Supreme Court: Drug Patents Don't Bar Competing Research

Drug companies have freedom under the Food and Drug Administration (search) rules to ignore their rival's patents when starting research on competing medications, the Supreme Court (search) ruled Monday.

The unanimous decision sets aside a lower court ruling for patent holder Integra LifeSciences Holdings Corp. (IART).

It means that big drug companies will have more flexibility to start experimenting with potential therapies so long as they cannot feasibly be marketed until after a competitor's patent expires. Lower courts will have to sort out just how much leeway the companies will have.

Some preliminary testing is acceptable, the justices said.

The court agrees with the government that "the use of patented compounds in preclinical studies is protected as long as there is a reasonable basis for believing that the experiments will produce the types of information that are relevant" to a future drug, Justice Antonin Scalia wrote.

The case involves Integra, which accused Merck KGaA of Germany of infringing on a patent that Integra holds on certain molecules Merck is using for research. The peptides, which are biological molecules, contain a specific amino acid sequence that researchers hope could inhibit tumors.

Integra, based in Plainsboro, N.J., sued for patent infringement after Merck set up animal trials for a cancer therapy as a first step in a decade-long effort to win federal approval for use in humans. The experimental cancer drug included the peptides that Integra says are patented until 2006.

Merck, which has no connection with the U.S. company, argued that it was entitled to the "head-start" research under an FDA exemption for studies "reasonably related" to a future drug application, saying it would promote the innovation of cutting-edge treatments while respecting patent holders' rights.

The U.S. Court of Appeals for the Federal Circuit ruled last year that the FDA exemption did not extend to exploratory research -- only later-phase, human trials typically involving generic drugs. It reasoned that Congress intended only to promote the growth of generics when it passed the exemption in 1984.

But in its opinion Monday, the Supreme Court disagreed and asked the lower court to take a second look at the case. It said drug companies should have more leeway under the FDA exemption to investigate new drugs, not just generics.

The stakes are high: Smaller firms such as Invitrogen Corp. (IVGN), which develops scientific tools for use in drug research, say their $26 billion industry would be threatened if larger companies are given freedom to poke around their patented work without paying a licensing fee first.

Backing Merck were the Bush administration and the AARP, which say drug prices will skyrocket if patent protections are tightened at the expense of research. In the last decade, consumer spending on prescription drugs has quadrupled from $40.3 billion to $162.4 billion.

Justices Sandra Day O'Connor (search) and Stephen G. Breyer (search), who own shares in U.S.-based Merck & Co. (MRK), had initially recused themselves when the court considered whether to hear the case. But after attorneys made clear in January that the German-based Merck split from the U.S. company in the early 1900s and wasn't affiliated, O'Connor and Breyer opted to participate in the decision.

The case is Merck v. Integra Lifesciences, 03-1237.