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Patent Settlements Become More Risky

Pharmaceutical companies can anticipate more costly, drawn-out patent litigation in the wake of the June 17 US Supreme Court decision, which creates great uncertainty about the grounds for negotiating settlements in patent cases. In ruling that “pay-for-delay” arrangements could violate the antitrust laws, and that the Federal Trade Commission (FTC) has the right to challenge these deals, the majority undermined years of patent case law and sent the issue back to the lower courts to decide.

The decision was not a complete victory for the FTC, in that it stopped short of declaring reverse payment agreements as per se illegal. Instead, the Justices instructed the lower courts to apply a “rule of reason” to these cases, and not the “quick look” approach employed by the Circuit Court case under review.

The ruling in FTC v. Actavis supports the long-held contention of FTC officials and consumer activists that brand-generic patent settlements maintain market exclusivity for brand name drugs, reducing competition and raising costs for consumers and health care systems. Both innovator and generic firms have insisted that these settlements actually permit generic products to come to market earlier than under costly, drawn-out court battles over patent rights. That argument was supported in an April 2012 ruling from the US Court of Appeals, which found that an arrangement that allows generic competition earlier than patent expiration did not violate antitrust laws. The dissenting opinion from Chief Justice John Roberts, which was joined by Justices Antonin Scalia and Clarence Thomas, echoes the earlier Court ruling and also raises concerns about linking antitrust law and patent issues and weakening patent protections for innovators.

However, a 5-3 majority led by Justice Stephen Breyer held that the FTC and other government and private parties have the right to pursue reverse payment arrangements as violations of antitrust laws. Breyer, joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan, expressed concerns that reverse payment settlements have an adverse effect on competition. At the same time, though, the majority failed to provide guidance on how to structure patent settlements so that they do comply with antitrust policy.

The ruling is expected to encourage the private plaintiffs’ bar to bring new lawsuits challenging brand-generic patent settlements of all kinds, setting the stage for years of uncertainty in challenging and defending patents on all sides. “It’s going to be a nightmare,” predicted Arent Fox attorney Wayne Matelski, as District Courts struggle to decide what “rule of reason” means in these complex cases.

While companies may be more reluctant to settle future lawsuits, they may face legal challenges to earlier settlements, and new arguments against cases currently before the courts. More plaintiffs may enter the fray, as seen in recent actions by chain drugstores. These cases will require decisions from judges on whether a settlement is illegal primarily due to the size of a reverse payment, or to other services and arrangements with a generic firm. The courts also will have to weigh the strength of a patent and the merits of a patent suit and what extraneous financial factors might lead a generic competitor to seek a settlement.

Although the FTC claimed the ruling a “significant victory,” many legal authorities questioned whether the decision would promote competition and lower drug costs. It remains to be seen if generic drug makers will become more aggressive in challenging patents in order to speed copycat products to market, or if brand firms become more determined to protect intellectual property rights, despite the high cost of litigation.

Congress gets off the hook, for now, as it’s likely to drop efforts to enact FTC-backed legislation to limit reverse-payment settlements. Yet, the issue could end up before the Supreme Court again if lower courts continue to produce divergent rulings on these cases, as they have done over the last decade.

Praise and Perils for Biotechnology Patent Policy

The Supreme Court decision blocking patents on naturally-occurring genes has generated predictions of doom for biotech innovation, along with expectations of more healthy competition in discovering new treatments and diagnostics. Although some commentators regarded the decision, Association for Molecular Pathology v. Myriad Genetics, as a “major reversal” in longstanding patent policy, many leaders of the biopharmaceutical research community described the ruling as likely to spur innovation and the development of therapies and companion diagnostics necessary for advances in personalized medicine.

All sides had legitimate reasons to claim victory:  patient and research groups anticipated easier access to more effective and efficient tests and therapies; biotech companies were relieved that the Justices did not invalidate ancillary patents surrounding genetic discoveries. A number of testing firms announced plans to develop newer, better, less costly tests using the BRCA genetic mutations. Myriad Genetics said its test for breast cancer would remain a leading option for patients and that it would continue its R&D program based on hundreds of other patents.

The ultimate outcome remains to be seen.  The U.S. Patent & Trademark Office (PTO) is expected to revise practices for granting patents for isolated DNA, although the court specifically permits protection for companies that modify genetic material or create new products based on human genes. But in upholding patents on complementary, or cDNA, the Court left the door open to further debate and legal battles over just what genetic manipulations qualify for patent protection.

Yet, there is reason to hope that the unanimous, non-partisan Court ruling will help clarify patent policy related to biotechnology, a subject that remains tangled up in multiple legal cases and legislative proposals.  And the non-political nature of this fairly technical ruling should provide grounds for optimism that the system can address some issues on the legal merits of the case.

Manufacturers Seek Strategies for Life-Cycle Approach to Process Validation

The US Food and Drug Administration and industry have been working to incorporate process validation as an integral component of drug development and production, and to avoid divergent policies in the US and Europe. A good deal of progress has been made in this area, but manufacturers continue to feel uncertain about the details in revising existing systems and updating long-held practices to fit new approaches, as seen in the discussion at the PDA/FDA Process Validation Workshop in Bethesda, Md., May 20-21. Participants assessed FDA’s Process Validation guidance, which was published in January 2011, and the corresponding PDA technical report on “A Lifecycle Approach to Process Validation” (TR 60) issued in January 2013 [available at www.PDA.org].

The aim is to help manufacturers who are wrestling with and working to implement the FDA guidance, explained Harold Baseman, chief operating office of ValSource and co-chair of the PDA process validation interest group. The workshop program followed FDA’s three stages for process validation, starting with process design and moving through process qualification to achieve continued process validation to provide ongoing assurance that a production process remains in a state of control.

Workshop attendees discussed the importance of gaining extensive knowledge about a process early in design and development stages to ensure that the system is well controlled. Patrick Swan, deputy director of the Division of Monoclonal Antibodies, Office of Biotechnology Products (OBP) in the Center for Drug Evaluation and Research (CDER), highlighted the value of tapping prior knowledge to support process validation activities, noting that this may expedite product development for lifesaving breakthrough therapies.
Process qualification involves identifying and interpreting information from process design functions to establish testing and acceptance criteria. Methods for equipment and facility assessment are important, as are sound process qualification sampling plans.

The lifecycle approach also involves linking process validation activities to a manufacturer’s Quality Risk Management system. While manufacturers and regulators are looking to shift away from assessing a set number of batches, questions remain about how much data is needed to show that something is or is not in control, Baseman explained.

Similar efforts by the European Medicines Agency (EMA) to update policies on these issues were discussed, with an emphasis on the importance of achieving similar approaches to validation requirements. Concerns were raised that EMA doesn’t consider process development part of process validation, that different terms are emerging, and that divergent regulatory approaches may cause confusion. Manufacturers filing applications in some 150 countries emphasized the importance of common formats and systems.

OBP deputy director Jeffrey Baker explained that FDA and EMA officials discuss these and other issues at “cluster meetings,” held to address topics such as biosimilar evaluation, good manufacturing practices and differences in review policies. Regulatory authorities at these sessions don’t consider specific companies or applications, Baker noted, but address general policy approaches, with an eye to gaining alignment on regulatory guidance.

Baker and others suggested that questions about data collection and regulatory requirements can be addressed by focusing on the science, which is key to appropriate terminology, data formats and determining what information is needed to assure product quality.

Yet, legacy products raise challenges, as manufacturers have to determine what would be involved in updating process validation data to support manufacturing changes or address safety issues.

One benefit of revised process validation policy that reduces the volume of unnecessary testing is to streamline the development and approval of important, life-saving therapies. Future FDA guidance on its regulatory approach to “breakthrough” therapies should explain further how the agency will address manufacturing and quality assurance issues for such products, Baker noted. But he pointed out that companies request the breakthrough designation and thus should be able to explain how they will supply a quality product efficiently and quickly for sick patients.

Will Congress Provide Sequester “Flexibility” for User Fees?

Just about every federal program and affected interest group is pressing for relief from the 8% across-the-board cuts in funding imposed by the budget sequestration mandate. Recent fast action on Capitol Hill to curb personnel furloughs of air traffic controllers by the Federal Aviation Administration, though, has spurred lobbying for similar treatment across many fronts. Read more »

Safety Trumps Access to Pain Meds for FDA

FDA has come down on the side of reducing abuse of opioid medications, over encouraging wider availability of low-cost painkiller meds. The agency decided to block generic versions of the original OxyContin formulation, which is fairly easy to manipulate by illegal users. The aim is to help halt the epidemic of prescription drug abuse raging across the country. FDA’s decision leaves the market open to Purdue Pharma’s newer version of the drug, which the agency determined has features that make it more difficult to abuse via injection or snorting. Read more »

Budget Cutters Propose Big Hits on Pharma

The Obama administration’s budget plan for fiscal year 2014 apparently assumes that the pharmaceutical industry can support Medicare and other health programs through changes in drug coverage and payments. It also relies on industry fees to keep FDA up and running. Meanwhile, FDA and other public health agencies are contending with the sequestration mandate, which is taking another bite out of government programs and payment policies. Read more »

CDER Runs into Trouble with Generic Drug Reorg Plan

After less than a year on the job, the head of FDA’s Office of Generic Drugs (OGD) has announced his departure, a sign that all is not well with plans for major organizational changes at the Center for Drug Evaluation and Research (CDER). Read more »

Sequestration: How Big a Hit for FDA, Research, and Pharma?

The greatly feared federal budget sequestration mandate went into effect Mar. 1, 2013, and, initially, the impact was fairly muted. The stock market soared, employment rose and government workers continued on their jobs. Federal agencies, including the Food and Drug Administration (FDA), launched initiatives to comply with the mandated 5% across-the-board cut in spending (in reality a 9% cut that exceeds $200 million) to minimize the impact on basic operations. That means curbs on training and staff travel, no new hires and a delay in launching new programs. Read more »

Quality Manufacturing Key to Global Attack on Fake Drugs

Jill Wechsler Washington EditorThe growing dangers from substandard and falsified medicines around the world has prompted a blue-ribbon panel formed by the Institute of Medicine (IOM) to call for clear international standards for higher quality medical products,  plus an electronic tracking system in the US to uncover bogus products in the supply chain. Read more »

Justice Department Steps Up Focus on GMP Violations

Jill Wechsler Washington EditorFederal law enforcers are looking hard at pharmaceutical manufacturers that put consumers at risk by cutting corners on product quality and safety and violating current good manufacturing practices (cGMPs). The Department of Justice (DOJ) is “taking an especially hard look” at situations that compromise drug safety, identity and quality, explained DOJ deputy assistant attorney general Maame Ewusi-Mensah Frimpong at this week’s CBI Compliance Conference in Washington, D.C. Read more »

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