In a potential blow to small biotechnology firms, the Supreme Court on Monday made it easier for other companies to use their research for drug development without running afoul of patent laws.
In a case that grew out of a dispute between two companies about research pioneered in San Diego, the court unanimously ruled that federal law provides a relatively broad exemption to patent protections for studies on potential new medications. That means that a compound patented by one company could be used by a competitor for its own drug development without paying a licensing fee.
"...The statutory text makes clear that it provides a wide berth for the use of patented drugs in activities related to the federal regulatory process," Justice Antonin Scalia wrote in the court's opinion.
However, the court did not apply the decision to "research tools" like equipment.
The ruling could be bad news for many of San Diego County's biotech companies. They rely on revenue from licensing their discoveries to other researchers, who now may be able to use them free of charge in many instances.
"It's a win for the (bigger) drug companies, for sure," said John Van Amsterdam, an attorney in Boston who specializes in biotechnology and pharmaceutical patents and was not involved in the case.
The high stakes were underlined by the large number of companies and interest groups that intervened, including the AARP. The nation's largest senior citizens advocacy group favored the sort of broad patent exemption granted by the court, arguing it could help drive down pharmaceutical costs by spurring further drug development.That position was echoed by the Justice Department.
Big pharma officials say this week's Supreme Court ruling on drug patents will help their companies develop important drugs more quickly and cheaply.
But other bioscience leaders say the ruling just leads to more questions in a field in which legal issues are becoming as complex as the science.
The high court on Monday expanded the rights of drug companies to experiment with patented compounds and molecules patented by other companies.
The court ruled unanimously that pharmaceutical companies do not infringe on patents during pre-clinical research stages "reasonably" aimed toward eventual approval of a drug by the U.S. Food and Drug Administration.
In the ruling, the latest in a nine-year legal dispute, German drug firm Merck KGaA won its appeal that it has a right to proceed with pre-clinical studies with a certain peptide patented until 2006 by Integra LifeScience Corp. of New Jersey. A peptide is a biological molecule. Merck KGaA is not related to Merck & Co. of the United States.
The court reversed a lower court ruling that the safe harbor established by the Hatch-Waxman Act to exempt experiments from patent infringements applies only to later-stage clinical trials of humans.
Lila Feisee, director of intellectual property for the 1,000-member Biotechnology Industry Organization, said it may be too early to gauge the effect of Monday's ruling on both established companies and fledgling biotechs.
"No, there is no immediate impact. Everyone will continue to proceed [with drug development experiments] as usual -- that is, try it as they go," Feisee said.
The ruling "answers one question, that the exemption is not just limited to clinical studies," Feisee said. "But it opens many more, such as where do you draw the line?"
The Supreme Court sent the case back to the U.S. Circuit Court for further deliberations.
"This case now has to be thoroughly analyzed," Feisee said. "The lower court has to look at the data and determine what is considered reasonably related to a future FDA filing. All we know so far is that [use of a patented drug] doesn't have to be related to clinical trials. It is still not clear at this point if this new ruling benefits big pharma."
Lawyers at the Pharmaceutical Research and Manufacturers of America differ with Feisee.
"We think there is now more certainty about the parameters of the exemption. That helps companies proceed with confidence," said Jeff Trewitt, spokesman for PhRMA, which represents 90 drug companies and other members. "This is a victory for timely development of new medications for patients."
AARP, in a friend-of-the-court brief, agreed that, if the lower court restriction on the exemption stood, "the inevitable effect will be that the costs of drug development will be driven up even further and will serve to delay the development of new medicines."
The ruling will have no immediate impact on "big pharma or smaller biotechs," said Fred T. Hadeed, CFO of United Therapeutics of Silver Spring.
"I cannot predict what will happen," he said. "I think the whole situation was limited to what was going on between those two companies."
Hadeed said United Therapeutics does not experiment with "molecules from other people" and that he is not aware of it as a widespread practice in the biotech and drug industries. Trewitt said PhRMA's attorneys agree that it is not a common practice.
Officials of several other Maryland bioscience companies said they preferred to wait for the case to play itself out in the lower court before commenting.
James S. Burns, president and CEO of EntreMed Inc. in Rockville, said through a spokeswoman that he is quite interested in the case and that it needs "a lot more study." EntreMed focuses on drugs with antiangiogenic properties, which inhibit abnormal blood vessel growth associated with cancer, blindness, arthritis and atherosclerosis. At the center of the Supreme Court ruling was Integra's effort to stop Merck KGaA from conducting pre-clinical studies with certain peptides with antiangiogenic properties, to keep cancer tumors from forming abnormal blood vessels.
"The court has said if there is going to be an exemption in the later stages of clinical trials, there should be an exemption in the preclinical studies, too," PhRMA's Trewitt said. "Why have a half loaf of bread when you are entitled to the whole loaf?"
Scientists conducting basic research, however, say that the term "pre-clinical drug studies" is not always well defined. It can be part of the clinical trials, basic laboratory work or animal studies of a drug effect.
"This sets up a precedent -- there will be more cases," BIO's Feisee said. "For now it is up to the lower court to look at the data and determine if it this is reasonably related to an FDA filing. What's 'reasonably'?"
The Supreme Court has said that if a drug company thinks a drug it is testing in research might work for a particular therapy then it would "fall into the safe harbor of the law," Feisee said.
"Would you spend big money on developing a product using someone else's patented drug?" Hadeed asked. "Perhaps there is more to this story than is in the media so far."