Genetically Modified Rice vs. China

A March 7, 2013 piece on Morning Edition, the morning news program from National Public Radio, raised a lot of questions. “In A Grain Of Golden Rice, A World Of Controversy Over GMO Foods” told the story of golden rice, a beautiful yellow rice enhanced with beta-carotene, or Vitamin A. This rice was ostensibly developed to be grown in developing countries, where foods high in Vitamin A either are uncommon or are expensive. This was the single most important modification to rice suggested many years ago by Peter Jennings, a legendary rice breeder.

A lot of discussion involves how this might benefit children in many developing nations and how evil corporations (my term) are in this only for the money. The piece touches on the concern about genetically modified organisms (GMOs) affecting unmodified crops, but much of the piece focuses on the fact that this rice was tested in China, and neither those in the test group nor those in the control group were notified about the “risks” of eating this modified rice.

Testing in China continues to have issues; China simply does not have the same recent sensitivity to informed consent, among other rights. That raises a problem for both the company sponsoring the test and for the subjects of the test. But that does not condemn the product.

What this article probably demonstrates more than anything is a continuing ignorance about many factors in GMOs. Genetically modified foods are not inherently evil. They are improving nutrition and yields in many parts of the world.

They usually do sell at a premium, which makes them more expensive for poor farmers. Developing these foods costs a lot. The companies that develop them take that risk. Those companies, of course, expect to receive something for that.

GMOs also can contaminate unmodified crops if they produce pollen that is not contained. Many countries ban or tightly control GMOs, including many countries in the EU. Companies producing these GMOs are working to reduce this perceived risk.

I find it frustrating that both the opponents and the press do not try to “separate the wheat from the chaff” in this. The reality is that we have been genetically modifying both plants and animals for thousands of years. In the past, we did it by selective breeding. Now we use more scientific methods, including combining traits of different species of plant, so-called “Frankenfoods.” But this different method often leads to sophistry. Some of these products do have little benefit and high risk, but some GMOs seem to have virtually no downside. Golden rice may be such a product. Test it, yes, and test it fairly. Label it, if you must. Find ways to restrict it to the places you plant it. But don’t condemn a positive development only because science was used to develop it, or because someone may profit from it. That helps no one.

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Biosimilars Still Present Challenges

A recent article in the Wall Street Journal outlines the challenges facing biosimilars in the U.S. market. Attempting to recreate a cheaper version of most pharmaceuticals is tricky, especially in terms of maintaining the same quality as the original, but it is not usually that complicated. Biologics, created with or from living tissue, is. The molecules are much larger. The process used to manufacture such treatments often involves multiple steps (including complicated overlapping IP) and sometimes involves trade secrets that make the process difficult for another maker to duplicate. There are IP “landmines” in most of these products. Even if the product can be duplicated, the cost to manufacture typically is high, unlike most generic drugs. A few such “biosimilars” are approved and available in Europe, but none have been approved in the U.S. yet.

The U.S. Food & Drug Administration still is drafting final rules for approval of biosimilars. The FDA recognizes that this is a balancing act. It also recognizes that some biologic products will be better suited to copy than others. This “know it when we see it” sort of product makes it difficult to draft regulations that work. That is why the FDA is being so careful and taking so much time. It also understands that allowing a biosimilar that is not “similar” enough could create danger to consumers. These dangers are not always evident until the “similar” product is tested, which is why biosimilars must be tested more extensively before approval.

Several states, including my home state of Virginia, have been lobbied heavily to pass legislation potentially restricting the ability of a generic maker to sell a biosimilar in that state. The Virginia Bill (HB 1422), passed by both houses of the General Assembly and awaiting the Governor’s action, restricts a pharmacist from substituting a biosimilar without the physician’s approval. This ostensibly is intended to ensure that the treating medical professional knows best whether the generic is really the same, or not. This effectively may lengthen the monopoly of the original maker of one of these drugs, often increasing the profits. Depending on what the FDA requires, this may be a reasonable precaution or an unnecessary opportunity for the patent holder to scare physicians into avoiding the biosimilar. Again, it may depend on the product and how it is made.

I have heard that the success of the Affordable Care Act depends in part on the ability to replace some very expensive biologic drugs with cheap biosimilars. I don’t know if that’s true, but if so, it may be a bumpy ride. The E.U. may provide a model for how to do this, but we don’t know yet whether the E.U. approval process for biosimilars will provide the level of protection that we expect of the FDA. And it is unlikely that any of these biosimilars will be “cheap.”

I work with a couple companies that produce products in a “factory” that is not easily copied. One actually manufactures its product in genetically modified animals. It cannot be made in different types of animals or in animals without the specific modifications used. The actual genetic modification is patented, as is the basic process, but the step for making this specific modification is the result of trial and error. It takes two years for the animal to mature enough to know whether they got it right or not. It is easy to see why companies working on generic versions of these products must choose their products carefully and may take a long time – and a lot of money – to reach a positive result. Accordingly, we are not likely to see anywhere near the savings from these biosimilars that we have seen for typical generic drugs. This will bear watching.

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Thoughts About the Election

The biotech law world has been pretty quiet lately, but it will be getting interesting in the next few months. Much of our world has been waiting on the results of a hotly contested, and very close, election. The status quo remains. President Obama won a second term, despite record levels of unemployment, gas prices, etc. and despite about 50% of the populace not liking the “Patient Protection and Affordable Care Act.” (I’ve stopped calling it “Obamacare,” because, although that’s an easy moniker, and the President supported it, it was drafted by Congress with little input from the President’s office. Let’s call it what it is and give neither full blame nor full credit to the President.) That seems to settle that issue for the foreseeable future. That does affect biotech law in lots of ways.

First, it will be a boon to many lawyers. The PPAC Act will result in miles of regulations and requirements that will help to keep lawyers busy for years. It will provide insurance to many who don’t have insurance now, and whether someone is in or out will create opportunities for lawyers. And, since most of the active provisions go into effect in 2013, it likely will be effective indefinitely. If it stays pretty much as it is now, this will affect biotech development.

I have written in past blog posts about the effect on medical devices. A recent article by Deroy Murdoch in National Review Online outlines how the prospect of the medical device tax already is preventing development and job creation, precisely because so many medical devices operate on relatively low margins. The possible offset will be that the PPAC Act will add numbers to the insured rolls, likely increasing demand for some devices. Even if the PPAC Act is a net negative, which most analysts seem to think, it is not likely to be removed. Why? The CBO predicts that dropping the tax may reduce PPAC Act “revenues” by as much as $30 billion.

On a similar note, Tracy Staton in FiercePharma.com (which you should subscribe to if you don’t already, and Ms. Staton’s articles are usually worth a read) explains what pharma will need to deal with going forward. The deal that pharma struck in 2009 will be what it lives with for the foreseeable future. Like devices, more demand will be created for pharmaceuticals, but there will be restrictions on prices and other costs. Price negotiation rights for Medicare and losing the tax deduction for consumer advertising will squeeze margins and change the face of the industry in ways that are not yet clear. And if the fiscal cliff hits, Medicare reimbursements may be reduced substantially, and the cuts to the FDA almost certainly will reduce its ability to increase the speed of new product approvals.

In short, it may be a bumpy ride. I’ll address this in more detail in the coming months. Change always is challenging. The PPAC Act has some good things for the Americans and for biotech and some not-so-good things. We all will just have to adjust as best we can.

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Follow the FDA Guidelines or Else!

There is a wonderful and frightening article in CNN Money titled, “Bad to the Bone: A Medical Horror Story.” Mina Kimes provides a Stephen King–worthy thriller of a (possibly) good medical product (device) gone bad due to (take your pick) over-zealous promotion / greed / indifference to patient risk. The article is one-sided, but it still is effective. In this instructive tale of the bone cement (Norian), the parent company (Depuy Synthes Companies), already a very successful orthopedic device maker, markets an FDA-approved bone cement off-label for spinal surgery. It (allegedly?) has a disastrous effect on some patients, especially in certain procedures. Please read the article.

This is a cautionary tale in so many ways. The corporate governance appears to break down. The management fiduciary concerns may break down. The quality control and regulatory safeguards break down. The individual doctors’ responsibilities break down. Surgery controls break down. And finally, the FDA and justice systems come down, hard! Now we wait for the plaintiffs’ attorneys to circle and attack what is left. Shockingly, the parent company still sold for a lot of money this year to Johnson & Johnson. I wonder what they would have been worth without this damage?

There are many ways to avoid the outcome here, but this reminds me of my childhood NRA classes and more recent study of Jeff Coopers’ four rules of gun safety (with apologies to Mr. Cooper for any inaccuracies in my memory):

  1. Always treat every gun as if it is loaded [until you have checked it yourself]. (And always assume that each application of every new medical device/drug may be dangerous until you have confirmed that it is not.)
  2. Never put your finger on the trigger until you are ready to shoot. (And never sell your product into a market until you have done all your tests and homework.)
  3. Never point your gun at anything you are not willing to destroy.  (The ancillary rule here is, never sell your product to a market if you have an indication it may cause harm.)  And finally,
  4. Know your target! You are responsible for everything between you and your target and everything behind your target. (Just as you are responsible for the immediate and long term safety of your product. You cannot allow yourself to be influenced/nudged/bullied into doing something that’s wrong. You have to be responsible. Even if someone says the range is clear/the drug won’t hurt anyone, you need to look for yourself. And even if it will get you fired, you need to stand up!)

That may seem obscure, but any shooters in the audience will recognize, I hope, that the “four rules of gun safety,” properly applied, would have prevented this fiasco.

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Bad News is Hurting Medical Device Funding

Too much bad news is haunting the medical device industry. I have written before about the nutty 2.3% sales excise tax on medical devises imposed by Obamacare.  There are other factors now depressing this industry.  Medical device recalls hit a two-year high. Executives of a developing medical device company have been charged with $400 million fraud. Two congressmen are attacking the 510(k) process that allows a device to receive pre-approval if it can demonstrate that it exhibits roughly the same safety and efficacy as an approved device that performs a similar function.

This letter states accurately that, “thousands of patients have been harmed – in some cases grievously and irrevocably – by medical devices that were modeled after recalled devices.”  It says that a flaw in the process allows defective devices to reach the market and endanger patients.  The letter recommends a change in 510(k) that would allow the FDA to reject clearance of a device that repeats design “flaws” of a previous device voluntarily recalled by the manufacturer.

I believe that the FDA already can reject clearance for almost any reason.  That is more of an issue for an FDA specialist.  What strikes me about the Congressmen’s letter is that it totally ignores the fact that draft guidance on changes to the  510(k) process has been published by the FDA, some of which has been withdrawn. This letter also does not address the other side of the equation, the medical devices that are delayed by the FDA, sometimes “grievously and irrevocably” withholding a possible benefit to a patient.  That is the unfortunate job that the FDA is in, making those calls and sometimes delaying approval.  Sometimes it acts too slow, sometimes too fast.  But in order to evaluate this proposal, we must understand what it may do to withhold beneficial products from patients.  The balance will never be perfect, but there should be a balance.

All this negative news about medical devices will continue to scare investors.  VC funding for medical devices has dropped once again. Medical devices are showing promise in replacing some pharmaceuticals. The U.S. still leads the world in medical device innovation and development. We will not continue to do that if we throw up unnecessary barriers to approval and stifle investment.

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Did Prometheus Really Change Anything?

DNA Double HelixA recent ruling by the United States Court of Appeals for the Federal Circuit held that patents may be valid when issued for isolated human genes used as markers to diagnose the likelihood of breast and ovarian cancer. On the face, this seems to imply that the recent SCOTUS ruling in Prometheus changed little, but I believe we need to wait before drawing conclusions.

A brief history: For years, the courts have struggled with whether a gene, which occurs naturally within the body, can be patented after it is “discovered.” How can someone “patent” something that exists in my (or your) body? Section 101 of the Patent Act excludes a “law of nature,” but there was an argument about whether that necessarily eliminated patenting a gene that occurs naturally but must be identified and separated for testing. Also, many commentators point out that without patent protection, there will be less financial support for product development of tools that identify and isolate gene markers.

On March 20, 2012 in Mayo Collaborative Services v. Prometheus Laboratories, Inc., SCOTUS said the rule about a law of nature was limiting, but not exclusive; it is important to look at the level of transformation involved in the “invention.” The Court held that the particular “invention” touted by Prometheus was not transformative enough beyond laws of nature and therefore was not patentable. This case provided a loose framework for testing if a gene is patentable.

Based on the Prometheus ruling, SCOTUS also remanded for reconsideration the case Association for Molecular Pathology v. Myriad Genetics, which dealt with a similar matter, the patent validity of specific human genes that are risk markers for certain types of breast and ovarian cancers.

Many commentators thought that if Prometheus’ patents were not valid, neither would be the Myriad patents, which are based largely on naturally occurring human genes.

In its decision, the Federal Circuit Court basically “re-upped” its prior decision and ruled that each of the claimed molecules represents a composition of matter not occurring naturally. In other words, separating the genes puts them into a different category, and the Prometheus analysis comes to a different conclusion in this case. The Court spends pages explaining the basic science and the process. It is a good review of the science for those of us without science backgrounds (sort of).

However, I think the details are not what most biotech lawyers really need to know, because this almost certainly will be appealed. When it is appealed, and when SCOTUS grants or denies certiorari, we may know more. What we can take from this case is that the ultimate result of Prometheus is not yet clear.

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Tech Transfer: “Free Agents” Are Not Free!

I explained in a prior post some challenges in dealing with university technology transfer offices. The system is not perfect, some universities still “don’t get it,” but in general, the system works – most of the time. Enter the Start-up Act 2.0.

The Start-Up Act 2.0 has many good things in it, such as financial incentives for investing in start-up companies, grants for development, and a provision allowing foreign students with degrees in math or science to stay in the U.S. Overall, this is a good bill. But it also is not perfect. Scott Shane has a fine article about how a portion of this act may not be helpful. The “free agent” provision of this Act would allow university faculty (and students) to choose their technology transfer agent, even someone outside of the university. The current tech transfer system, however imperfect, will be damaged by this part of the Start-Up Act 2.0 now being considered by Congress.

I believe that the more activities you remove from government control, the more efficient we become. This is not the case in most university tech transfer. This portion of the Start-Up Act 2.0, in my opinion, is wrong-headed. This will encourage private operators of varying degrees of competence to “cherry pick” the better IP out of universities. It may create an agent-centric process that could make current challenges worse. It will reduce the negotiating leverage of universities. If a university, even for good reason, does not accept a deal that the faculty member wants, the prospective licensee might take the faculty aside and try to explain what he will get if he “moves” the agency to another (outside) vendor. It will pit faculty against the universities that employ them and that provide the infrastructure that supported the invention.

Bayh-Dole, in effect, recognized that the university and the faculty-inventor are partners in the invention. This IP typically belongs to the university first and foremost under most states’ laws. Free agency may reduce the property rights (or value) of state universities. This potentially separates the interests of two ownership entities – faculty and university – who should have common interest in getting a deal done. It may force universities to become more adept at doing deals, but there are other ways to accomplish that. It provides too much leverage to the faculty member who often has less knowledge about the business realities. Some of my clients will disagree, but I think that it is a bad idea.

AUTM, not surprisingly, has come out very strongly against “Free Agency” and so have bloggers in the field (Laura Schoppe has a fine explanation here. The Act claims that it is consistent with Bayh-Dole (see Section 8(d)), but Bayh-Dole gives IP property rights to the universities, not the faculty. I suspect that there was a good reason for that. Congress then knew that most faculty don’t know bupkis about business. They are easy prey. There are exceptions, but they are exceptions. University tech transfer offices, as difficult as they can be, often protect the faculty from deals that do not make sense.

While it is true that some tech transfer offices do not operate effectively, the bill’s proposed solution attacks a gnat with a shotgun. This is not the most effective way to fix this problem. Instead, perhaps Congress could fund the independent development of best practices for tech transfer offices to follow. Perhaps it could require that each university have an appeal process when faculty does not agree with the tech transfer office. Perhaps it could set standards in order for the good parts of the Start-Up Act 2.0 to apply.

There are a number of ways to improve the process. “Free agency” is a step too far at this time.

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