Pharmaceutical Company Breaches Collaboration Agreement by Marketing Cancer Drug

female scientistThis case involves a biotech company that developed cancer-fighting drugs. The company partnered with a pharmaceutical company to develop a new-generation of cancer drugs. One of the drugs that the two companies developed became a successful drug for treating liver and kidney cancer, and also showed promise for treating colorectal and breast cancer. The pharmaceutical company soon synthesized and began marketing a compound that was virtually identical to the cancer-fighting compound in the drug that they had developed together. The biotech company claimed that the new drug had actually been identified during the collaboration period and that the pharmaceutical company’s actions of marketing the new drug violated their collaboration agreement. The biotech company also claimed that the pharmaceutical company was marketing the new drug in direct competition with the drug they had discovered together and that this meant that the two drugs were illegally competing for market share and for research funding.

Question(s) For Expert Witness

  • If a pharmaceutical company tries to market a new cancer drug that is based on a compound already identified during its collaboration with a biotech company, is this a breach of the collaboration agreement?

Expert Witness Response

Collaboration agreements in the pharmaceutical industry usually involve an agreement between a biotechnology company and a pharmaceutical company where the two companies agree to share intellectual property, resources, and scientific and regulatory expertise in an effort to develop a new drug and bring it to market. Collaboration agreements are used in the pharmaceutical industry because large pharmaceutical companies may lack the depth of scientific knowledge and experience that provides the foundation for biotech research. Also, small biotech firms may lack the experience and capital to both take a new drug through the difficult process of obtaining FDA approval and commercially market the drug. The collaboration agreement between the two companies in this case probably required disclosure of each other’s medical and pharmaceutical research results and probably only allowed the pharmaceutical company to pursue independent pre-clinical research of a new cancer drug with the express consent and notification of the biotech company. The problem with the pharmaceutical company’s conduct in this case is that they probably went ahead and started doing clinical trials on a cancer drug that they gave a “new” name to, even though the drug and the compound it contained had already been named and identified during the collaboration with the biotech company. This was probably a breach of the collaboration agreement between the two companies. The pharmaceutical company had an obligation under the collaboration agreement to let the biotech company initially review and comment on its clinical trial submissions. Since the compound had already been identified during the collaboration period, the pharmaceutical company was probably required to allow the biotech company to have an ownership share in the new drug that the pharmaceutical company wanted to market containing the compound.

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