Health warning: it's boffins vs lawyers

Laws designed to make lifesaving therapies cheaper are driving drug companies to waste millions in court

Two years ago, before Glaxo Wellcome merged with SmithKline, it was launching a drug in Europe, and was racing against the regulatory filing deadline. The research documents were successfully flown to Stockholm, but the large DHL delivery lorry waiting at the airport wasn't big enough for the hundreds of thousands of pages of legal material. The filing delay held the drug off the market for months.

The legal environment for drugs makers has always been complicated, but now the process of developing and selling medicine is mired in a torrent of legal considerations. The outcomes of major cases affect the way companies make new medicines. Some believe it is only a matter of time before pharmaceutical groups are judged more on the strength of their lawyers than their white-coated boffins.

The issue is particularly acute in biotechnology companies. For many, their existence is based on ownership of "concept" patents, and many thousands of patents are associated with the mapping of the human genome. Analysts believe progress of biotech research will depend on the outcome of the next two years of legal battles.

In a sense, the shift is already well under way. A glance at the share performances of some of the biggest drug-makers shows the importance investors attach to events on the legal horizon. Although last year's HIV showdown between the South African government and 30 major drugs makers, including Roche, Bayer and GlaxoSmithKline (GSK), highlighted the critical importance attached to intellectual property (IP) protection, the most significant issues arise within the industry itself.

The market remains concerned with the pipeline of new drugs, but share prices are increasingly at the mercy of concerns over ongoing or future legal trouble. At the centre are the IP patents the companies treasure so highly, and the attacks on them by generic manufacturers. The challenges to patents on Prilosec and Augmentin battered the stock of their producers AstraZeneca and GSK.

Because of the cyclical nature of medical breakthroughs, the market is experiencing a glut of patent expirations on drugs from the advances in the early Eighties. Generic drugs makers have latched on to the rich pickings from selling off-patent versions of the blockbusters, and their eagerness often ends in court.

Most of the impetus stems from the 1984 US Waxman-Hatch Act, which covers drugs patents. The Act was designed to encourage generic manufacturers to produce their wares – and bring prices down – while acknowledging the importance of leaving enough incentive for the pharmaceutical companies, which spend an average of £500m to bring a product to market, to invest in drug design.

Unfortunately, by encouraging the generics, the Act caused the legal battles. Under it, the first generic maker to successfully challenge an existing patent can win the right to exclusivity on the generic version for the first 180 days after the original patent expires. The lure of that has led the generics to massive challenges on the validity of hundreds of patents held by the big pharma companies. This forces the companies to devote time to producing the scientific defence evidence.

Many generic companies devote themselves to chasing old documents suggesting that what a given company holds as an exclusive patent was in fact widely available to the scientific community. In return, big pharma has become embroiled in countless automatic lawsuits where they claim their patents are infringed. "We owe it to shareholders and it's a matter of principle," a GSK spokesman says. "The market has to know we will defend our IP whenever it comes under attack."

This drains off a huge quantity of management time and financial resources, and has had a huge effect on scientists. The creation of new drugs, so fundamental to the pharmaceutical business, now takes a form dictated by the new legal precedents.

One of the main effects has been for the pharma companies to divert increasing amounts of laboratory activity into seeking new formulas, delivery methods or tiny improvements in existing drugs so their patents can be extended.

Another effect has been a greater emphasis on the speed of drug development. Patents tend to be filed from the second the principle of a drug is demonstrated. Then the industry takes an average 12 years to bring the finished, approved product to market. Those 12 years eat into the 20-year life-span of the patent, and there is now the added risk of a successful legal challenge before the time is up. So scientists are under mounting pressure to work more quickly. AstraZeneca, for example, plans to bring its average development times down to just six years.

Courtroom clashes have also led to profound changes in the relationships between the drugs companies and the university researchers who provide so much of the original research. After major lawsuits over patent ownership, drugs companies have tightened many relationships. That has created, says one Cambridge biochemist, "a very non-collegiate atmosphere".

Many big companies broadly accept that drugs rese- arch will run into more legal tangles, and are working out ways to protect themselves and shareholders. Some are investigating a new product from the UK insurer Glenrand IP that covers profit margins against a legal challenge to a particular drug's patent.

Ultimately, the boffins may reassert their central importance to an industry that should be all about science. But with the US precedent in the global driving seat, that seems a long way off. As Aldous Huxley once said: "Big money doesn't talk; it just hires a battery of lawyers."