The disruption of 2020 presented one of the biggest and most important challenges to the biotech and pharmaceutical industries. Learn how the pandemic has led to a reevaluation of investment in R&D, an increased interest in parallel therapies and an evolution in how companies manage associated legal risks.
2020 was a transformative year for all businesses, but pharmaceutical companies in particular were challenged to innovate, collaborate and generate results directly connected to solving a public health crisis.
From the outset, it was clear that the industry's response to the Covid-19 pandemic would define pharmaceutical companies’ perceived efficiency, efficacy and ethics. Many biotech and pharmaceutical companies moved quickly toward a singular goal—perhaps signaling a broader shift in how the industry is thinking about the allocation of resources for new investments and development. The pandemic mobilized many companies into new and expanded research and development (R&D), with valuable results including multiple therapeutic solutions and breakthrough technologies for the future. Below we explore how this change has led to a reevaluation of investment in R&D, an increased interest in parallel therapies and an evolution in how companies manage associated legal risks. It was encouraging to see large and small pharmaceutical companies alike aim to solve a common and global problem in response to Covid-19. In the pharmaceutical industry there is a long tradition of companies carving out market niches for their products, which are rigorously protected by patents and intellectual property rights. Market exclusivities and high prices tend to be justified by the massive expense of R&D and high rates of failure at early and clinical development stages for these products. R&D for Covid therapies and vaccines prompted notable collaboration.
Companies like Pfizer and BioNTech worked collaboratively to develop an effective vaccine for Covid-19. Failure by one company even led to collaboration with a competitor: After Merck discontinued development of its own vaccine candidate it teamed up with Johnson & Johnson to ramp up production of theirs. The rousing success of many pharmaceutical companies’ parallel efforts may be a spark that ignites further interest in biosimilars and parallel therapies. But while it is promising to see companies’ parallel efforts, litigation over patents and market share remains inevitable between competitors and copycats alike. The industry’s successful collaboration to solve a global pandemic will have lasting benefits for the world, but a return to competition is inevitable.
Parallel therapies are on the rise
In the 11 years since the Biosimilars Price Competition and Innovation Act (BPCIA) was enacted, the United States has seen the 29th biosimilar approved by FDA and the 20th biosimilar product commercially launched.⁴ This is an impressive start, even though there currently are no interchangeable biosimilars on the market. While we are still in the early phases of observing market trends in the US (the first biosimilar product approved in Europe predates the first US biosimilar product by about a decade), the legal environment of biosimilars has only become larger and more complex As the biosimilar industry continues to grow and companies compete for market share, we will inevitably see an uptick in patent litigation. Manufacturing and formulation patents, which protect all aspects of the manufacture of biologics, continue to play a central role in biosimilar litigation, as biosimilar makers obtain patents to protect their products and gain a competitive edge.⁵
Biopharmaceutical companies are reevaluating business opportunities
There is a widely held perception that innovative pharmaceutical companies survive and thrive by reinvesting profits from existing drug sales back in R&D pipelines to fuel new discoveries for the next generation of medicine. In 2020, we saw more companies looking beyond existing product sales and critically assessing where future funds could come from, how their funds are being spent and their risk tolerance for new investments.
Identifying new approaches to financing R&D
Research shows that the pandemic has propelled companies to invest more into R&D to foster market share. One biopharma EVP/VP explained, “Our top strategic priority would be to start more and more R&D initiatives globally, so we have a good hold in each market for research.”⁶ But developing new products and therapies will inevitably give rise to additional litigation and legal costs as companies protect their intellectual property. Therefore, as companies secure additional research funds, they should also have a plan in place for increased legal spend.
With legal finance, pharmaceutical companies can prepare for expanding litigation costs, while freeing up additional resources that can help promote innovation and growth. Legal finance enables companies to offload the cost and risk of litigation to a third party. And while it can be used to protect existing intellectual property (by covering fees and expenses relating to ongoing patent disputes, for example), companies increasingly recognize the value of using legal finance to complement their R&D roadmaps: By preemptively securing finance for litigation, companies can redirect funds that would otherwise have been set aside for litigation costs to the early stages of product development.
Anticipating—and preparing—for litigation relating to existing intellectual property
There was a temporary lull in biosimilar litigation in 2020, but with new and expected biosimilar filings expected to pick up in the year ahead, litigation will invariably follow.⁷ Pharmaceutical companies therefore will need to prepare for the inevitable costs associated with securing and protecting patents—or, in other instances, defending against weak ones.
Innovative pharmaceutical companies need robust patents to keep copycats out of the market—and must vigilantly protect those patents until they’ve expired, as the failure to bring a timely patent claim can irrevocably destroy a product’s market success. As a result, companies must continuously monitor the competitive landscape to identify and pursue meritorious matters to protect the patent—a costly and time-consuming process.
On the other hand, not all patents are invulnerable. When biosimilar applicants identify weaknesses in an innovator’s patent validity or infringement positions, they too, face a costly legal investment. Further, depending on the scale and focus of the company, it may not have the resources to adequately defend against weak patents.
Commercial legal finance helps pharmaceutical companies solve these business challenges and pursue meritorious litigation by removing the burden of litigation expense. By working with a legal finance provider, companies can protect their patents and keep copycats off the market without adding additional risk and cost to the balance sheet, and companies challenging weak patents can secure the financial support required to pursue affirmative patent litigation.
Costs should not be a barrier to innovation
The disruption of 2020 presented one of the biggest and most important challenges to the pharmaceutical industry. The quick and shared response of companies led to multiple vaccines and other therapies authorized for emergency use and a shift in the way pharmaceutical companies think about R&D. As is the nature of the industry, increased development means more patents and efforts to protect those patents. Litigation is expected and inevitable, but the associated costs should not be a deterrent for new innovation.
Joshua Harris is a Senior Vice President with responsibility for assessing and underwriting legal risk, focusing on patent and intellectual property matters. Prior to joining Burford, he was a litigator in Loeb & Loeb’s New York office, where his practice focused on pharmaceutical patent litigation and counseling, representing brand pharmaceutical companies dealing with issues including infringement, validity and enforceability of patents.