Moderator: Welcome to today's Tech Law Week Viewpoint discussion with David Beier. David, thank you for joining us. Please get us started by talking about the role biotechnology can play in the advancement of health care for Americans.

David Beier: Biotechnology related products are already serving the health needs of millions of people all around the world. Good examples of biotech products you may be familiar with include medicines for heart attacks, stroke, treatment of anemia and vaccines to help prevent disease.

The true promise of biotechnology derived products is remarkable. The unlocking of the secrets of life through work done on sequencing the human genome, advances in biology and improvements in computer science mean that the 21st Century is likely to be known --- as former Senator Moynihan said --- as the Century of Biology.

Bruxelles, Belgium: I am a reader from Europe. We have seen some disagreement recently across borders regarding the safety of drugs. I assume that science doesn't recognize political boundaries, yet safety analysis seems to. Questions of biotechology will be even more complex. What does the future hold?

David Beier: In general terms the requirements for the approval of new drugs and biologics are very similar between the United States and Europe. This has not proven to be the case in the area of agricultural biotechnology.

For the most part the United States has a sophisticated and science-based system for the regulation and approval of agriculture related biotechnology derived products. In the recent past some European countries have imposed non-science based criteria. The approach by the European Union is counterproductive. Thwarting the development of biotech related agriculture products will, in the long run, hurt European consumers, and slow down the development of products that could materially improve the world's response to hunger in the developing world.

Bethesda, Md.: What is your opinion on the current FDA approval process for drugs? How would you suggest that we expedite the process while still maintaining the integrity of the system?

David Beier: The approval process for new drugs and biological products within the United States is very well managed by the Food and Drug Administration (part of the Department of Health and Human Services). As a result of FDA reforms (both administrative and statutory) plus the creation of a User Fee program the FDA has been able to materially reduce the time for reviewing new products while maintaining an appropriate focus on safety and efficacy.

One important challenge for the FDA in the future will be its ability to keep up with developments in bioinformatics (the merger of biology and computer science). It is likely that they will need additional resources to keep up with developments in this field.

Moderator: What do you think will happen with the Patent Office and the granting of patents for ESTs and other genomic inventions?

David Beier: The United States Constitution provides the basis for our patent laws. Congress --- from the beginning of our country --- has recognized the advantages of a strong patent law. Patents advance the public interest by putting new science into the public domain and protect against "free riders" who copy important new inventions without adding any innovation.

United States patent law requires that inventions meet tests relating to whether the product is new, useful and non-obvious. In applying this test to patent applications the Patent Office uses a standard that, in essence, is based on what a person who is expert in that field would know.

Last year the Patent Office altered the standards for looking at EST patent claims so that the utility of those claims is examined more carefully. Many observers think this will produce both fewer EST patents and patents of a narrower scope. These changes were, in general, supported by the biotechnology industry.

Germantown, Md.: Mr. Beier, what insight can you give us regarding the future ramifications of the Festo decision regarding patent prosecution in biotechnology?

David Beier: The question raised is a very sophisticated and important one. The question relates to a case decided by the Court of Appeals for the Federal Circuit which is currently pending before the United States Supreme Court. The case concerns the vitality of a patent concept that measures the scope of patent protection.

If the lower court decision stands it will be substantially more difficult for biotechnology inventions to receive the same scope of protection as they have received to date. If the decision is upheld it will also be more expensive to engage in patent prosecution work. This is true because the back and forth that inventors have with the Patent Office can serve to narrow the scope (and subsequent enforcement) of an issued patent.

Alexandria, Va.: I'm sure you noted with interest the reports of terrorists and crop dusters. What was your reaction? Thank you.

David Beier: As many government officials and experts have noted, the risk of bioterrorism is diminished by the complexity of the science and potential delivery mechanisms involved.

Prior to the events of the past two weeks, the Federal government had substantially increased its activities to help prepare responses to bioterror attacks, but clearly more needs to be done. There is legislation pending by Senators Kennedy and Frist which would materially increase funding for state and local governments who are the "First Responders" in the case of any bioterror attack. In addition, there are steps underway to speed up the development of vaccines for the most likely bioterror threats.

Alexandria, Va.: Currently, various public and private institutions hold patents granting exclusive rights for embryonic stem cell lines. As new embryonic stem cell lines are established, how will these lines be deemed novel for patent purposes in relation to other embryonic stem cell lines? It would appear that such cells being undifferentiated would be nearly identical, even if isolated from distinct embryos.

David Beier: The promise of stem cell research is profound as President Bush recognized in his National Address in August. The kind of stem cell research that many find interesting is with "pluripotent" cells (i.e. those cells that have the capability to develop into multiple parts of the body like muscle, heart tissue or skin). It is clear that research in this field has great promise to address the unmet medical needs of millions of Americans.

To date the work done on stem cells has been largely done within the private sector or by universities without Federal funds. In some instances those researchers have applied for and obtained patents either for the product or the process of making the product.

It is too early in the ligitation process that is underway to determine who has rights to what invention and what the scope of those patents will be. It is clear, however, that the process of applying for patent protection in this field will become substantially more complex as a result of the increase in the number of research projects funded with Federal dollars.

Gaithersburg, Md.: Biotechnology has received an enormous amount of interest from venture capitalists. In light of the weakening economy and the time it takes for biotechnology products to hit the market, what is your opinion of the VC interest for the next year or two?

David Beier: An excellent question, especially because of the prominence of the life science industry within our region. As many local residents know, because they are employees or investors, our region has the third largest concentration of life science companies in the nation.

The relative downturn in venture investing in the information technology or e-commerce space has not been seen as strongly in the health area. In fact, recent reports suggest that this year will be the second biggest in the biotechnology sector. Even this morning there are reports of substantial increases in the stock prices of some biotechnology related companies.

One important cautionary note. Biotechnology firms have very long time horizons. They are addressing very important public health needs, but the science they are applying takes substantially longer to reach the market than in the telecommunications field. Investors need to understand that reality and make sure that they have the patience to stick with companies based on strong science, experienced management, and a coherent vision about how they can market their product.

The future of the life science and biotechnology sector in the Washington region is strong. The availability of a talented labor pool, great academic institutions, and the presence of the NIH create an incredible platform. Equally important, the local and regional venture community has shown that it is the equal of other regions in expertise, experience and insight.

San Francisco, Calif.: Is the lack of an FDA Commissioner adversely affecting the rate of new drug approvals?
Is FDA's DDMAC stepping up enforcement actions (e.g. warning letters) against companies with drugs in Phase III testing (that are not previously approved or marketed) because of statements about results for early clinical trials on the corporate website and in press releases?

David Beier: As with any organization, it is less than optimal to have a vacancy at the top. The current senior leadership at the FDA, however, are doing a good job of trying to keep up. The agency does face difficult and daunting tasks in the years ahead and would be better served by a nominated and confirmed Commissioner.

It is frequently noted that the FDA regulates or approves about 25 percent of all consumer products in the United States. As a result it is a very high profile agency with broad and diverse responsibilities. The position of Commissioner is a non-partisan role. That said the role of FDA Commissioner is of vital importance to public health.

Everyone in all the regulated industries and amongst the general public will be better served once the FDA has a permanent Commissioner.

The second question about warning letters is an interesting one for biotechnology firms. It is frequently the case that smaller start-up biotech firms need to inform their investors (and potential investors) of what is happening to products in the pipeline. Sometimes the FDA has tended to overregulate the statements or releases of these smaller companies because they think such releases are unduly promotional. This approach is understandable, but sometimes can produce unnecessary overregulation. If a small biotech firm can not effectively communicate in plain English with Wall Street and the investment community, they may not be able to raise the capital to finish developing their promising new products.

Moderator: Does HCFA fairly and adequately reimburse patients for new and innovative therapies and tests that arise out of biotechnology?

David Beier: The agency formerly known as HCFA (now known as CMS, Centers for Medicare and Medicaid Services) plays a vital role in the innovation cycle. There is a broad consensus that NIH should have its research budget doubled. There is a consensus about FDA reform and the need to approve new drugs, biologics and devices in a timely fashion. What has been missing has been a recognition of the role that coverage and reimbursement plays in this cycle.

The goal of the biotechnology industry in its dealings with CMS is: (1) to seek a clear, transparent, and fair process for decisions about what new technology to cover and at what levels of reimbursement; (2) a coverage process that rewards innovation and improvements in health outcomes; (3) coverage decisions that respect the need for local autonomy and experimentation; and (4) a process that does not unnecessarily duplicate or contradict the FDA approval process.

Moderator: Biotech companies usually have a very limited in-house legal staff. What is the best way for them to make sure that they get good legal advice?

David Beier: The best legal advice tends to come from attorneys with expertise, experience and perspective. It is frequently the case that smaller firms have an in-house legal staff who are strong in one or more legal specialties. The challenge for these firms is in finding outside counsel to supplement that expertise. Here the best test is whether the firm --- or firms --- you are considering using can address all, or most, of your business legal needs.

While it is possible to obtain legal services a la carte, it is preferable to have outside counsel who understand the company, its science, its products and its business plan. It is not uncommon even for reasonably big biotech firms to think about product development as a patent and FDA process. The role that health care reimbursement and marketing strategy play in the success of any biotech company should not be ignored. Finding a firm that can grow with your biotech company as you grow is the ideal outcome.

Moderator: What are the stages of financing that a typical biotech company goes through? How do they use outside lawyers and financial advisers in this process?

David Beier: Companies vary considerably in terms of financing history. Many companies raise their first round of financing from venture capitalists and "angel" investors. Very often this initial round is supplemented by one or more additional rounds of financing. The biotech sector is somewhat distinct from the information technology sector because the total capital needed to successfully develop a new product can easily exceed several hundred million dollars.

At each stage of biotech financing there is a need for sophisticated and experienced legal counsel. The best firms to perform this work will be entities with: (1) experience and knowledge of this sector in multiple disciplines, including patents, private equity, FDA regulation and health care policy issues; and (2) contacts and exposure to the parts of the financial world who can help the firm obtain the necessary financing.

Again finding a firm that can perform all of the relevant legal task as the company grows is an advantage. This approach limits the amount of time that senior management spends educating a series of lawyers and permits a team work approach to legal problems from the earliest stages in a company's life.

Moderator: Why doesn't the Washington Metro area have more biotech companies?

David Beier: Most readers of Washtech may assume that the bulk of life science business activity is found in Maryland. That is true, but may not represent the complete picture in the future.

The development of Life Sciences in Virginia has been the focus of the Virginia State government. They have been very aggressive in recruiting new companies and research facilities.

The most important change that will occur in Virginia will be the development of a new facility in conjunction with the Howard Hughes Medical Foundation. The construction of a multi-million dollar facility in Northern Virginia could well be the stimulus that is necessary to increase the presence of the life science industry in the State.

Of equal importance to the State of Virginia will be the evolution of the field of bioinformatics. Just as those public and private sector researchers working on the human genome discovered the speed of research is a computer science question. The prominent role that Northern Virginia plays in computer science and software development leaves it well positioned to grow in this emerging field.

Alexandria, Va.: I read an interesting article authored by the CEO (or perhaps another senior exec) of Sun Microsystems about the future of biotechnology. He argues that we have to define some kind of endpoint at which we no longer seek answers to certain technological questions, particularly related to health, for fear of our own undoing. Bioinformatics, artificial intelligence, bionics, and other science fiction-esque matters are among his examples.

My question is who, if anyone, has this item on their agenda from a policy standpoint? Is this the type of concept that only gets hot in the event that there's an announcement in the scientific community, as cloning was a few years ago? Or are preventive measures considered? Who are the major players?

David Beier: Great question. I believe that you are referring to an article written by Bill Joy, a prominent computer scientist. The issues raised by Bill are profound and important.

The biotechnology field has a long, and positive, history of thinking about ethical issues. Early on in the development of this modern kind of biotechnology scientists in the field voluntarily created a moratorium on research until certain basic questions could be addressed. This approach lead to the development of early regulations of the industy by the National Institutes of Health.

More recently, the biotechnology research activity undertaken by the Federal government on the human genome has been accompanied by an acute awareness of the ethical, legal and social issues. In fact a percentage of all the sums spent by the Federal government on the Human Genome Project has been devoted to funding in these fields.

Finally, the Biotechnology Industry Organization (BIO) has played a leadership role in confronting these issues. More details can be found at their website, www.bio.org.

In sum, BIO and the research community must continuously ask themselves the kinds of questions you raise. What they seek to do is to advance the human condition. In that process they need to understand and be sensitive to the moral, religious and ethical issues their work raises.

David Beier: Thanks for the opportunity to dialogue with so many readers on such important issues. It has been fun, but also challenging. Everyone alive today will have their life touched in important ways by biotechnology. The more each of us understands what it is --- what it is not --- the better off we all will be.

As citizens we want our elected representatives to speak for us, but the first step is to make sure that we are well informed ourselves. In a new field like this one, it is also incumbent on us to better understand what is at stake and what benefits we are likely to see.

Moderator: Our thanks to David Beier, Hogan & Hartson L.L.P., and all who participated.