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Generic Drugs – The Freedom to Operate


In a recent post about contract manufacturing and IP, I discussed how Neuland doesn’t compete with clients in the generics space. A friend in Pharma subsequently asked me my thoughts on Freedom to Operate – a facet of the industry which has emerged as front and center as global pharma increasingly becomes the only Pharma we know.

FTO Critically Important to Life Sciences Firms

Pharma and biopharmaceutical firms live and die by their intellectual property. As I mentioned in that May 4th post,  the strength of a company’s IP portfolio plays a key role in its success at raising capital – the lifeblood of the pharma industry.  More than just a legal matter, Freedom to Operate is an important element of Risk Management  and directly impacts a company’s short- and long-term strategies.  Even CRO/CMO providers who don’t compete with customers (such as Neuland) must consider FTO – not only in terms of our clients and the impact on their (and thus our) pipelines, but also as it relates to our own methods development and R&D.

What is Freedom to Operate?

“Freedom to operate”, abbreviated “FTO”, is usually used to mean determining whether a particular action, such as testing or commercialising a product, can be done without infringing valid intellectual property rights of others. (Read more at PatentLens)

Do I Have Freedom to Operate?

A Freedom to Operate analysis is crucial – and is best performed before embarking down the product development path. The FTO analysis typically comes in the form of a legal opinion as to whether the product will infringe issued, pending or third-party patents. Since patents are jurisdiction- or country-specific, the FTO analysis should be geared towards regions in which the company intends to market the product.

A Pharma life sciences company may find they have the freedom to operate due to a number of factors:

  • Any related patents are not in force or have expired
  • Related patents are not in force in the intended jurisdiction (e.g., E.U., Japan, U.S., India)
  • The invention was previously disclosed in non-patent literature

Once general FTO has been established, numerous legal, IP and risk management strategies can be explored. These include: in-licensing, cross-licensing, compulsory licensing (in rare and controlled circumstances),or a combination of some or all of the above.

One issue clients face – even after an exhaustive FTO analysis – is uncertainty. FTO searches really only provide a snapshot of the legal landscape today. Non-infringement also doesn’t confer instant patentability. Patent validity is a separate (and equally complex) issue that intersects with FTO. For this reason, Freedom to Operate analyses are often carried out periodically at various stages of drug discovery, development and commercialization. For a big Pharma company perspective on FTO, here’s an interesting presentation by Dr. Stoyen Radkov, of Novartis.

How much does Freedom to Operate affect your Company’s drug research & commercialization efforts?


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