Supreme Court Seeks U.S. Views on Drug Testing Royalties

The U.S. Supreme Court asked the Justice Department to outline the government’s view on whether drugmakers can be forced to pay patent royalties for tests they conduct on the safety or proper dosage of approved medicines.

GlaxoSmithKline Plc (GSK) has filed an appeal at the Supreme Court arguing that a royalty exemption given to drugmakers while they’re seeking regulatory approval for new treatments should also apply to post-approval testing. The London-based company is fighting a lawsuit by Classen Immunotherapies Inc., which says Glaxo is infringing its patents on methods for scheduling vaccinations to limit patients’ risk of developing other disorders.

The high court in 2005 let drug and biotechnology companies use patented inventions for research, without paying royalties, when the purpose is to win U.S. Food and Drug Administration approval. Glaxo said an appeals court wrongly limited that opinion to research conducted before a drug receives FDA marketing approval.

“Efforts to research and develop improvements to medical products commonly continue after initial drug approval, leading to changes to the approved product and its labeling,” Glaxo said in seeking high court review.

“The dividing line between pre- and post-marketing approval activities” created by the appeals court “ignores this basic reality, and is inconsistent with the FDA’s mission of facilitating the development of better, safer and more efficacious drugs,” Glaxo said.

Vaccine Risks

The Supreme Court today held off on deciding whether to hear Glaxo’s appeal until the federal government files a brief presenting its analysis of the case.

The dispute is over tests Glaxo conducted to evaluate whether there was any correlation between its vaccines and disorders including diabetes. Baltimore-based Classen, whose founder claims there is a link, obtained patents on evaluating risks and altering vaccination schedules.

Classen contends a victory for Glaxo would expand the immunity from royalty payments beyond Congress’s intent and “would completely eviscerate the patent rights enshrined in the United States Constitution in the field of pharmaceutical and medical device patents.”

The case is GlaxoSmithKline v. Classen Immunotherapies Inc., 11-1078.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net