Biomedical Business and Legal Management Essentials

Biomedical Business and Legal Management Essentials

As convergence of technologies enables the birth of avant-garde combination products or devices, the classical distinctions between what the U.S. Food and Drug Administration (FDA) considers a “drug,” “device,” or “biologic” begin to blend together. Envision, for example, a molecular machine programmed to “seek and destroy” cancer cells in the body. These machines would combine into one therapeutic product — a nanoscale device for delivering a payload of drugs, together with a biologic component that self-assembles into a protective capsule around the delivery site. The drugs would affect only the cancer site within this protective capsule, thereby improving efficacy and minimizing side effects. Just as a nanotechnology combination product unites these three physical components — drug, device, biologic — so too are the regulatory, intellectual property (IP), and business law issues increasingly related with regard to the legal aspects of these products. To succeed in the marketplace, the innovators of combination products must be armed with an integrated legal strategy.

Regulatory Issues
All products submitted for FDA approval are first assigned to a particular center within the FDA that will have primary jurisdiction for regulating the product. Drugs, devices, and biologics each have their own center. Combination products (i.e., drug-device, drug-biologic, or device-biologic products) are assigned to a center based on the “primary mode of action” of the combination product. For example, if the primary mode of action of the above-described molecular machine is that of a biologic, then the product would be assigned to the Center for Biologics Evaluation and Research. The “primary mode of action” is the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the combination product. Making this determination, however, is often difficult. Weighing the contributions of each component is imprecise. More practically, there are large variations between the three centers in terms of time and money required to obtain FDA approval. Therefore, a combination product's designation to a particular center could have a big impact on a company's ability to attract financing and to reach its scheduled milestones. This is an example of where regulatory law intersects with business issues.
The FDA has announced that it expects to classify many nanotechnology products as combination products. Companies in the nanotechnology space should be prepared to make a case for why their products ought to be assigned to a particular center, rather than relying on the FDA to decide by itself. This requires a clear explanation of the nanotechnology product's “primary mode of action” within the body. Early designation is possible, without the need for preliminary animal toxicity data. Applicants can compare their products with similar products that the FDA has recently approved. Requests can be made either informally or by formally submitting a Request for Designation. Because a favorable designation can greatly shorten a product's time to market, applicants are well advised to carefully consider the product's regulatory pathway at the outset of the development process.
IP Issues
A patent application should be filed in the United States Patent and Trademark Office (PTO) before applying for FDA approval. Applicants must be careful, however, when making statements to the PTO about the product’s therapeutic effect, lest the FDA later use those statements when assigning the product to a particular center. This is an example of where regulatory law intersects with IP. The patent application only needs to describe the invention to the PTO in such detail as to enable others in the field to make and use the invention. The patent application does not need to speculate about the invention's primary mode of action, which should be examined later with more tests and then be described in a Request for Designation to the FDA. By knowing these differences at the PTO stage, an applicant can avoid arguing against himself later at the FDA stage.

Combination products also present the problem of obtaining patents needed to broadly exclude competitors. If a patent covers only a device combined with a specific biologic, then a competitor might avoid infringement by switching to a different biologic. Ideally, the applicant should have included the alternative biologic in the original patent. If the alternative biologic was not known at the time of the initial patent filing, the applicant should use multiple “continuation” patents to protect the new components as they are discovered. Currently, the PTO allows applicants to file an unlimited number of continuation patents. A proposed rule change, however, would place strict limits on these continuations. If this proposal ever becomes a PTO rule, it would greatly reduce a patentee's ability to fully protect all variations of its combination product. Nevertheless, the patents should be drafted with the goal of blocking the manufacturers who supply the separate components of the combination product — not just the doctors or patients who administer the combined, final product. For example, if the patent covers only the final combination of a drug, a device, and a biologic, then a manufacturer can escape direct infringement by supplying only the drug and biologic components — thus, the doctor or patient will be the direct infringer when he or she incorporates the device component supplied by a third party. Patenting the separate components would avoid this dilemma.

In addition to excluding competitors, the innovators of combination products also must worry about infringing other parties' patents. The likelihood of infringement increases with each additional component of the combination product. In particular, a seller of combination products must have freedom-to-operate for each separate component (i.e., drug, device, biologic) before it can sell the combination. Thus, a manufacturer might need permission from multiple parties in vastly different fields. For instance, a manufacturer might need to negotiate a separate license agreement with a large pharmaceutical company for the drug component; a microelectromechanical system (MEMS) company for the device component; and a biotechnology startup for the biologic component. These three companies will inevitably differ in their business interests, sophistication, and the perceived importance of their patents. And because each additional license will decrease the manufacturer's incentive to market the combined product, the manufacturer should seek an “anti-stacking” provision that caps the net royalties paid to all patent holders. This is where the IP and business issues overlap.

Business Issues
Combination products require carefully structured business agreements between patent holders, financiers, suppliers, and distributors. Manufacturers must comply with the FDA's “Good Manufacturing Practice” requirements of sterility and quality control. The National Institute of Occupational Safety and Health (NIOSH) and the Occupational Health and Safety Administration (OSHA) also provide guidance for protecting the manufacturer's employees. If a licensee will be the party that manufactures and sells the combination product, then the owner of the technology should consider writing this compliance into the license agreement and require indemnification in case of breach or loss.

The success of a combination product will ultimately hinge on strategic choices regarding its distribution and reimbursement. Do you sell the drug-device-biologic product to a large pharmaceutical company that specializes in pharmaceutical drugs; to a medical device company; or to a company that makes both? Will doctors receive the completed product, or will they themselves insert the drug into the delivery device? Because nanotechnology is inherently cross-disciplinary, the physicians who administer nanotechnology combination products might need to be trained across several medical disciplines. For example, orthopedic surgeons might work with neurologists to administer a spinal cord-regenerative device laced with growth factors.

Companies must be proactive in addressing the public's perception of nanotechnology. The FDA has stated that it knows of no adverse health effects associated with nanotechnology products. Despite the lack of actual risks, nanotechnology products are subject to perceived risks, that are just as problematic as actual risks. For this reason, companies through their research and public relations departments should continue to educate the government and the public through such initiatives as the Nanotechnology Environmental and Health Implications working group and the public forum Nanotechnology Workshops.

Nano-enabled combination products will inevitably change the way we diagnose and treat patients, ultimately allowing us to “seek and destroy” diseases within the body. To successfully reach the marketplace, the developers of combination products must consider the overlapping regulatory, IP, and business issues.

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