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Supreme Court drug case could restrict development: Lilly, other firms want research exemption confirmed

March 21, 2005

The U.S. Supreme Court will hear arguments April 20 in a case that Eli Lilly and Co. and other pharmaceutical corporations say could restrict the development of new drugs.

The dispute stems from a June 2003 decision by the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The panel affirmed a district court's finding that Merck KGaA in Germany infringed upon four of New Jersey-based Integra LifeSciences Holdings Corp.'s licensed patents.

At issue is whether pharmaceutical companies must pay the holders of patented research tools such as new chemical or biological molecules often used in the development of new drugs. The appellate court said they do and confirmed a jury award of $15 million in damages to Integra and other plaintiffs.

Pharmaceutical manufacturers such as Lilly claim a federal law passed in 1984 exempts them from paying for the use of the research tools in drug experiments. The exemption allows the manufacturers to use protected research tools as long as the use is related to the development and submission of information to the Federal Drug Administration.

In briefs filed with the high court, the pharmaceutical companies contend the appellate court interpreted the law incorrectly, limiting its scope to pertain only to generic drug companies and to research resulting in FDA approval. They further said a similar ruling by the Supreme Court could delay drug development if they have to wait for the patents to expire.

"Some believe it's already having an effect on legal advice that people seek to find out whether or not they can conduct research without being liable for patent infringement," said Brian Barrett, Lilly's associate general patent counsel. "The appeals court did not get it right."

Congress enacted the statute more than 20 years ago to let generic drug manufacturers sell their equivalents of patented drugs immediately upon expiration of the patents. Before passage, generic drug companies could not even test their equivalents to obtain FDA approval to sell their products. This resulted in pharmaceutical manufacturers' receiving extensions on their patents corresponding to the period between expiration and FDA approval for the generics, which could take years.

But recognizing innovators such as Lilly also needed some protection under the law, Congress extended the exemption to manufacturers so new drug development receiving FDA approval would not be delayed while they waited for the patents to research tools to expire.

In arguing to the district court that Merck violated its patents, Integra said Merck sought to broaden the exemption beyond its original scope to include research that could lead-however far in the future-to the development of a drug subject to FDA approval.

The appellate court agreed, narrowing the exemption available to drug companies.

"The question is, how far does this exemption go?" said Don Knebel, chairman of Barnes & Thornburg LLP's intellectual property practice. "Right now, there's so much uncertainty, [pharmaceutical companies] don't know what they can do and what they can't do."

Mike Young, chief patent counsel for Roche Diagnostics Operations Inc., said Roche holds patents on research tools. While he thinks companies should be able to conduct research using the tools, he does not believe they have a right to use the tools for routine purposes, such as when screening for compounds.

"You should have to pay for that," Young said. "Certainly, we have a [pharmaceutical] interest, but we have research tool patents as well. It's an important issue for us."

The U.S. Office of the Solicitor General petitioned the Supreme Court to take the case, and the FDA and the National Institute of Health both have filed briefs supporting Merck.

Jack Pincus, vice president for technology transfer at the Indiana University Research & Technology Corp., said a Supreme Court affirmation of the federal appeals court decision might affect some university research that could be viewed as infringement. Like corporations, public institutions such as universities are not exempt from paying for patents used during research that does not result in FDA approval. But due to their not-for-profit status, they're less likely to be sued for infringement.

Integra originally brought its lawsuit in 1996 in a federal district court in California. After nearly 10 years tied up in litigation, Lilly and other pharmaceutical companies hope the uncertainty is nearing an end.

"We have been watching this case, as have a lot of innovators," said Barrett, who also serves as chairman of the intellectual property group for the Biotechnology Industry Organization in Washington, D.C. "I think the Supreme Court will take this case in the right direction or [it] wouldn't have taken it."
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