The excitement about biotechnology can obscure the risks involved. Those risks range from not getting funding to having a venture halted midway by antitrust charges to class-action litigation.
That's why we're having this exclusive interview with Joseph K. Hetrick, Partner at Philadelphia-based Dechert LLP. Hetrick brings to this discussion both his expertise as an attorney and as a trained chemist. He has handled product liability matters for clients ranging from GlaxoSmithKline to Baxter Healthcare.
A simple definition of "biotechnology" might be the most useful. And that's the one provided in the popular Wikipedia. "Biotechnology," it says in Wikipedia, "is often used to refer to genetic engineering technology of the 21st century, however the term encompasses a wider range and history of procedures for modifying biological organisms according to the needs of humanity."
There's certainly plenty of excitement about the ability of biotech to bring about the next generation of blockbuster products for the pharmaceutical and related industries.
Because of that, the best and the brightest in many disciplines have entered the field. Last May, Dechert conducted a major seminar on "Lessons Learned from Big Pharma: Minimizing Risk at Each Stage of a Therapeutic Product's Life Cycle." Silicon Valley leaders, venture capitalists, traditional scientists - they were all there to find out how to mine the promise of this field while protecting themselves from the risk. As the title of the seminar indicates, there have been significant lessons about product liability that we should have learned from Big Pharma.
Those attending the seminar - were they too focused on the risk to allow this field to really take off?
Unfortunately, the contrary was the case: The enthusiasm outweighed the sensitivity to potential problems. And that blind optimism went across the board - be it getting startup money to protecting a patent to conducting clinical trials.
But, we were able to get across two things: Yes, risk exists. Yes, that risk is manageable.
Specifically, what kinds of risks are there?
Let's start, Jane, with the non legal ones which, like most things, introduce legal ramifications.
For example, your idea might not get funding. It's not easy to find private funding. The landscape has changed. Although there is an insatiable demand for products, raising capital has become very expensive, the IPO market has become uncooperative, and early-stage money almost non-existent.
Therefore, you are going to have to think about structuring strategic alliances. That means making legal contracts about ownership of intellectual property, profits, governance and so forth. This must be nailed down before the ventures start, not during.
What you're saying is that in biotech it's imperative to front-end your strategies and tactics to protect against risk?
Yes. That's the essential message of this interview: EXPECT problems. Expect them from every front - your partners, your direct competitors, generic manufacturers, the plaintiff bar, SEC, FDA, and the media. And expect them at every stage of our venture. If your product hits the jackpot, expect even more legal challenges.
How about those risks which we conventionally think of in drug development?
Those directly related to legal matters include obvious areas such as patents. We know that in this field a narrow patent is better than a broad one.
A narrow patent builds in a sort of defense for FDA regulations. It also puts you on the offense as to the possibility that it will be invalidated.
This patent issue is very important and it's becoming even more important every day. Recently I did a quick search of patent infringement cases and 150 turned up quickly. And these are not occurring only with major products. I'm seeing this happen to those with only $40 million in sales.
The next kind of legal risk?
The next kind of legal risk is the regulatory types which involve the SEC. The reality is that securities fraud suits continue to target all industries, including pharmaceutical, biotech and medical devices.
One key area the SEC looks at is over-optimism presented to potential investors about development and approval prospects. Again, this is what to keep in mind before creating any materials which will go to solicit investments. You want to be able to demonstrate that you are in full compliance with disclosure regulations.
Along these lines, it is prudent to keep your researchers and your marketing and sales teams separate. Marketing and sales thinking and language have a way of seeping into the early disclosure material and that can wave red flags in any discovery.
One more caution and this applies not only to SEC scrutiny but also protecting yourself in the event of discovery in general. And that's to have in-place a policy for e-mail and all written materials. They will be reviewed with the most jaundiced eye. If it's put into an e-mail or print memo, make sure it's clear, accurate and bullet-proof from misinterpretation. A wise approach is to reduce what you put in writing by simple things such as going over to your colleagues' offices to discuss a sensitive issue.
It seems that warnings about e-discovery can't be hammered home enough. Okay, what about other legal risks?
Another regulatory risk comes with antitrust matters. This is where your competitors can and will strike. They will attempt to halt development on antitrust grounds.
Here you need to know the basic laws and the enforcement environment.
Expect challenges on patent settlements, line extensions/switching strategies, other agreements of not to compete, acquisition, listing and enforcement of patents, authorization of generic agreements, arrangements to tie up API supply and bundling/combination.
And, now we are going to focus on the monster risk area of clinical trials?
Yes. As you indicate, Jane, this is the primary area of attack for the plaintiff bar.
Expect challenges that:
- The studies were designed poorly
- The studies were poorly executed
- The study results are irrelevant to actual market use
- The study results are biased
- The clinical trial was outsourced to another location such as Romania to conceal etc.
And the challenges will come in these forms:
- Claims that adverse events were red flags which were ignored
- Claims that there was a failure to make public or share data regarding unfavorable results
- Claims of misrepresentation of results inside and outside the label [this failure to warn issue is where many lawsuits default]
- Claims that there was reliance on irrelevant results.
Obviously then, the clinical trial should be designed, executed and documented to anticipate anything which could make your company appear in court to not only be greedy and/or negligent but downright evil.
Thank you, Joseph. Now I would like to provide readers with a bit more detail from your resume.
Joseph K. Hetrick was selected among THE BEST LAWYERS IN AMERICA for product liability litigation in the 2007 edition. As a partner at Dechert, he is a member of the mass torts and product liability group.
He defended Philip Morris in tobacco litigation and represented Baxter Healthcare in the factor concentrate mass tort litigation throughout the world. He was part of Dechert's national defense team representing GlaxoSmithKline in the Baycol litigation, and took a lead role in the Paxil litigation in New Jersey and Pennsylvania. He also plays a central role in the Vioxx litigation for Merck & Co. and has served as trial counsel for matters for clients such as West Pharmaceutical, York International Corporation, Stryker Corporation, and Airgas, Inc.
Joseph K. Hetrick can be contacted at Joseph.firstname.lastname@example.org, 215-994-2250.