Powered by

How to organise cooperations effectively

In order for a company to make efficient use of its potential and its specific skills it must focus on its own core competences and on the cooperation with other companies that have supplementary skills. This is all the more important in economically difficult times when investors and banks tend to shy away from investments. The implementation of cooperations between companies raises a number of general issues as well as specific issues relating to drug law regulations.

Biotechnology companies rarely have the financial muscle needed for the approval of a new drug and for the establishment of a marketing network. Pharmaceutical companies, on the other hand, have the necessary resources and are often very interested in new products and developments coming out of the biotechnology industry. In order for a cooperation between biotechnology and pharmaceutical companies to achieve its ends, issues relating to drug law regulations and general legal questions need to be clarified. In addition, an agreement stipulating the specifications of the cooperation needs to be signed between the parties.

This is the case for cooperations between innovative, albeit financially weak, biotechnology companies and established pharmaceutical companies which need innovative products and services to expand their portfolios. It is also the case for research-based and sales- and production-oriented pharmaceutical companies seeking cooperation partners in order to be able to expand the medical indications, the use of new active substances or the efficient analysis of research, production and marketing capacities.

1. Research and development cooperation

© Pixelio

Research and development are hugely important for the pharmaceutical sector. The likelihood of making a good profit from blockbuster drugs for the treatment of diseases for which little or no sufficient therapies are available is huge. However, the cost and the time required for the development of new drugs is also huge.

The cooperation between drug companies and specialised contract research institutions, also known as vertical cooperation, focuses on the carrying out of clinical trials, which includes the approval process, the involvement of principal investigators and the acquisition and analysis of the results.

Horizontal cooperations between numerous R&D companies are also of particular importance for the biotechnology industry.

Research and development cooperations can focus on pharmaceutical products, analytical methods as well as on equipment. In the majority of cases, the companies involved bring specific technological background know-how or background patents into the cooperation, which serve as the basis for the pharmaceutical product, method or equipment under development.

A cooperation involving numerous partners requires companies to have detailed knowledge on the intellectual property rights related to the "background". A company must try to restrict the use of certain property rights to the joint R&D product, whilst retaining the rights for the use of certain methods or products for other areas, for example other medical indications.

Research and development cooperations are divided into two phases. The first phase is the development phase, which involves the development of the result (foreground) based on the "background" in the narrower sense and the objective here is to achieve marketable results. The second phase involves the exploitation of the results obtained in the cooperation (exploitation phase).

In the majority of cases, the cooperating companies establish a BGB company. They sign a contract which specifies how research and exploitation of the results have to be carried out. Under such an agreement, the rules of the BGB company apply if the partners have not made other agreements.

In certain cases, the partners might opt for the establishment of a limited liability company (German GmbH or AG). This is an advantage when several companies decide to jointly transfer a certain work area to the limited liability company and the new company takes over the long-term overall entrepreneurial responsibility for the work transferred.

It is crucial to determine the research and development phase as well as the exploitation phase in a contract. The following paragraphs deal with the advantages, disadvantages and specificities of the options that are available. 

Regulation of the research and development phase

Two aspects are of particular importance when setting up a contract stipulating the development and research phase.

It is crucial that the cooperation partners determine whether and to what extent the "background know-how" and the "background patents" can be used by the other cooperation partners for their contribution to the joint research.

It is also essential to lay down in contracts whether and to what extent the partners involved or in cooperation with third parties are allowed to carry out independent research in the same or similar areas. 
In terms of the assessment according to cartel law, the organisational division of the research and development phase is not relevant. It is up to the cooperation partners to decide whether they divide the work amongst themselves, whether they set up joint work groups or whether they outsource certain areas to third parties; this carries no weight in terms of cartel law. In addition, it is also crucial to specificy whether and to which extent the cooperation parties are entitled to publish the results obtained for the jointly developed product.

Regulation of the exploitation phase

Contractually, there are numerous ways to organise the exploitation phase. One possibility is the unlimited exploitation ability through any of the partners in the contract. However, this has the disadvantage that the partners are competing with identical products. Another possibility is an agreement on the exclusive joint exploitation of the product. Since the latter would require joint production, marketing and licensing, the joint exploitation would almost always lead to the establishment of a joint enterprise, which is often not what the partners would wish.

It seems to be of greater advantage to divide the manufacturing processes between the individual partners involved and subsequently jointly market the product. In this respect, special focus should be put on the price setting between the partners and the marketing company and on the price formulation of the marketing company. The companies can restrict the marketing of the product, for example by limiting the quantity produced, or dividing the sale of the product according to technical criteria or client groups. In addition, the partners can also determine production limitations. In the previous two cases, however, cartel law needs to be taken into consideration. In general, further important aspects to take into consideration when signing a cooperation agreement are the purpose and length of the contract, the responsibility of the cooperation partners, as well as liability and financing questions.

2. Marketing cooperation

© Pixelio

Once the hurdles associated with the development and clinical investigation of a new drug have been overcome and the product has received marketing authorisation, then the question arises as to how to effectively place it onto the market. The establishment of an own marketing system might then involve a huge amount of work for companies that are focused on research and development. For such companies it might prove useful to establish a marketing cooperation with other companies that already have a broad marketing structure. However, drug marketing cooperations might also be practical in other cases, for example in cases when a company intends to use the existing potential of a marketing partner for certain market segments, without passing on its entire marketing activities to this partner.

With regard to the establishment of such marketing or cooperation agreements, a number of drug law specificities besides the protection of intellectual property and licensing issues need to be taken into consideration.

An important aspect in the establishment of a marketing agreement relates to which partner will act as responsible pharmaceutical entrepreneur in terms of marketing. As specified in the German Drug Act (Deutsches Arzneimittelgesetz, AMG) § 4. para. 18, this is always the holder of a marketing authorisation when the product in question is a drug that needs to be approved or registered, but can also be any person placing medicinal products under his own name onto the market.

If the marketing partner is to market the drugs in his own name, then there is the possibility of transferring the marketing authorisation to the marketing partner. This requires the notification of a regulatory authority according to § 29 AMG. The marketing cooperation agreement needs to specify the respective notification obligations. In addition, the agreement should also foresee the obligation to return the marketing authorisation to the original holder in case of the marketing cooperation being terminated.

If  the marketing authorisation is to be left with the original holder, then this holder will remain the responsible pharmaceutical entrepreneur listed as such on the packaging as specified in § 10 para. 1 no. 1 AMG. The marketing partner is then able to act on the basis of a wholesale permit as specified in § 52 a AMG without acting himself as pharmaceutical entrepreneur.

In addition, it is also possible for the holder of the marketing authorisation to choose another company for the marketing of the product through an agreement under private law. This co-marketing company will then use the marketing authorisation by placing onto the market the same drug in the company's or the entrepreneur's name. The co-marketing company then becomes a pharmaceutical entrepreneur as specified in § 4 para. 18 of the German Drug Act, resulting in its liability as specified in § 84 AMG.

Such a type of co-marketing alliance is generally recognised in Germany as a standard marketing form, since drug marketing authorisations are not person- but product-related. Obtaining marketing authorisation according to AMG does not, in contrast to traditional commercial marketing authorisations, depend on the subjective properties of the applicant. In terms of European legislation, the permissibility of co-marketing activities is contentious since the European Commission requires the holder of the marketing authorisation and the pharmaceutical entrepreneur to be one and the same entity. However, the practice of co-marketing is tolerated and is becoming increasingly accepted. Nevertheless, the fact that co-marketing practices, in contrast to wholesale activities, require the co-marketing entity to be listed as a pharmaceutical entrepreneur needs to be taken into account. In addition, co-marketing cooperation needs to take into account the particular type of marketing authorisation.  

Marketing authorisation
© Pixelio

Since 1995, companies seeking to obtain marketing authorisation for certain drugs can use a centralised European marketing authorisation with the EMEA. This enables companies to obtain a uniform marketing authorisation for all EU member states, without having to apply for marketing authorisation in the individual states. The same is also true for drugs used for the treatment of rare diseases, so-called orphan drugs. These drugs also require companies to use the centralised marketing authorisation procedure, although some special concessions apply, such as a 10-year exclusive right to market the orphan drug. This procedure simplifies the marketing of a drug considerably as it enables the companies to place the drugs on the market in all EU states once a centralised authorisation has been obtained. For example, according to § 9 para. 2 AMG, a pharmaceutical entrepreneur with headquarters in a member state of the European Union or of the EEA (European Economic Area) can place a drug on the German market. However, this does not include Switzerland, which is otherwise often chosen for fiscal reasons.

If the centralised marketing authorisation procedure does not apply, companies wishing to place a drug on the market can also obtain a simplified national marketing authorisation in other European countries once a national marketing authorisation has been obtained. Such a European authorisation procedure is based on the principle of recognition of the assessment by so-called reference member states (RMS) (decentralised marketing authorisation procedure). Therefore, several companies can hold a national marketing authorisation in different countries.

Additional contractual regulations
Besides including details of the specific type of marketing cooperation, the contract needs to take into account a number of areas of applicability. These include the manufacture and supply of the products and the necessary definition of the responsibilities as well as specific liability regulations, the assignment of responsibility for the maintenance of the marketing authorisation, the handling of further developments of the product or the carrying out of supplementary studies and post-marketing surveillance studies.

The German Drug Act also stipulates that the marketing contract must include regulations on the surveillance of potential drug risks (pharmacovigilance). It always falls to the pharmaceutical entrepreneur to deal with pharmacovigilance. According to § 63 a AMG, the pharmaceutical entrepreneur must appoint a qualified person (PPP Officer, Stufenplanbeauftragter) to deal with the collection and analysis of adverse drug effects and the coordination of any measures that need to be taken. In all cases, the contract must ensure that information is exchanged and periodic safety update reports, such as stipulated by § 63 b AMG, are dealt with in good time.

Last not least, payments between companies need to be included in the contract. Payments can be based on the supply of the drugs and/or on the revenues achieved with the sale of the product. In the latter case, adaptation regulations relating to drug prices, fixed amount allocations or other developments that might have a negative or positive influence on the sale of the drug, have to be taken into account.

Contact:

Rechtsanwalt Thomas Henßler
Luther Rechtsanwaltsgesellschaft mbH
Gänsemarkt 45
20354 Hamburg
E-Mail: thomas.henssler(at)luther-lawfirm.com

Franziska Irmer
Luther Rechtsanwaltsgesellschaft mbH
Sophienstraße 5
30159 Hannover
E-Mail: franziska.irmer(at)luther-lawfirm.com

Luther Rechtsanwaltsgesellschaft mbH
Augustenstraße 7
70178 Stuttgart
Website address: https://www.biooekonomie-bw.de/en/articles/pm/how-to-organise-cooperations-effectively/