The Medical Technology Blog

In the third instalment of her guest blog, Louise Campbell, an undergraduate law student with the University of Southampton, examines the increasing scope of lawyers in healthcare

Nowadays, law firms have become as important partners to the medical industry as the scientists, sales executives, marketing managers and CEOs that are driving the company forwards.  This blog looks at some of these areas in more detail and illustrates that lawyers are as important in the work environment as are in the courtroom.

Commercial Agreements

Lawyers are often employed to aid the creation of commercial agreements between companies. They will assist in negotiating the terms of the contract and, once agreed, will draft and facilitate the signing and exchange of the relevant documents and contracts. The nature of the terms and of the agreement will naturally vary, but some of the most common used in the healthcare industry include:

  • Patent Licence agreements: key terms may include: the scope of the licence, its exclusivity and the territory it covers the licence, which often includes or excludes all countries that have granted patent protection to the invention. Others encompass remuneration, royalties and how such payment(s) are made; and duration, how long the agreement is to last
  • R&D collaboration: where two or more enterprises agree to collaborate developing new products or processes. To commercialise the results of the collaboration, the agreement often extends to the exploitation of the results. Collaboration can also extend to higher education institutions
  • Confidentiality agreements
  • Contract manufacture and supply agreements:  As a guide, key terms may include: interpretation; orders for products; manufacturer obligations; inspection and testing; delivery; rejection of products; warranty and indemnity; prices and payment;  how to vary the terms of the contract in the future if necessary; intellectual property;  confidentiality and; termination
  • Distribution and agency agreements: An Agency Agreement involves appointing a third party to act on its behalf, marketing and selling its products and services – often in exchange for commission. The distribution agreement transfers the ownership of goods to the distributor prior to their ultimate sale. Flexibility in such agreements allows for sales targets and territories to be negotiated
  • Co-marketing and co-promotion agreements: Co-marketing is where two companies cooperate with separate distribution channels. This sometimes includes profit sharing. Co-promotion on the other hand, is where two or more companies use each other’s salesforces as well as their own, to promote the same brand or range of brands

Corporate Services

Corporate compliance, in other words, meeting statutory obligations surrounding how a company operate, reporting and particularly directors’ duties towards shareholders are covered by legislation. Companies are regarded as legal persons and failure to meet the various requirements may result in fines and other punishments for directors and officers.
In the UK, the most recent updating of legislation governance is The Companies Act 2006 which supersedes previous regulations. It is the longest Act of Parliament in British history, containing 1,300 schedules in 15 sections. Given the considerable size of the legislation, lawyers are useful in determining which sections are relevant to the company and advising as appropriate.

Lawyers may also provide useful guidance in raising funds and the most suitable process in which to do this. Some examples of common practices are raising money through debt financing or equity financing. Debt financing is when a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid. Equity financing is where shares are issued in a public offering. In return for the money paid, shareholders receive ownership interests in the corporation.  A recent example of this in action is Archimedes Pharma successfully raising £65 million round of new funding in 2010. That particular deal is believed to be Europe’s biggest single fund raising round for a bio-pharma company in 15 years.

Should a company wish to merge or acquire another company, a legal mergers and acquisitions team ensures that this is completed effectively. Lawyers are heavily involved in the due diligence side of this, analysing the target firm’s business history, its assets, its capital, and its organisational structure.  They will also negotiate, draft and facilitate the signing of contracts and help manage the integration process after the merger or acquisition is complete.

Intellectual Property and due diligence

Protecting and defending innovations in this sector is essential. Companies may call upon lawyers for help with applying for intellectual property rights, such as patents and trademarks, and perhaps identifying a particular strategy with regards to this.

Due diligence is a routine practice in the healthcare sector prior to investments and public offerings, mergers and acquisitions, private equity and venture capital transactions. These transactions involve providing capital to private businesses to speed up their development. The completion of a successful venture capital or private equity deal requires the deal to progress through a multistage process including due diligence. Due diligence is also a key element in licensing and collaboration agreements.

Dispute Resolution

For when it all goes wrong, lawyers are often the first port of call for resolving a dispute either through going to court or an out of court arbitration or mediation process.

In terms of IP disputes, often these centre on enforcement and/or infringement of IP rights and disputes over ownership. A recent example of this was the patent dispute between Ranbaxy (UK) Ltd and AstraZeneca AB in which Ranbaxy, the claimant, successfully achieved declaration of non-infringement and revocation of a European patent owned by AstraZeneca, the defendant pharmaceutical company.

For contract disputes, the most cost effective way of settling the disagreement is through out of court means as litigation costs can be huge.

Product liability is key area for disputes. Lawyers can be on hand to aid defence or settlement of product liability claims. Strategic advice and representation in multi-claimant litigation is also offered by many law firms as well as assistance with international coordination of product liability actions. They may also advise on what steps to take after realising any safety concerns or objections raised by regulatory authorities such as product recalls, additional safety instructions or temporary restrictions on use. The unmissable DePuy ASR hip replacement litigation is a prime example of this.

Regulatory and Competition compliance

The healthcare industry has been increasingly subject to regulatory and competition (antitrust) measures, including regulation of clinical trials, freedom of information and advertising.  Lawyers are often asked to take the hassle out of contacting the relevant regulatory authorities and advise on ensuring compliance with these regulations.

With regards to competition law, ultimately companies must not abuse their dominant market position should they be in such a position of strength. Co-marketing and promotion agreements, as an example, can be subject to intense scrutiny by the national and European competition authorities as can any mergers and acquisitions. Lawyers can help set up a compliance programme or advise on how to minimise and reduce any risk of violating competition laws. One example of this was when AstraZeneca lost a claim that false representations to the European Patent Office constituted an abuse of their dominant market position.

Infrastructure, Tax and Employment

Tax lawyers are useful in ensuring that the corporation is tax efficient and drafting documentation to allocate tax risks between parties in the agreed manner.

Lawyers are also involved in the transactions for the design, construction and maintenance of new and existing healthcare infrastructure.

Employment lawyers can aid in drafting employment contracts, tailored to the needs of the business, and consultancy agreements which strike the right balance between safeguarding your interests and commercial and economic flexibility. In some cases, healthcare corporations will need to place restrictive covenants on their employees to prevent them from exposing confidential information or intellectual property and lawyers can advise on the best ways to do this also.



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