For the biotechnology industry, effective patent protection is a necessity, not simply a business advantage or a luxury, a leading industry figure has told the Senate Judiciary Committee.

“It is far past time to update our laws for the 21st century and the future of American innovation,” Committee chairman Patrick Leahy (Democrat) told a hearing conducted by the panel to discuss the Patent Reform Act of 2007 (S 1145), which he introduced recently with Sen Orrin Hatch (Republican) and others. However, Kathryn Biberstein, senior vice president, general counsel and secretary at biotechnology company Alkermes, urged the Committee, in its discussions on changing the current system, to “consider carefully the cautionary language embraced by the Hippocratic Oath – first, do no harm.”

Testifying on behalf of the Biotechnology Industry Organization (BIO), Ms Biberstein noted that, while America has no monopoly on the generation of novel and inventive ideas for the treatment of serious disease, “what it does have is a remarkable ability to fund the development of those ideas at early stages – frankly to the benefit of the entire world’s population.”

All this is possible because of the certainty and predictability provided by the US patent system, which also gives investors in biotechnology’s capital-intensive, long-term and high-risk R&D endeavors the assurance of a return on their investment, she said.

Without strong and predictable patent protections, investors will shy away from investing in biotech innovation and simply put their money into projects or products that are less risky, without regard for whether they provide less societal value, Ms Biberstein told the legislators. Further, collaborative R&D between small innovators and large manufacturers, which is often the only route to commercialisation for small biotech companies, could be delayed or even undermined by attacks on patents over time, she warned.

One reason why BIO opposes S 1145 in its present form is a provision of the bill which would create an “essentially limitless” opportunity to broadly challenge a patent at any time during its life. Under this new system, virtually any competitor or purchaser of the patent holder - indeed, anyone who demonstrated “significant economic harm” from the patent - could commence such a challenge at any time, and under a low standard of proof, even years after the patentee and the public had come to rely on it, and years after biotech companies had invested hundreds of millions of dollars to bring a patented invention through clinical trials and regulatory approval.

Such a system would be “a dramatic departure from domestic and international norms, casting a cloud of uncertainty over issued patents,” Ms Biberstein warned the legislators. Patents would have far less value, and investment predicated upon them would inevitably be diminished. This, in turn, would likely result in fewer cures for diseases and other breakthrough biotechnology products, she added.

Small biotechs “having to spend R&D money on audit controls”

Meantime, BIO president Jim Greenwood has told the House of Representatives’ Small Business Committee that changes proposed by the Securities and Exchange Commission (SEC) and the Public Companies Accounting Oversight Board (PCAOB) to current auditing procedures would provide a “marginal improvement” for emerging biotechnology companies

However, “the current system is so bad that any change is a marginal improvement,” Mr Greenwood also told the panel, at a hearing held to discuss whether the changes proposed by the SEC and the PCAOB to the Sarbanes-Oxley Act of 2002 (SOX) would result in lower compliance costs for small companies. Mr Greenwood had helped draft SOX when he served as a member of Congress but, he told the hearing, Congress never intended for the legislation to “be a windfall for auditors, nor pile on the compliance costs for companies.”

Currently, however, the situation facing many emerging biotech companies is that funds which they would otherwise be spending on core R&D for new therapies have to be used for overly complex auditing controls or unnecessary evaluation of such controls, Mr Greenwood told the panel.

“The stakes for getting this right could not be higher,” he stressed. Consistent oversight into the application of the new rules and consequent appreciation of how they are continuing to impact capital formation, particularly for small companies, will be critical to restoring the USA to its proper primacy in the global capital markets. “We must ensure the rules provide the necessary flexibility to enable biotech companies to invest in what they do best – developing new technologies that extend lives and alleviate suffering from horrible diseases that affect families across the world,” he said. By Lynne Taylor