporarily halted when the High Court in London upheld Pfizer’s exclusivity on Lipitor, the chole-sterol-lowering medicine. It is the world’s highest-earning drug and is under patent to Pfizer, the industry’s biggest drugs manufacturer.

‘There’s now a new breed of aggressive generic companies, such as Ranbaxy, who no longer wait. They are prepared to have a go at the originator companies before the patents expire and apply to the courts to revoke them and persuade them that they are invalid,’ says Andrew Rich, head of life sciences at City firm Herbert Smith.

It is hardly surprising in this particularly febrile litigious atmosphere that pharmaceutical companies are prepared to spend huge amounts of money on teams of specialist lawyers to protect the billions that they invest in research and development to discover the next wonder drug. A new survey of 98 in-house legal departments across Europe recently found that companies in the sector were spending the most on legal services (see [2005] Gazette, 13 October, 4). In fact, pharmaceutical companies spend in the region of 2.6 million euro (£1.8 million) a year, which compares with ¤1 million in the manufacturing sector and 700,000 euro in the transportation area.

‘Patent law is the life-blood of this industry,’ says Mr Rich. The solicitor reckons that in a routine year where, for example, there are no mergers, about 70% of the global legal spend of the major pharmaceutical company will be on patent litigation. ‘Our practice mirrors that big spend,’ he adds.

A couple of weeks ago, City firm Bird & Bird won a major case on behalf of the Dutch pharmaceutical company Synthon, against SmithKline Beecham (now GSK) in the House of Lords, bringing to an end a four-year legal tussle (see [2005] Gazette, 27 October, 7). Simmons & Simmons acted for GSK. The case concerned the validity of a patent for paroxetine mesylate, which incorporates the active ingredient for the antidepressant Seroxat, and is owned by GSK. The Lords ruled that the patent was invalid.

Morag Macdonald, joint head of Bird & Bird’s intellectual property group, explains that it can often be the case that applications for the same invention are filed by competitors within months, or even days, of each other. The ruling clarifies what the first applicant needs to show to obtain their patent over the second applicant.

Synthon argued that its own pre-existing patent application ‘anticipated’ the GSK patent. Lord Hoffmann, who gave the main judgment in the Lords, explained that Synthon’s application ‘plants a flag’ on the invention of crystalline paroxetine mesylate. The court went on to rule that to invalidate the GSK patent, Synthon had to demonstrate that its application provided enough information to enable a technically qualified person to make the compound.

In the past five years, only three patent cases have gone before Britain’s highest court. Almost exactly 12 months before the Synthon decision, the Law Lords ruled on a five-year dispute between Amgen, the world’s largest bio-technology company, and TKT over the former’s blockbuster Epogen anaemia treatment. It was the first time in two decades that the court had looked at the ‘scope of protection’ provided by a patent.

Bird & Bird represented TKT, which was held not guilty of infringement. ‘At the base of any life science company is its intellectual property rights,’ explains Ms Macdonald. ‘If it doesn’t have patents in place, it has no assets, apart from the company’s bricks and mortar.’

While the much of the pharmaceutical sector’s energies are devoted to protecting patents, there is also growing corporate activity as companies work out how best to ally themselves to develop their products. ‘There are increasing pressures on the larger biotech companies and the pharmaceutical companies to strike deals in the form of licensing and other collaborative arrangements,’ reports Charles Mayo, head of pharmaceuticals and biotech at Simmons & Simmons. ‘It brings the biotech company status, accreditation, and money upfront as well as possible future royalties. For the pharmaceutical company, it provides access to innovative therapies and other sources of income.’

The economic pressures to do the deal can be ‘quite considerable but the issue is how to manage the different agendas’, he continues. Earlier this year, Pfizer bought the remaining 90% ownership of Meridica, a drug-delivery technology company, for $125 million (£70 million). Simmons acted for PA Consulting Group, which set up Meridica. In October 2003, Pfizer had purchased a 10% interest in the company and licensed the rights to Meridica’s inhaler.

Simmons has been acting for pharmaceutical clients since, as they put it, ‘Mr Simmons met Mr Beecham in the 1920s’, and claims to be the only UK firm that acts solely for research-based companies. According to Rowan Freeland, the firm has ‘a deliberate policy’ not to represent generic companies because their commercial interests conflict with those of its main client base.

US firm Covington & Burling, which has a strong European pharmaceutical practice run from its Brussels and London offices, has a similar policy. ‘We think it is important to choose a side,’ says Peter Bogaert, a partner in the Brussels office who is co-head of the life sciences practice. ‘We want to be consistent in terms of the work that we do and quite often we act against generic companies.’ In the US, specialist firms generally act for one side or the other and Mr Bogaert expects that model to be followed elsewhere.

There is also plenty of activity this month on the regulatory front with a new European regime coming into force. The Pharma Review, as it is known, represents an overhauling of the major texts of EC pharmaceutical legislation and comprises Directive 2004/27/EC (amending Directive 2001/83/EC) on medicinal products for human use and regulation 726/2004 on medicinal products for human and veterinary use.

Zoë Butler, an intellectual property partner in London firm Bristows’ pharmaceutical practice, reckons that the most controversial change has proved to be reform of the regulatory data protection. ‘When a pharmaceutical company applies for marketing authorisation, it has to apply for clinical trials data to prove the safety and efficacy of the product, and that’s subject to data privacy for a certain period of time. After that period, generic companies are able to refer to that data,’ she explains.

This period is crucial to the research and development industry, because generating that data is hugely expensive. ‘The position through Europe was not really harmonised and so in some countries the period was ten years while in others it was six,’ she says. The legislation also introduces a provision that, again, represents a compromise between the interests of the generic and research sectors. It effectively allows a generic company to carry out acts, for example clinical trials, for developing and submitting information in support of an application before the expiry of the patent protection of the reference product in question.

There have recently been signs of greater co-operation between research and generic companies. Last month Roche indicated its willingness to work with generic companies to increase production of Tamiflu, which can fight one strain of avian flu.

Unsurprisingly, many lawyers who specialise in the pharmaceutical sector are dual-qualified. Does specialising in the law still satisfy former scientists turned lawyers? Patrick Duxbury, a partner in Birmingham-based Wragge & Co’s life science practice, was originally a microbiologist and geneticist before qualifying as a lawyer in 1993. ‘When I converted to the law, I justified it to myself by saying to myself that I was doing law as it applied to science, and that area of law still appeals to that scientific side of my brain,’ he says.

Mr Rich is a former marine biologist who on graduating discovered, as he puts it, ‘this strange class of lawyer – intellectual property lawyers – that used science’. He goes on: ‘I have always loved science, and for a scientist who doesn’t want to do bench work, it’s a great job. I probably spend more time struggling over difficult concepts of science than I do points of law.’

Jon Robins is a freelance journalist