Drug-related startups face a serious barrier at the early stages of the commercial production of drug therapies (as do those seeking the licensing or purchase of those therapies by established pharma companies).
This barrier is caused by the timing and funding gap between the initial phase of patent acquisition, which provides intellectual property protection for the startup, and the achievement of clinical trial results that demonstrate a credible commercial drug therapy.
Consequently, expediting Food and Drug Administration approval at the earliest stages of a drug’s development can be highly advantageous to startups.
For many startups, the prospect of gaining FDA clearance can appear not only intimidating in terms of time and effort, but also questionable as an allocation of resources, because of the substantial costs involved.
However, every drug-related startup needs to keep in mind that FDA clearance is needed before a commercial product can be sold directly to physicians or hospitals and paid for by insurance.
Some startups have tried to avoid the FDA processes by marketing and selling drugs for off-label uses, which are uses for which no FDA clearance has been obtained.
Although doctors can legally prescribe drugs for off-label uses based on their own medical judgment, it is a legally risky decision for any company to engage in the marketing of drugs for off-label uses.
Substantial fines and legal settlements may be the cost of engaging in attempts to market drugs off label.
Moreover, in raising capital from investors to finance the research and development work of the startup, it is a huge advantage to show that the startup has already considered and formed a strategic plan for expedited FDA approval.
Investors are concerned with a range of risks that drug-related startups face, including unknowns regarding anticipated costs between innovations and commercialization; possible high fixed costs to establish regulatory precedent (such as the nature of the content and format of required information for the FDA to perform an evaluation of an innovative drug); the potential existence of other treatments that might advance to market before the FDA process is completed; a shifting regulatory regime; and changes in political control and outlook that can affect FDA policies.
For these reasons, efforts to gain FDA clearance as soon as possible should be considered a key part of a start-up's business plan.
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© 2020 Thomson Reuters/ Westlaw Journal Intellectual Property. All Rights Reserved.
Re-published with permission. Commercialization Strategies for Early Stage Drug-Related Startups, Ping Wang M.D., Michael Ye Ph.D. and John Murray Ph.D. , Westlaw Journal Intellectual Property, VOLUME 26, ISSUE 25.