Appeals court hears key patent case affecting small drug makers

A federal appeals court is hearing a closely watched case today that may have significant implications for the pharmaceutical industry, but especially for smaller drug makers.

The session hinges on a disputed interpretation of patent law, and the case is considered so important that all 12 judges on the US Court of Appeals for the Federal Circuit in Washington, D.C., are hearing arguments, which is an unusual occurrence.

Here is the back story: In 2005, a small drug maker called The Medicines Company hired a contract manufacturer organization, or CMO, to produce a few batches of the Angiomax heart drug because it was having difficulty making the treatment on its own. Crucially, this took place roughly three years before The Medicines Company filed its patent applications for the drug.

Much later, another drug maker, Pfizer’s Hospira, sought to sell a version of the treatment, and the companies became locked in litigation over the validity of the Angiomax patents. Ultimately, a three-judge appeals court panel last year decided The Medicines Company patents were invalid. How so? The drug maker effectively sold its rights by hiring a contract manufacturer to make its drug before patents were filed.

The appeals court panel said the transfer of the drug back to The Medicines Company by the contract manufacturer constituted a sale. And this triggered what is known in patent law as the “on-sale bar,” said Courtenay Brinckerhoff, a patent lawyer at Foley & Lardner. This stipulates that an invention cannot be patented if it has been on sale for more than one year before a patent application is filed.

This interpretation has alarmed many drug makers, especially smaller companies that rely on outside vendors to help with various aspects of production. A certain amount of a medicine must be produced in order to have enough supplies for clinical trials, which must be conducted in order to win regulatory approval to eventually sell a medicine.

A key point of dispute is the use of the word “sale.” Although certain amounts of Angiomax may have been transferred between The Medicines Company and the contract manufacturer, the drug was never available for sale to the public. As far as The Medicines Company is concerned, it always held title to the amount of Angiomax that had been transferred (here is its brief).

“No one but the inventors were allowed to buy the drug, and they were only ‘buying’ it in the sense that they were hiring an outside vendor to manufacture it for them because they lacked the capacity to do the manufacturing in house,” explained Gregory DeLassus, a patent attorney with the Harness Dickey law firm.

“If the drug had been invented by someone at Pfizer or GlaxoSmithKline, the inventors would simply have had their own manufacturing units do the work, and the ‘one year, on-sale’ bar would never have been triggered,” he continued. “In short, it was only because the inventors worked for a small company that they lost their patent rights. If the court of appeals uses this case to reform the law concerning what is ‘on sale,’ it could be a big deal for … the small companies.”

The Obama administration, which the appeals court asked to provide its views, made similar points in a court filing in support of The Medicines Company.

Meanwhile, in its own court filing in support of The Medicines Company, the BIO industry trade group wrote the panel decision “would apply to any contract in which a patent holder uses a CMO to assist in producing a product made by a patentable process. Such an interpretation of the on-sale bar discourages use of CMOs and, accordingly, promotes an inefficient and costly method of production of valuable pharmaceuticals.”

“Given the wide-ranging and growing use of contract manufacturing organizations in the biopharmaceutical industry — widely considered to be essential to the continued growth and development of pharmaceutical drugs and biologics — the decision has dangerous consequences for a large number of existing patent holders in the industry,” BIO added.