Allain Andry

The economic recession and the passage of federal healthcare reform are obvious recent forces that will have lasting effects on the biotechnology industry.  Lurking just below these headline issues are several pending legal and regulatory changes that will have major impacts on the industry as well.

Possible Narrowing of Patent Law

Fundamental questions are currently unresolved concerning the protection of genetic-related patents.  The issue of whether isolated genes are patentable is before the federal courts in the Myriad case, which was organized by the American Civil Liberties Union to challenge Myriad Pharmaceutical’s patents on certain breast cancer susceptibility genes.

The legal and policy arguments about gene patents can be briefly summarized.  On one hand, human genes may constitute “products of nature” which by law cannot be patented.  There also may be a basic moral objection to any individual or firm obtaining a patent (which is a legal monopoly) on a human gene.

On the other hand, the Patent Office and courts have long allowed patents on genes that are isolated from their natural environment in the body and are thereby distinguished from basic “products of nature.”  Gene patent advocates argue that companies will have the necessary economic incentive to develop lifesaving diagnostics and therapies if the intellectual property the companies create—including isolated genes–cannot be protected.

In March 2010, a U.S. District Court granted summary judgment in favor of the ACLU side and invalidated the Myriad patents.  The ruling has just been appealed to the federal appeals court and the legal battle will continue, likely to the Supreme Court.  Uncertainty about gene patents will persist for some time since a final ruling remains years away.

Meanwhile, there are other patent cases in the federal courts that may affect a number of businesses, including biotechnology.  The Bilski case is at the Supreme Court, with a ruling expected at any time, and deals with the patentability of business methods.

The decision in Bilski may have far-reaching consequences for patents on methods of analysis, data interpretation, and performing certain tasks including the administering of diagnostic tests and therapeutics.

Food and Drug Administration Regulation of Personalized Medicine

The era of personalized medicine has been discussed for some time now, and advances are being made in using new diagnostics – especially genetic diagnostic tests – to target the most effective therapies for individual patients.  This growing importance of diagnostics now is triggering greater regulatory oversight.

Just last week, the U.S. Food and Drug Administration announced that it will hold a public meeting in July to “discuss how the agency will oversee laboratory-developed tests (LDTs).”  Prior to this time, the FDA had asserted jurisdiction over LDTs but had mostly exercised its discretion not to regulate such diagnostics, although it has recently taken some action with respect to direct-to-consumer genetic tests.

The recent announcement declares the FDA’s intent to much more aggressively regulate the entire field of LDTs.  The FDA’s notice highlights the growing complexity of LDTs, their widespread use “to inform critical treatment decisions”, and the increasing commercial significance of LDTs.  The actual shape of LDT regulation will be determined over months and years, with the FDA currently stating only that it “believes that a risk-based application of oversight to LDTs is the appropriate approach.”

What about Biotech in North Carolina?

The North Carolina biotechnology cluster has been affected by all of the broader national and international changes in the industry.  One critical trend is the intense focus on product cost and comparative effectiveness and the difficulty of receiving reimbursement approvals for new, expensive products.

The relentless search for cost cutting and efficiency in biotech is likely to cause pharmaceutical and other companies to look to outsource functions such as research, clinical trials and manufacturing to efficient specialty providers.  With its recognized strengths in contract research organizations and contract manufacturing, North Carolina may be relatively well positioned to surf the wave of economic, regulatory and legal changes that are reshaping the biotech world.

By Allain C. Andry

Robinson, Bradshaw & Hinson, P.A.

This is the fourth and final article in a four-part series that examines the emerging biotechnology and life sciences industries in the Southeast.

For Part one see: Economic incentives available to biotech manufacturers ; For Part two see: Five Keys to North Carolina’s successful biotech cluster For Part three see: New creativity needed to advance promising biotech discoveries

Allain Andry serves as chair of the Life Sciences Practice Group at Robinson Bradshaw & Hinson, a corporate and commercial law firm with more than 125 attorneys. The firm has offices in Charlotte, the Research Triangle and Rock Hill, South Carolina. He can be reached at 704-377-8359 or aandry@rbh.com. On the Web at www.rbh.com.

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