The Baltimore Business Journal reported:

The industry unleashed a $168 million lobbying effort last year, the largest among all sectors and 90 percent of which was dominated by three biotech and pharmaceutical trade groups and 40 global companies. . . . Among top company spenders were British-based AstraZeneca PLC, which owns Gaithersburg-based MedImmune and tallied $4.1 million in lobbying efforts, and Israel-based Teva Pharmaceuticals, which owns Rockville-based CoGenesys and tallied $2.3 million. Amgen Inc., based in Thousand Oaks, Calif., topped the company list with a $16.3 million total contribution last year.

As the California Biotech Law Blog previously reported, BIO spent $6.6 million in lobbying efforts in 2007.

According to The Baltimore Business Journal, the industry's investment seems to "have paid off." 

Was the investment really dollars well spent?  Well, clearly the industry has had some success with respect to delaying the passage of patent reform legislation, which was largely viewed as being more favorable to high tech companies than biotech companies.  Likewise, the lobbying efforts seem to have had some success in the SBIR area, as we previously reported in a recent blog posting.  So, the industry has definitely seen some success in Washington this past year, although that success has not been felt uniformly across the board.

There is no doubt that having a voice in Washington is taking on increasing importance for the life sciences industry, particularly in light of the lobbying efforts of the technology world.  It seems likely that the industry's investment in lobbying will continue to grow in the near future, as the topic of health care reform continues to be a key political issue and the interests of technology and life sciences companies continue to diverge.  As I've suggested before, however, it is rather stunning to consider how much money that has to be invested these days in order to maintain a presence in Washington politics: $168 million is certainly not pocket change.

Alexis Madrigal for Wired.com reported yesterday that HairDx decided "on advice of legal counsel, to require California (and New York) residents to order their tests through a doctor."  Then today, Madrigal reported that two additional genetics companies, Sciona and SeqWright, have decided to pull out of the California market.  According to Madrigal, SeqWright "ceased allowing tests from the state without even getting rapped by regulators."

Will other DNA testing companies soon follow suit? It seems that the State of California's actions may very well prove to have had a chiling effect over the whole DNA direct-to-consumer industry.  As Madrigal in his Wired.com column suggests, this may have very well been the intended result.

At least one company, however, may be prepared to take this fight to the next level.  Madrigal reported today that 23andMe seems to be standing its ground.  The company appears to be taking the position that it is in compliance with California law and is going to continue to sell in California at this time.  There is no word yet as to whether any other DNA testing companies are prepared to stand up to the state and challenge its regulatory actions.

It's hard to see how these developments are good for the State of California.  One would have expected that a state as proactive as California with respect to promoting biotechnology and stem cell research would not have taken such a hard stance against direct-to-consumer DNA testing.  Will this incident ultimately prove to be the nail in the coffin for DNA testing services?  Certainly, California's actions have the potential to initiate a wave of similar actions across the country, as other states may feel pressured to follow California's lead.

The California Biotech Law Blog will continue to follow developments on this issue as they arise.

As the California Biotech Law Blog reported earlier this week , California's Department of Health sent out cease and desist letters to thirteen genetic testing companies, including Navigenics, Inc. and 23andMe, Inc, demanding that these companies halt sales in the state until they can demonstrate that their laboratories are certified by the state and federal governments and that the tests have been ordered by a doctor as required by state law.

Wired.com is following the controversy, and has obtained copies of the letters that went out to at least two of the recipients.  Alleging that the companies violated California law, the letters cite eight statutory provisions of California's Business and Professions Code in support of their allegations: Sections 1206(a)(4), 1220(d), 1241, 1246.5, 1265(a)(1), 1281, 1287(b)(3), 1288. 

These provisions state as follows:

• 1206(a)(4):"Clinical laboratory test or examination" means the detection,
  identification, measurement, evaluation, correlation, monitoring,
  and reporting of any particular analyte, entity, or substance within
  a biological specimen for the purpose of obtaining scientific data
  which may be used as an aid to ascertain the presence, progress, and
  source of a disease or physiological condition in a human being, or
  used as an aid in the prevention, prognosis, monitoring, or treatment
  of a physiological or pathological condition in a human being, or
  for the performance of nondiagnostic tests for assessing the health
  of an individual.

• 1220(d) (1) Each clinical laboratory shall perform all clinical
  laboratory tests or examinations classified as waived under CLIA in
  conformity with the manufacturer's instructions.
     (2) Except for those clinical laboratories performing only tests
  or examinations classified as waived under CLIA, each clinical
  laboratory shall establish and maintain all of the following:
     (A) A patient test management system that meets the standards of
  CLIA in Subpart J (commencing with Section 493.1101) of Title 42 of
  the Code of Federal Regulations.
     (B) A quality control program that meets the requirements of CLIA
  in Subpart K (commencing with Section 493.1201) of Title 42 of the
  Code of Federal Regulations.
     (C) A comprehensive quality assurance program that meets the
  standards of CLIA in Subpart P (commencing with Section 493.1701) of
  Title 42 of the Code of Federal Regulations.

• 1241: This chapter applies to all clinical laboratories in
  California or receiving biological specimens originating in
  California for the purpose of performing a clinical laboratory test
  or examination, and to all persons performing clinical laboratory
  tests or examinations or engaging in clinical laboratory practice in
  California or on biological specimens originating in California,
  except as provided in subdivision (b).
     (b) This chapter shall not apply to any of the following clinical
  laboratories, or to persons performing clinical laboratory tests or
  examinations in any of the following clinical laboratories:
     (1) Those owned and operated by the United States of America, or
  any department, agency, or official thereof acting in his or her
  official capacity to the extent that the Secretary of the federal
  Department of Health and Human Services has modified the application
  of CLIA requirements to those laboratories.
     (2) Public health laboratories, as defined in Section 1206.
     (3) Those that perform clinical laboratory tests or examinations
  for forensic purposes only.
     (4) Those that perform clinical laboratory tests or examinations
  for research and teaching purposes only and do not report or use
  patient-specific results for the diagnosis, prevention, or treatment
  of any disease or impairment of, or for the assessment of the health
  of, an individual.
     (5) Those that perform clinical laboratory tests or examinations
  certified by the National Institutes on Drug Abuse only for those
  certified tests or examinations.  However, all other clinical
  laboratory tests or examinations conducted by the laboratory are
  subject to this chapter.
     (6) Those that register with the State Department of Health
  Services pursuant to subdivision (c) to perform blood glucose testing
  for the purposes of monitoring a minor child diagnosed with diabetes
    if the person performing the test has been entrusted with the care
  and control of the child by the child's parent or legal guardian and
  provided that all of the following occur:
     (A) The blood glucose monitoring test is performed with a blood
  glucose monitoring instrument that has been approved by the federal
  Food and Drug Administration for sale over the counter to the public
  without a prescription.
     (B) The person has been provided written instructions by the child'
  s health care provider or an agent of the child's health care
  provider in accordance with the manufacturer's instructions on the
  proper use of the monitoring instrument and the handling of any
  lancets, test strips, cotton balls, or other items used during the
  process of conducting a blood glucose test.
     (C) The person, receiving written authorization from the minor's
  parent or legal guardian, complies with written instructions from the
  child's health care provider, or an agent of the child's health care
  provider, regarding the performance of the test and the operation of
  the blood glucose monitoring instrument, including how to determine
  if the results are within the normal or therapeutic range for the
  child, and any restriction on activities or diet that may be
  necessary.
     (D) The person complies with specific written instructions from
  the child's health care provider or an agent of the child's health
  care provider regarding the identification of symptoms of
  hypoglycemia or hyperglycemia, and actions to be taken when results
  are not within the normal or therapeutic range for the child.  The
  instructions shall also contain the telephone number of the child's
  health care provider and the telephone number of the child's parent
  or legal guardian.
     (E) The person records the results of the blood glucose tests and
  provides them to the child's parent or legal guardian on a daily
  basis.
     (F) The person complies with universal precautions when performing
  the testing and posts a list of the universal precautions in a
  prominent place within the proximity where the test is conducted.
     (7) Those individuals who perform clinical laboratory tests or
  examinations, approved by the federal Food and Drug Administration
  for  sale to the public without a prescription in the form of an
  over-the-counter test kit, on their own bodies or on their minor
  children or legal wards.
     (8) Those certified emergency medical technicians and licensed
  paramedics providing basic life support services or advanced life
  support services as defined in Section 1797.52 of the Health and
  Safety Code who perform only blood glucose tests that are classified
  as waived clinical laboratory tests under CLIA, if the provider of
  those services obtains a valid certificate of waiver and complies
  with all other requirements for the performance of waived clinical
  laboratory tests under applicable federal regulations.
     (c) Any place where blood glucose testing is performed pursuant to
  paragraph (6) of subdivision (b) shall register by notifying the
  State Department of Health Services in writing no later than 30 days
  after testing has commenced.  Registrants pursuant to this
  subdivision shall not be required to pay any registration or renewal
  fees nor shall they be subject to routine inspection by the State
  Department of Health Services.

• 1246.5: Notwithstanding any other provision of law, any person may
  request, and any licensed clinical laboratory or public health
  laboratory may perform, the laboratory tests specified in this
  section.  A registered clinical laboratory may perform the laboratory
  tests specified in this section if the test is subject to a
  certificate of waiver under CLIA and the laboratory has registered
  with the department under paragraph (2) of subdivision (a) of Section
  1265. A program for nondiagnostic general health assessment that
  includes a laboratory test specified in this section shall comply
  with the provisions of Section 1244.  The results from any test may
  be provided directly to the person requesting the test if the test is
  on or for his or her own body.  These test results shall be provided
  in a manner that presents clear information and that identifies
  results indicating the need for referral to a physician and surgeon.
  
     The tests that may be conducted pursuant to this section are:
  pregnancy, glucose level, cholesterol, occult blood, and any other
  test for which there is a test for a particular analyte approved by
  the federal Food and Drug Administration for sale to the public
  without a prescription in the form of an over-the-counter test kit.
  A test approved only as an over-the-counter collection device may not
  be conducted pursuant to this section.

• 1265(a)(1):A clinical laboratory performing clinical laboratory
  tests or examinations classified as of moderate or of high complexity
  under CLIA shall obtain a clinical laboratory license pursuant to
  this chapter.  The department shall issue a clinical laboratory
  license to any person who has applied for the license on forms
  provided by the department and who is found to be in compliance with
  this chapter and the regulations pertaining thereto.  No clinical
  laboratory license shall be issued by the department unless the
  clinical laboratory and its personnel meet the CLIA requirements for
  laboratories performing tests or examinations classified as of
  moderate or high complexity, or both.
  

• 1281:It is unlawful for any person to own, operate, maintain,
  direct, or engage in the business of operating a clinical laboratory,
  as defined in this chapter, unless he or she possesses a valid
  clinical laboratory license issued by the department.  In the event a
  health facility does not perform clinical laboratory services, but
  provides laboratory services to its patients under an agreement with
  another person or entity that holds and is operating under a valid
  clinical laboratory license, the health facility shall not be
  required to obtain a clinical laboratory license.

• 1287(b)(3):  The enforcement remedies provided under this section are not
  exclusive, and shall not preclude the use of any other criminal or
  civil remedy.  However, an act or omission punishable in different
  ways by this section and any other provision of law shall not be
  punished under more than one provision.  Under those circumstances,
  the penalty to be imposed shall be determined as set forth in Section
  654 of the Penal Code.
  

• 1288:Any person conducting or operating a clinical laboratory may
  accept assignments for tests only from and make reports only to
  persons licensed under the provisions of law relating to the healing
  arts or their representatives.  This section does not prohibit the
  acceptance of evaluation specimens for proficiency testing or
  referral of specimens or such assignment from one clinical laboratory
  to another clinical laboratory, either licensed or exempt under this
  chapter, providing the report indicates clearly the laboratory
  performing the test.  A report of results issuing from a clinical
  laboratory shall show clearly the name and address of the laboratory
  and the name of the director.

The letters demand that the party submit a plan before June 23, 2008 advising how the company will prevent further violation of the law.

It is impossible to determine from these letters whether or not these companies actually are in violation of the law;  however, assuming the allegations are in fact accurate, is this really the whole story?  Or is something else actually responsible for this "attack" on genetic testing companies?  What is prompting this interest in genetic testing?

I cannot help but wonder if the medical community is at the heart of this controversy.  But if this is in fact the case, what is the issue?  Is there a concern by doctors that they are going to be found guilty of malpractice simply as a result of something they either overlook or do not know how to respond to in the genetic testing report?  As we suggested in our previous blog posting, there is certainly some debate as to how accurate various genetic tests actually are and what, if anything, should be done in response to certain results.  On the other hand, is there a fear by the medical community that the public will not know how to handle the data in the report?  Or is there at the heart of this issue an entirely different matter entirely?

It is interestng that in the same week that this controversy has erupted, Newsweek ran a story about Dean Ornish's new book, where he looks at how changing lifestyle can change genes.  The prospect of potentially changing your genetic predisposition by making lifestyle changes is perhaps the best argument for why the public should have direct access to these tests.  Thomas Goetz of Wired.com also makes a compelling argument for direct access, arguing that "Frankly, it's insulting and a curtailment of my rights to put a gatekeeper between me and my DNA." 

To date, this controversy has erupted in only two states: New York and California.  There are forty-eight other states yet to take this issue up.  Those states will be looking to New York and California to see how they deal with the controversy.  Perhaps the California legislature should jump to the forefront of this issue and look at changing the law to ensure direct public access to genetic testing.  Such an action would undoubtedly set an important precedent for the other forty-nine states, which might very well follow in California's footsteps.  California: will you rise to the challenge? 

The California Biotech Law Blog will continue following this controversy as it further unfolds.

According to SF Gate, thirteen companies received the letters, including the two most visible genetic testing companies, Navigenics INc. and 23andMe Inc.

SF Gate reported:

All the companies have two weeks to demonstrate to regulators that their laboratories are certified by the state and federal governments, said department [of health] spokeswoman Lea Brooks. They must also show that the tests currently being sold to California residents have been ordered by a doctor as required by state law. . . . Companies face fines of up to $3,000 a day if they don't comply.

The California action follows a similar action taken by the New York Department of Health earlier this year, as we discussed in our May 14th blog posting.

Having just spoken last week at the Beyond Genome Conference in San Francisco, where we were discussing the ins and outs of the recent advances in genetic testing , I was a bit surprised to read that California--given our robust biotech industry--was following in New York's footsteps on this issue.  Moreover, I was surprised to discover that there is a state law in California requiring that genetic tests be ordered by a physician.

While perhaps it makes some sense to require the laboratories of these companies to be certified by the state and federal governments (although I confess that I do not know what is involved in the certification process), does it really make sense to require that all genetic testing be initiated by a doctor's order?  Is this really good public policy? 

As I indicated in my prior posting on this issue, I personally would be rather reluctant to pursue genetic testing even if I was interested in the results simply because I would not want the results to get into the hands of the insurance companies.  Requiring that no testing can be pursued without a doctor's order makes it virtually impossible to run the tests without the insurance companies obtaining copies of the results.  According to Ryan Phelan, the CEO and Founder of DNA Direct, who also spoke at the Beyond Genome Conference last week, genetic test results are not even considered uniformly reliable across the board; some tests are viewed as being more reliable than others.  Would this be understood, however, by the insurance companies evaluating the results?  I personally would not be willing to take that risk.  Then again, as I have shared with blog readers previously, I have had first-hand experience with the challenges that can be encountered with obtaining health insurance even when young and in relatively good health, as my COBRA insurance was terminated six months after my previous employer closed its doors and I was forced to go out and look for insurance on the open market before I had "exhausted" my COBRA under state law.  Based on my experience, it is not inconceivable to think that an insurer would label you "uninsurable" solely on the basis of your genetic testing results. 

In evaluating the debate over genetic testing, I cannot help but  wonder what is at the crux of the fears over confidential genetic testing.   Is the medical community concerned that a public that already has access to HIV and pregnancy testing over-the-counter somehow cannot handle genetic testing results?  Is there a concern about protecting the public from reliability issues arising from some of the genetic tests?  Is there a worry about what the public will do with the information, or what the public will expect physicians to do with the information? Or is something else entirely at the heart of these concerns?

I'm interested to hear any commentary on the genetic testing debate: should there be laws in place to require physicians to be involved with genetic testing, or to order the tests?  Would you be deterred from pursuing testing because of a physician's involvement?  Do the laws need to be changed so that states cannot in essence "shut down" genetic testing start-ups that are emerging in the marketplace? 

The California Biotech Law Blog will continue to follow this issue as it unfolds, and we will keep you posted on any feedback we receive on the issue.

The deal will pay investors $5.50 per share, which amounts to a "huge premium" according to BioHealth Investor, which indicated that the stock was only at $1.65 on the day the deal was made, and that its 52-week trading range was $1.28 to $6.49.

BioHealth Investor reported on the acquisition as follows:

The acquisition of Kosan will enhance Bristol-Myers Squibb’s pipeline will get to enhance its pipeline with compounds in two important classes of anticancer agents, called novel Hsp90 (heat shock protein 90) inhibitors and epothilones.

The company believes this will result in new treatment options for patients as another important milestone in becoming a next-generation BioPharma leader.  Kosan evolved from a research platform to a development company and this should offer a timely opportunity to place its clinical programs in the hands of a much larger company to bring innovative cancer treatment options to patients.

According to the San Francisco Business Journal, a separate exclusive worldwide license agreement was signed simultaneously, which will remain in effect even if the acquisition does not go through.  The terms of that agreement are $25 million up front plus milestones for rights to Kosan's epothilone compounds.

The In Vivo Blog reported on the Kosan deal that while some were underwhelmed by the price Bristol-Myers Squibb paid to acquire Kosan, "The market--and, probably Bristol as well--attached very little value to Kosan's unpartnered projects beyond the epothilones."  In Vivo Blog further explained:

That the deal isn't centered more around tanespimycin probably says more about the difficulties Kosan has faced with this particular molecule than it does about the value of Hsp 90 inhibitors generally. Remember Hsp90, as a target class, has been the driver of multiple buyouts and licensing deals in the past couple years. . . . Instead it probably has more to do with the fact that tanespimycin is one of several Hsp90 inhibitors in development that are derived from geldanamycin, a natural compound relatively high in molecular weight that might have trouble reaching an important hotbed of Hsp90 activity, the interior of the mitochondria. . . .

Meanwhile, Kosan's epothilones are clearly commanding more interest. These molecules target a tumor cell's skeletal infrastructure, much like taxanes, but via a different mechanism, and molecules like Ixempra have been specifically designed to overcome drug resistance. . . . Cornelius and co. are counting on Ixempra as a key part of its strategy to regain leadership in the cancer arena.

So, while this deal may not have resulted in a huge payoff for Kosan investors, there does seem to be a perception among at least some industry watchers that the deal--providing a 230% premium over the stock price--achieved a good result for both sides. 

No details of the settlement have been released thus far; however, the parties are reported to be filing a stipulation of dismissal in the next few weeks.

The SF Gate reported:

[B]iotech companies may face some rough weather ahead, said Scott Morrison, Ernst & Young's U.S. life sciences director. New product approvals will slow as drug regulators scrutinize applications in the post-Vioxx era, Morrison said.

Drug prices may face more pressure in a political environment focused on health care reform and the federal budget deficit. Beyond that, constriction in the larger capital markets has finally started to affect biotech companies this year, he said.

"Biotech has not been immune from the ills of the subprime mortgage meltdown," Morrison said. "Total fundraising year to date in 2008 is down by 60 percent."

Yet, according to a recent Ernst & Young report, biotech had a record year in 2007.  The Jacksonville Business Journal wrote of fthe findings from this report as follows:

European and American companies raised nearly $30 billion in overall financing in 2007, a banner year only surpassed by 2000.

Global venture financing reached a new high in 2007, surpassing $7.5 billion, of which $5.5 billion helped seed or nurture companies in the United States.

Global biotechnology net losses were at $2.7 billion as of 2007, down from $7.4 billion in 2006.

Ernst & Young has also concluded that the U.S. biotechnology sector is almost profitable for the first time. 

 As a result of a good 2007, the tight economy is not expected to hit the biotech industry as hard as is expected in other industries.  According to SF Gate, the Ernst & Young report indicated that nearly half of the 386 publicly traded U.S. biotechnology companies have more than two years of cash on hand, and another 27 percent have more than five years of cash. In addition, venture capitalists remain interested in biotech--more so than in other industries.

All in all, the SF Gate article suggests that the outlook is mixed for the biotech industry in 2008; however, I think that those of us working in the industry would agree that we are not overly worried about the industry's future.  I think that it is safe to say that the future remains very bright for biotechnology.

Mass High Tech reported on the new regulatory requirements as follows:

[T]he federal government and nearly half of the states have enacted or proposed legislation to protect patient safety. The most far-reaching mandate is California's electronic pedigree (e-pedigree) law. It requires electronic serialized product pedigrees for all prescription drugs at the item level (i.e., each salable item has a unique identity or serial number) and a secure chain of custody for all transactions involving that drug, starting with the pharmaceutical manufacturer.

Serialized product e-pedigrees enable the tracking and tracing of prescription drugs as they move through the supply chain to prevent counterfeit and diverted drugs from entering and remaining in the legitimate supply chain.

California recently provided the industry with additional time for full compliance, extending the implementation deadline to Jan. 1, 2011.

According to Mass High Tech, compliance with these regulations is a time-consuming and very complex process, which will require that companies comply with the new legislation more than a year prior to the implementation deadline, in order to meet the deadline at all.

The complexities of the implementation process were in fact what prompted the extension of the California deadline, according to a statement issued by Pharmaceutical Research and Manufacturers of America ("PhRMA") Senior Vice President Ken Johnson.  Johnson wrote as follows:

Clearly, more time was needed for effective implementation of the e-pedigree law. And now there's an extension of two years, which allows a longer period for a number of things to happen. For example, the makers of blood products -- such as those that treat hemophilia -- have two additional years to test the effects of radio-frequency identification (RFID) on the treatments. And they have more time to encourage the Food and Drug Administration to provide guidance on how companies should test to determine whether heat generated by the RFID system affects either the safety or effectiveness of blood products.

What's more, researchers will have more time to address the technology compatibility problem that confronts those trying to implement the law. The fact is, the technology exists to track medicines, but we do not have one standard electronic serialization system everyone can use to monitor medications throughout the pharmaceutical supply chain. In addition, there's now more time for state and local government agencies in California to resolve the budget crises they face. Organizations like the California Department of Corrections, state mental hospitals, California State University campus clinics and University of California hospitals must purchase many different expensive technologies to be in compliance with the law. And accomplishing that goal by January 1 would have been a daunting task.

In case you missed the passing of the California legislation, a summary of the text and background to the California legislation has been posted for review. 

Babel describes a key problem with the Chinese system as follows:

China, unlike the United States, is a first-to-file system. This means that if two inventors file a patent application for the same innovation, the first to file the application with SIPO will be granted the patent even if the other inventor was the first to invent. In addition, unlike the United States where an inventor has one year from the date of the first public disclosure of the innovation to file for patent protection, public disclosure prior to filing in China is an absolute bar to the grant of a patent on the disclosed innovation, except in very limited circumstances. . . .

The combination of a first-to-file system with a system where a patent may be granted with little or no investigation results in the obvious: patents granted to non-inventors. It is a relatively easy matter, at least as to utility model and design patents, for an interloper to file for and be granted a patent on an innovation created by another person or which has been afforded protection in another jurisdiction, such as the United States. For instance, if a foreign entity has a United States patent but fails to file or register that patent in China, a Chinese company can easily take the innovation and get a utility model patent in China in its own name. The Chinese company then can use its utility model patent to prevent others, including the foreign entity, from producing products in China that incorporate that innovation.

According to Babel, another problem is the full investigations are often not conducted on patent filings.

Babel explains as follows:

Since, realistically, a full investigation has not been made by SIPO, the presumption flowing from the Chinese process presents an unfair advantage to those who improperly obtain patents. Since the burden of proof is on the person challenging a patent to show that the innovation in question is that person's property, the various evidentiary and procedural hurdles found in the Chinese court system can make it very difficult, and perhaps impossible, to overcome the presumption and prove that an innovation was stolen by a Chinese company.

So what are some best practices to follow when trying to protect inventions in China?

Babel recommends the following:

[C]ontractually prohibit any Chinese company with which the United States inventor is dealing from filing a patent application related to any innovation found in the product it is producing for its United States customer, and/or to obligate such Chinese company to recognize that any innovation found, discovered, and/or created during the parties’ relationship is the property of the United States customer. This language can help if the Chinese company tries to seek protection of an innovation owned by a United States company. Chinese courts do have a relatively good record of enforcing contracts.

Another alternative is to require arbitration of patent disputes. The Chinese court system recognizes and will enforce arbitration decisions. Arbitration allows parties to adjudicate their disputes without having to adhere to the archaic and problematic evidentiary rules of the Chinese court system. There are a number of organizations located in Beijing and Hong Kong which can render arbitration awards that will be enforced by Chinese courts. Two of the more recognized organizations are the China International Economic and Trade Arbitration Commission in Beijing and the Hong Kong International Arbitration Centre. Many of the arbitrators employed by these organizations are Western trained, which helps to further avoid many of the archaic evidentiary and procedural rules found in the Chinese court system. Therefore, it is advisable to insert an arbitration provision in any contract with a Chinese company.

While I have not handled many transactions in China to date (although several of my clients are in the process of moving into the Chinese market, so this is likely to change in the near future), Babel's advice is in line with what I typically advise clients who are doing business in Asia.  It is important to contractually protect intellectual property in any business relationship, and in doing business overseas, it is always a good idea to provide for the resolution of disputes by binding arbitration to the extent possible.  I typically try to steer clients toward arbitration in countries where the system of law is based on the English system, since the U.S. legal system is similarly based on the English system of law, but in the alternative, I like the idea of using Western-trained arbitrators. 

Peter Zura's 271 patent blog reported on the highlights of the Berman letter as follows:

• According to the recent GAO report titled "Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog, " the GAO found that the USPTO cannot hire enough patent examiners to reduce patent pendency in the next five years. It seems, however, that this projection is based on estimates provided by the USPTO. . . . Please provide all data related to these "USPTO estimates, " including mathematical models, and underlying statistics and assumptions such as examiner retention and productivity. Under these same assumptions, hypothetically, how many patent examiners would have to be hired in the next five years in order to reduce the patent backlog?
• After release of the above mentioned GAO report, the USPTO issued"a press release on October 4, 2007 that stated the USPTO would"review assumptions the agency uses to establish production goals for patent examiners." Then, before the Subcommittee, Director Dudas confirmed that the USPTO has begun to study patent examiner production goals. Please provide details on the methodology of the study and personnel conducting it. What is the current progress of the study and when can Congress expect the study to be completed? To what extent is the Patent Office Professional Organization and the Patent Public Advisory Committee involved in this study. . . . .
• Examination on Request (or, as the USPTO called it, Deferred Examination) is used in many countries such as Canada and Japan. Under such a system, applications are not examined automatically, as in the U.S., but only upon a specific Request for Examination within a set time period, say 3 years. If no request is filed within that period, the application is deemed abandoned and is never examined. From experience of other patent offices, 10% to 40% of applications are never examined under Examination on Request systems, resulting in substantial workload reduction. This is due to applicants' voluntary abandonment of obsolete applications prior to the Request for Examination deadline. Under current USPTO practice, applications that become obsolete, but receive examination by the USPTO, are the worst investment the USPTO can make because their obsolescence means that the patents are unlikely to fetch any renewal fees.
• Why did the USPTO reject such a method that has the potential to reduce its workload and increase efficiency?

There is no word yet on the USPTO's response to this inquiry.  We will keep you posted of any developments that arise.  To review the full text of the letter, please see attached.

Forbes reported on the issue as follows:

New York State's Department of Health recently sent letters raising the specter of fines and jail time to 23andMe, its competitor Navigenics, their partners Illumina and Affymetrix, and five other gene-testing outfits. The state says they can't do their scans without permits. (Navigenics says it uses a licensed doctor.) California is investigating 12 public complaints about certain mail-order gene testers.

In Maryland a health department official frets that self-prescribed gene tests have "serious potential for causing harm" if misinterpreted. Overall, 24 states prohibit or limit certain testing without a doctor's involvement, according to the Johns Hopkins University's Genetics & Public Policy Center.

Should the states have the ability to regulate gene testing, and should that regulation require the supervision by a licensed doctor?   This question raises some interesting public policy issues.

As a consumer, if I were to pursue gene testing, I am not sure that I would want such testing run through a physician, since in all likelihood, that would mean that the test results would end up in the hands of my insurance company, whereas, if I paid a company privately for such tests, the information is more likely to remain private.   My preference would be to have the tests privately run and then take responsibility myself for ensuring that the appropriate medical tests were run subsequently to screen for whatever illnesses that the testing had indicated I would be genetically inclined to catch.

In contrast, I am sure that a physician's perspective would be that a physician needs access to the results in order to better treat the patient.  The physician might argue that the results are worthless unless the physician has access to the information.  He or she might even argue that it is not in the patient's best interest to be told the results without having a physician there to interpret the data or to offer some support as needed.

I am interested in hearing what the blog readers have to say on this issue: should private companies be allowed to run gene screening tests privately without being regulated by the individual states and without requiring that the tests be run under a physician's superivision? If you have any comments on this issue, please pass them along and we will post them to the site.

There is little doubt that this debate is going to continue to receive attention in the near future as gene testing increases in popularity.  We will keep you posted here at the California Biotech Law Blog as the debate further develops.

StemCells issued a press release following the filing of its complaint, which described the nature of its suit as follows:

The California action alleges that Neuralstem and its two founders infringed the Company’s U.S. Patent No. 7,115,418 (methods of proliferating human neural stem cells) and its recently issued U.S. Patent Number 7,361,505 (neural stem cell compositions of matter).  The two patents had not previously been asserted by StemCells against Neuralstem and are not part of the pending Maryland litigation initiated by StemCells in 2006, which is currently on hold by court order.   Further, the California action alleges that Neuralstem has engaged in a campaign of misinformation about StemCells’ patents and proceedings before the U.S. Patent Office.  StemCells is seeking compensatory and enhanced damages as well as injunctive relief.  

According to the Associated Press, StemCells previously filed another lawsuit against Neuralstem alleging infringement of two different patents, and Neuralstem just last week filed suit against StemCells in the same Maryland court seeking to invalidate one of the StemCells patents and alleging that StemCells committed fraud and misconduct in gaining that patent.  The Maryland case is currently on hold pending reexamination of the patents.

It goes without saying that the parties appear headed for a long and heated patent battle.  The California Biotech Law Blog will keep you posted on the legal developments as the suit  progresses.

 Reuters reported on the Chinese strategy as follows:

Pharmaceutical information group IMS Health Inc said last year's first okay from the U.S. Food and Drug Administration for a Chinese generic -- a copy of AIDS drug nevirapine -- was a sign of things to come. . . .

Zhejiang Huahai Pharmaceutical Co Ltd won a U.S. green light last July to sell generic nevirapine, once the patent held by Germany's Boehringer Ingelheim expires in 2012.At least 10 other Chinese companies are set to follow suit with other generic products, according to IMS. Some could be available as early as this year. The result will be increased competition in a generic drugs industry that is already struggling with tumbling prices.

"In order to ensure their success in the market, the Chinese manufacturers are likely to undercut all others on price," IMS said in its annual Intelligence.360 report.

According to Reuters, the one potential roadblock that Chinese companies are likely to encounter is the fact that they do not have a good reputation for quality, particularly in light of the recent heparin scandal.  This may give Indian companies, which are also trying to enter the generics market, a competitive advantage.

As a consumer, I welcome the additional competition, which will ultimately result in lower prices at the drugstore.  With all the recent Chinese safety scandals, however, I cannot help but wonder if the increased presence of Chinese generics companies in the marketplace is going to end up generating even more safety problems for American consumers--and perhaps even more legal problems as well.  Hopefully the FDA is following what is happening in China and responds accordingly to better ensure that U.S. consumers are not purchasing unsafe Chinese products.

Marketwatch reported on McCain's plan as follows:

McCain espouses some ideas that have broad bipartisan appeal: the use of generic drugs; incentive pay for doctors and hospitals that achieve good health results; and electronic medical records to reduce wasteful spending. But several of his proposals, such as changes in the tax treatment of employer-sponsored coverage, raise more questions than he seems prepared to answer. . . .

Tax credits that encourage the purchase of individual health insurance form the centerpiece of McCain’s health plan, and would be a dramatic departure from the way health insurance is distributed today. . . . McCain proposes to give refundable tax credits of $2,500 for individuals and $5,000 for families to offset the cost of coverage in exchange for eliminating tax breaks that employees and employers currently have. If you get your coverage through a job, gone would be the tax exclusion that allows your premium dollars to come out of your pretax pay. He argues that would level the playing field for people who don’t get their insurance through work while preserving choice — you could take that money and keep your employer plan or use it to buy one on the individual market. . . .McCain also wants to allow people to buy health insurance across state lines. . . .

[H]e wants to create a Guaranteed Access Plan “that would reflect the best experience of the states” and function as a health insurer of last resort, kind of like the high-risk pools 30 states have set up.

While some of McCain's plans make sense such as the idea of being able to carry insurance across borders and having a Guaranteed Access Plan, his focus on encouraging individual plans fails to address the issue of how people with minor health problems will get coverage as individuals.  The reality is that many Americans would have no other option but to go with the Guaranteed Access Plan: how exactly would the U.S. fund such a plan?  Obviously, if businesses no longer receive tax benefits for the payment of premiums, it will become increasingly difficult for such business to justify offering their employees such benefits.   

Another problem: how would insurance across state lines be regulated?  I am completely in favor of the idea, as I had terrific insurance when I lived out of state and was sorry to lose it when I moved to California; however, in a multi-state model, it seems likely that a new federal entity will be needed to provide oversight over the regulation of insurance in all of the states.

All in all, while Americans should be happy to see that McCain has a health care reform plan, they may be disappointed to see that his plan has no groundbreaking solutions--certainly none that will resolve the current system's problems.  Is this really a surprise though?  Unfortunately,  we remain a long way from electing anyone who can really  resolve all of health care's problems. 

Attached is a copy of McCain's speech on healthcare in full.

The National Law Journal reported on the filing of the petition as follows:

The company's petition, drafted by veteran high court litigator Robert Long of Washington's Covington & Burling, contends that one of the three panel judges in its case was named to the board in violation of the Constitution's appointments clause. Translogic Technology v. Dudas, No. 07-1303. . . .

Such a constitutional flaw, if legitimate, could call into question the hundreds of decisions worth billions of dollars in the past eight years. The flaw, discovered by highly regarded intellectual property scholar John Duffy of George Washington University Law School, could also afflict the appointment of nearly half of the agency's trademark appeals judges.

According to The National Law Journal, forty of the sixty-one of the BPAI judges were appointed after March 29, 2000, which was the date when a law changing the appointment process came into effect.

The National Law Journal reported:

The Intellectual Property and Communications Reform Act of 1999, according to Duffy, was intended to give more authority and status to the director of the PTO, but also to keep the agency firmly within the Department of Commerce. A provision of the act transferred the power to appoint BPAI judges from the secretary of Commerce to the PTO director.

BPAI judges exercise "significant authority," argue Duffy, Long and others, and qualify as "inferior officers" under the appointments clause. The clause requires that inferior officers be appointed either by the president, the courts of law or heads of departments. The PTO director is not a head of a department.

Given the large number of judges appointed after March 2000, Duffy said, the odds are that the vast bulk of appeals since then had at least one invalidly appointed judge sitting on the panel.

With respect to the current petition, Long has is arguing that the Supreme Court should vacate the BPAI decision in the Translogic case; however, he denies that such an action by the Supreme Court would call into question all of the decisions by the BPAI since 2000. 

The National Law Journal states as follows:

[Long] contends that the de facto officer doctrine does not apply, and that the PTO's claim -- that failure to apply it would cast a cloud over "many thousands of Board decisions" -- is inaccurate.

"Our position is this affects only decisions that are still subject to a direct appeal -- those pending in the Federal Circuit or in the Supreme Court -- a much smaller group. . . . "

We will continue to follow this matter as it develops, and keep you posted here at the California Biotech Law Blog.