Life Sciences 2017: Trends
Levels of activity within the life sciences market show no sign of abating, despite the economic uncertainty brought on by recent political events on both sides of the Atlantic. M&A and consolidation continues to be active and in regions where joined-up regulatory regimes are about to come into place, as in the European Union, regulatory and compliance law is robust. One of the reasons for such a buoyant market may be the successes that innovators have had recently, with several new biopharmaceutical products becoming available that seem likely to be lucrative regardless of the ups and downs of the market. This has culminated in a healthy year for life sciences, and for lawyers practising in all areas of the field.
According to the Economist Intelligence Unit, overall spending growth in the life sciences sector was projected to increase by over 4 per cent in 2016, and then over 6 per cent per year in 2017 and 2018. However, this growth is set to be uneven. Developing regions such as Asia and the Middle East may see quick growth from rapidly modernising healthcare systems, while the move towards universal healthcare systems in some countries will aid pharmaceutical sales. According to a recent report by Deloitte, the US continues to dominate the global market: 50 per cent of pharmaceutical R&D is performed in American laboratories, with the UK contributing 10 per cent. It is no surprise, given these figures, that both jurisdictions have seen some high-profile litigation and court cases relating to new drugs.
Regarding deals and transactions, one US-based lawyer told us that “M&A may pick up with Trump in charge”, an indication that the new president’s promised pro-business agenda may result in opportunities for lawyers and pharma firms alike in 2017. While the number of deals that surpassed the billion-dollar mark in Q3 2016 only reached seven – down from 14 in Q2 – biotechnology formed the largest segment of M&A transactions in the market as a whole for the quarter, stacking up 20 deals worth US$20.9 billion in total. Political and economic developments may perhaps have affected the market stability seen at the beginning of the year, but the fact that biotechnology makes up such a large proportion of deals demonstrates that disappointing figures for the M&A market as a whole does not mean disappointing figures for all players in the market.
It may also be premature to play up the role of recent events. The incoming Trump administration in the US, as well as Brexit in Europe, are both huge market uncertainties, but a large chunk of market news over the past 12 months has involved cases going back years. Indeed, for many of the big pharma firms it has been a year of costly settlements. Pfizer recently reached a US$486 million settlement after it was accused of hiding safety risks relating to pain-relieving drugs Celebrex and Bextra, while Teva Pharmaceuticals said in a quarterly report that it had set aside just over US$500 million for its foreign bribery settlement, conducted by the FCPA.
What is more, the giants of the industry have seen themselves overshadowed in terms of R&D by smaller innovators who are producing highly desirable products. For example, one of the highest-profile battles of recent years has involved the patent for CRISPR–Cas9, a gene-editing tool that has been advocated as a key instrument in the battle against cancer. As patent litigators have noted, with a healthy R&D market, patent litigation will remain a robust area of law with huge sums at play.
Similarly, the jurisdictional discrepancies in pricing and reimbursement remain a source of dispute and therefore result in more work for lawyers. While European consumers have the protection of price regulation schemes, the US does not. In both developing and developed markets looking to innovate, pricing issues over new drugs and technology remain a fruitful area for life sciences lawyers working in contentious matters.
Litigation surrounding biosimilars continues to loom large in the legal market, with battles over issues of patent infringement at the forefront. A recent landmark ruling in the Southern District of Florida that Apobiologix’s biosimilar did not infringe the original of Amgen’s drug Neulasta represents the first instance in which a biosimilar applicant proceeding under the Biosimilar Price Competition and Innovation Act (BPCIA) has achieved a district court victory. This demonstrates the marked difference between the US and Europe – since 2006 the EU has approved 20 such biosimilars, while in the US only two have been approved.
Data protection law may also become an increasingly integral part of life sciences law as the e-health industry experiences growth. One lawyer we spoke to commented on the increasing interest from universal healthcare providers, such as the UK’s NHS, to continue further down the route of electronic computerisation of healthcare services. This may also aid the rise of class action cases and patient group litigation. The implementation of new technology without full understanding of its utility could potentially result in an increase of legal work in areas such as qui tam litigation or personal injury.
What Brexit Means for the Life Sciences Market
With the advent of Brexit, one of the biggest uncertainties for the European life sciences market, as identified by our interviewees, is exactly which regulatory body will now approve new pharmaceuticals in the UK. The European Medicines Agency (EMA) is responsible for validating all new drugs in EU states, but its headquarters currently reside in London. A number of regulatory lawyers we spoke to admitted that there is no obvious solution to this issue, and that “Brexit will be a big strand for regulatory lawyers”.
The other issue affected by the UK’s decision to leave the EU is its relationship with the Unified Patent Court (UPC), an EU-wide collaboration that has been years in the making. The European Union continues to look to streamline several aspects of law. In the patent field, the potential end point of this would be a patent regulator that operates across the entire trading bloc. Added to this is the future of Supplementary Protection Certificates (SPCs), which offer the opportunity to extend patent rights after the expiry of the initial patent. Recently these have become difficult to interpret, with the advent of an increasing number of pharmaceutical products that do not fall within the SPC’s definition of drugs – namely those containing single, small molecule active ingredients. For starters, this definition naturally precludes biosimilars. The question of whether the UK continues to adhere to the SPC stipulations or develops its own patent regime is now highly pertinent.
Norway perhaps offers the UK a glimpse into a successful life sciences market outside the EEC. As one Norwegian lawyer opined, regulatory law “can be messy” due to the nation’s existence outside the EU, but the market is currently performing well – biotech and medical devices are burgeoning, and since 2009 there has been a 30 per cent increase in the number of biotech companies in Norway alone. UK lawyers may now have much to learn from their counterparts in Oslo and elsewhere about getting business done in the EU from outside of it. It seems likely, though, that for both EU and non-EU lawyers, there will be no shortages of regulatory work in the coming years as the Brexit saga unfolds.
For the life sciences legal market currently, perhaps the most apposite phrase is “plus ça change, plus c'est la même chose”. With strong but uneven global growth, new products entering the market at different stages, and an increasing “‘pharmaceuticalisation’ of products in legislative terms”, as one lawyer put it to us, life sciences lawyers have rather full plates.
But recent revolutions in the industry should not be overplayed. The robustness of the legal market is likely because, as always, the same issues remain paramount: arguments over patents and innovation; attempts to increase market share from innovators and manufacturers; and liability and personal injury claims from consumers. Despite the innovations of new drugs and technologies, the nature of life sciences legal matters looks unlikely to change, and this should continue to generate plenty of work over the coming years.