Commercial Contracts and the Pharmaceutical Industry

Commercial contracts and pharmaceuticals often go hand-in-hand. With the recent outbreak of COVID-19, the pharmaceutical and biotech industries are particularly prevalent in the public’s mind. Expected to reach over $1.17 trillion in net worth by 2021, the pharmaceutical industry sees significant yearly growth; despite being one of the most heavily regulated markets.

Regulation is important – it protects businesses and consumers and ensures lives are not put at risk. But it can add extra complications to pharmaceutical commercial contracts. In this article, we examine the importance of including intellectual property rights and protection within contracts and look at why it is essential to keep these clauses watertight.

The rights & protection of Intellectual Property

Intellectual property (IP) clauses in a commercial contract determine ownership of the property in question (e.g. an idea or a physical invention) and identify how it can be transferred or licensed. They include terms on disclosure and confidentiality, making them vital aspects of any commercial contract in a biotech or pharmaceutical company.

There are several different ways to provide intellectual property protection, including copyrights, trademarks, and patents. Patents are vital to the industry, as they help to promote development and research of potentially life-saving pharmaceuticals and reduce the likelihood of market failure.

Ensuring a balance

On the whole, IP rights are crucial in ensuring the successful continuation of a biotech or pharmaceutical company. They ensure that investments (including time, money, and effort) are protected and returned; encouraging economic growth within the organisation. This, in turn, leads to further medical breakthroughs and developments that benefit the consumer.

IP rights also prevent unauthorised use and piracy of the product. This protects customers from poor quality medications and disreputable pharmaceutical organisations. This will also prevent damage to brand reputation from copycat products.

However, it is often a difficult balance. While having sole rights to intellectual property will reap benefits for the business’ reputation, profits and (in the long run) the consumer, it can highlight ethical issues around not providing affordable, accessible medication to all.

The difficulties With IP rights

One of the key difficulties with IP rights is that new technologies and discoveries in the pharmaceutical industry have been so diverse and unique, that they have often challenged previous intellectual property rights. This has led to a continuously evolving strategy to cover new influencing factors and ensure that property remains protected.

Additionally, across the world, different countries can vary in levels of safety and enforcement for IP rights. For example, if a pharmaceutical company operates in more than one area, they may require international protection for their property.  

Intellectual property clauses in a commercial contract are extremely important. The factors affecting and changing them can lead to significant challenges for the pharmaceutical legal teams involved. For the consumer’s benefit, criteria and requirements around intellectual property have to be met to prevent harmful copycat products. This will then encourage research and development to continue, leading to further medical discoveries.

As discussed above, the companies themselves heavily rely on IP clauses and without it, they would struggle to keep up with the competition.

Is Legal Tech a Solution?

Keeping ahead of changing IP rights and implementations is already extensive work. For lawyers, it can be incredibly daunting when intellectual property clauses need to be reviewed or changed in a pharmaceutical company with hundreds of contracts. However, due to the importance of intellectual property in this industry, nothing can be missed.

Legal tech can streamline and organise these tasks. Document management systems enable legal teams to effectively store and organise their contracts and see what’s in them at a glance. Contract summary and review platforms, like Summize, can significantly speed up contract reviews or clause changes by pulling out the relevant information instantly.

By using a digital contracting solution like Summize, tasks such as reviewing IP clauses can be completed across all contracts (instead of just the important ones) in less time; without replacing the experience and knowledge of a legal team. Breaches or mistakes can be found quickly, increasing consumer confidence in the products they purchase. In that way, time and money can then be spent on developing the new pharmaceuticals of tomorrow.

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