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by John Avellanet
Cerulean Associates LLC



Drug and product development collaborations would seem to benefit everyone from large pharmaceuticals to start-up biotechs and eager customers. Yet there is one group increasingly at risk – shareholders. Why? Although collaborations increase innovation and speed new products to market, they also jeopardize two elements necessary for sustainable profit in the global marketplace – intellectual property and regulatory compliance.

2005 estimates from Interpol, the World Customs Organization and the United States Federal Bureau of Investigations and Department of Commerce place intellectual property (IP) theft from companies in North America, Europe and Japan at nearly $600 billion (US), with pharmaceutical patents being frequent targets. Further complicating the issue is the cost of complying with a broad array of regulations around the globe. Recent studies have benchmarked the cost of compliance for Life Science firms in the US alone at approximately $2 billion (US) per year.

While the costs of compliance and discovery can be incorporated into the price of new products, this is only a short-term remedy. IP losses and compliance challenges place the long-term competitiveness of most biopharmaceutical organizations at risk.

How then to bring compliance in line and secure IP without reducing the speed and innovation benefits brought by collaborations? The answer is a proactive, flexible strategy embedding compliance early into product development while capturing intellectual property opportunities.


Trade Secrets and Compliance

Such a strategy emerges with recognition of the inherent parallels between ensuring regulatory compliance and safeguarding IP. Key to this strategy is the “trade secret” concept.

At its essence, a trade secret is knowledge (including techniques, methods, ingredients, processes, etc.) which a company takes reasonable precautions to protect. The definition of “reasonable” has historically been interpreted to consist of a risk assessment (including a cost-benefit analysis), a survey of industry standard practices, and safeguards appropriate to the organization and its product.

Compare this to the recent developments under the United States Food & Drug Administration’s (FDA) global harmonization drive: risk assessments, industry standard practice expectations, and reasonable safeguards around information integrity and validation appropriate to the organization and its product.

Seen in this light, regulatory compliance requirements are synonymous with intellectual property protection, despite differing goals. A strategy that aligns these two similar sets of requirements while incorporating the flexibility to achieve both compliance and IP security, will provide companies with long-term bottom line improvements.

In our experience, such a strategy involves six key tactics:

1. Education
2. IP liaison
3. Control checkpoints
4. Knowledge flow agreements
5. Personnel changes
6. Use of five technologies

Most organizations have some semblance of each of these in place today. By taking a more holistic, strategic approach that makes use of the processes and skills already available within an organization, plus creative use of several technologies widely available in the marketplace, a company can put this strategy into effect in less than 100 days.


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John Avellanet is the managing director of Cerulean Associates LLC, a United States, Virginia-based consultancy advising executives on cost-effective regulatory compliance, intellectual property security and information technology (www.ceruleanllc.com).
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