Supreme Court OKs New Product Development Using Patents

For pharmaceutical companies, developing new drugs just got a little bit easier.

In Merck KGaA v. Integra Lifesciences I, Ltd., the Supreme Court unanimously decided that drug companies can use rivals' patented compounds in even the earliest stages of their own research "so long as there is a reasonable basis for believing that the experiments will produce 'the types of information that are relevant'" to a future submission to the Federal Food and Drug Administration (FDA). In any event, however, any new drug developed from an already-patented compound cannot be marketed until after the expiration of the original patent.

The dispute originally arose because Merck KGaA of Germany (no connection with the U.S. company), began funding research conducted by Dr. David Cheresh at the Scripps Research Institute in 1988 to identify potential drugs to stop angiogenesis, which is the process of generating new blood vessels. In his research, Dr. Cheresh used peptides for which Integra holds five patents, and succeeded in reversing tumor growth in chicken embryos. Thereafter, Merck KGaA and Scripps agreed to collaborate further, and in November of 1996, began the process of regulatory approval for one of their peptides in the United States and Europe

In July of 1996, Integra filed a patent infringement suit against Merck KGaA, Scripps, and Dr. Cheresh based on their activities to that point. Integra claims it holds patents for the peptides, patents which don't expire until 2006.

Under United States patent law, an infringement occurs when someone makes, uses, sells, offers to sell, or imports any invention covered by a patent. However, in 1984, Congress enacted a "safe harbor" exemption for FDA drug applications. The Federal Circuit concluded that this safe harbor was limited to the stage of human trials and did not cover exploratory research, that the exemption "simply does not globally embrace all experimental activity that at some point, however attenuated, may lead to an FDA approval process."

The Supreme Court, while it agreed with this general proposition, took issue with the Federal Circuit's conclusion, stating "[i]t does not necessarily follow from this, though, that [the] exemption from infringement categorically excludes either (1) experimentation on drugs that are not ultimately the subject of an FDA submission or (2) use of patented compounds in experiments that are not ultimately submitted to the FDA."

The Court noted that because research is inherently a trial-and-error process, scientists simply don't know whether they'll end up with something submission-worthy for the FDA. "That is the reason they conduct the experiments," Justice Scalia wrote. The Court found that the statute does not require such foresight in scientists, and turned to the wording of the exemption to conclude that it "leaves adequate space for experimentation and failure on the road to regulatory approval."

Accordingly, the Court held: "At least where a drugmaker has a reasonable basis for believing that a patented compound may work, through a particular biological process, to produce a particular physiological effect, and uses the compound in research that, if successful, would be appropriate to include in a submission to the FDA, that use is 'reasonably related' to the 'development and submission of information under ... Federal law.'"

Both the Bush administration and the AARP supported Merck, citing fears of further soaring drug costs if companies could not experiment with already-patented compounds. As is, over the last ten years drug costs have ballooned from $40.3 billion to $162.4 billion.

So what does this holding mean for drug companies?

For Merck KGaA's part, its attorney Josh Rosenkranz judged the ruling "a grand-slam home run for our clients, for pharmaceutical researchers, and for consumers." Rosenkranz noted that the Supreme Court's decision will allow so-called "second-generation drugs" on the market sooner because companies do not have to wait for a compound's patent to expire before they test with it.

Some smaller companies are worried that their businesses may be in trouble if the big guns swoop in and use their patented compounds to develop their own products. One expert called the decision "a wash" since small patent-owning drug companies are also free to experiment with their competitors' finds.

Professor Janice Mueller of the University of Pittsburgh Law School called the decision "pretty narrow" because "it only applies to work done for submitting data to the FDA or another regulatory body. I was hoping that the Court would take a broader view of other research, and, indeed, for research outside the drugs industry."

As for the specific case, the Supreme Court declined to apply the facts to its newly-pronounced rule of law, so who truly will win has yet to be decided. For now, it will be up to lower courts to figure out just how a party might show that it began research with a "reasonable basis for believing" it would eventually lead to the FDA process. Indeed, Mauricio Flores, attorney for Integra, commented that they still expect to win at the lower level since he can show that Merck KGaA's activities do not fall under the safe harbor exemption.

Regardless of the outcome of this particular case, we can all join what seems to be the hope of the Supreme Court in issuing this ruling—that by further opening up the research field, medical advances will come along more quickly and that we will all benefit from this decision.