The following chapter was published in a textbook entitled Inside the Minds: Navigating Legal Issues in the Biotechnology Industry published by Thompson-West (Aspatore)

A Basic Primer For The Evaluation Of Developments In Biomedical Law

by Brett Godfrey


The Twin Gods of Economics and Finance

The legal issues of greatest import to the biotechnology industry are those that most directly impact the economics of research and development, intellectual property and risk management. Primarily, these include regulatory compliance, antitrust law and its opposing counterpart, intellectual property law and exposure to civil and criminal liability.

Advancements in biotechnology are driven by the same fundamental principles that propel innovation in any industry. Consumers desire to extend and improve the quality of their lives. Staving off death and disease, repairing genetic and developmental defects and recovering from severe injuries are universal consumer objectives. Health and longevity concerns are more urgent and intimate than most other consumer impulses. Ironically, consumers who engage in self-destructive behavior such as smoking, drug abuse and unsafe sexual practices have an even greater need than most to enjoy the benefits of advancements in science and medicine. Societies possessing the resources to surpass mere subsistence represent markets with vast profit potential for biotechnology firms.[1]

The direct economics of biotechnological advancement are influenced by new legal development in three principal ways. Addressing them in the order in which they arise in the course of technological development, the first of these are the economics of research and development, meaning the cost of developing new technologies and the extent to which the financial burden of regulatory compliance adds to the cost of bringing a new technology to market. The second is the cost of owning, protecting and defending ownership of technology, including the defense against attacks brought by others claiming to own a superior interest in a given technology. The third is the cost associated with liability to fines, civil judgments, criminal prosecution and other penalties in the event of the delivery of dangerous products into the stream of commerce. A key indirect effect of each of these is measurable in terms of the availability of funding for research, development and product release, the analysis of which is more a subject of finance than economics, and includes the cost and availability of commercial credit, stock values and insurance costs.[2]

Navigating On An Ocean Of Conflicting Interests

At the simplest and most general level, the legal issues having the greatest impact upon the biotechnology industry are those associated with the balancing of two vital but competing interests. We must preserve the financial incentives for scientific advancement while at the same time protecting the public from the hazards posed by dangerous technologies. This much is obvious. What is less obvious is the shear volume of challenges to both of these interests posed by the exponential growth rate of technology and the globalization of markets.

It is overly simplistic to assert that we must force companies to ensure that products are safe without overregulating them to the point of economic collapse. It is not necessarily true that the protection of intellectual property rights, free markets and other elements essential to science-based profit are antithetical to the development of a legal framework sufficient to protect public safety while facing a tidal wave of emerging technologies. There is undeniably a financial burden imposed upon industry by restrictive and complex regulation, as well as civil and criminal liability, yet in the absence of these we have long since passed the point in our technological growth where the outright eradication of human life is a real possibility.

Therefore, when we discuss the most “important” legal issues affecting the biotechnology industry, we must stop and ask the question: important to whom? Public benefit is measurable in terms of both the broad availability of the fruits of technological advancement and the prevention of wide-scale damage that can be arise in unregulated industries. Corporate profit as a short-term priority is often adversely affected by measures serving the public interest. As the law seeks to balance competing interests and influences, the growing complexity of the perceived problems renders the task of formulating optimized legal solutions less and less attainable, so the task becomes a statistics-driven experiment in social engineering.

Before delving more deeply into specific legal issues, in order to grasp the policy considerations that should govern the evaluation of legal initiatives, let us conduct a thought experiment. Suppose a drug company were to develop a new pill, for which we will use the made-up name Prolecia, containing millions of nano-machines called “nanobots” or “nanites” (submicroscopic robots operating at the cellular or even molecular level) to cure just about everything from cancer to neurological disorders such as Parkinson’s, Alzheimer’s and Multiple Sclerosis, cardiovascular disease, and more. The only catch is that Prolecia kills 20 percent of the patients who use it. An argument can easily be made that Prolecia should be developed, and that at least some patients should be given the option of this treatment. Now let us complicate matters further. Prolecia costs many billions of dollars to develop. Should the law be remodeled to make the development of this drug more economically viable? Regardless of how this question is answered, consider yet another complication. Because the nanites can jump from host to host, both the benefits and lethal side effects of Prolecia may turn out to be contagious, or at least potentially contagious. Individual patient choice may no longer be part of the equation, and the health impact could become global at some point after the product’s release. The human race as a whole would arguably benefit from the eradication of so many diseases (setting aside the effect of global overpopulation), but at what moral cost?

The dilemmas posed by this thought experiment are very real. Experimental medicines and technologies that carry the huge risks and rewards of our imaginary Prolecia are in development today. Who should make these decisions? Should we have global elections where the entire human race may be affected? Or should these decisions be made by administrative officials at the FDA? Should Congress or the president have the ultimate say? Interestingly, FDA approval is merely the culmination of a complex administrative process involving input and oversight on the part of institutional review boards (IRBs), which themselves are comprised of members of academia, industry and policymakers whose objectivity is frequently compromised by extensive personal bias if not outright conflicts of interest. At the other end of the pipeline, the FDA itself is a vast administrative bureaucracy governed by a regulatory scheme roughly as complex as the United States tax code. Congressional oversight is inconsistent and spotty. Investor and insurance oversight is driven by a multitude of arbitrary considerations, the wisdom of which are blunted by a lack of technological and scientific sophistication. In short, there are a nearly infinite number of cooks contributing to this stew, and no common recipe is being followed. With no single person, entity or group having control over the question of whether certain new technologies are developed, the outcome is more a matter of random chance than the product of lucid and insightful consideration on the part of well-informed policymakers.

The Law of Unintended Consequences

The foresight to predict how new developments in biotechnology will affect the public is a scarce commodity among law and policy makers. The reason for this is that new technologies are based upon the discovery of hitherto unknown principles. In the immortal words of Albert Einstein, “If we knew what we were doing, it would not be called research, would it?” Examples of this abound in the recent annals of medical research. Thalidomide developed in Germany in the 1950s, was a promising new anti-nausea and anti–anxiety medication. First marketed in 1957, the drug went into wide use shortly thereafter. In the two decades to follow, rampant numbers of severe birth defects were traced to the use of the drug. Only long-term exposure to a human consumer base revealed this aspect of the drug’s properties. Thereafter, its use was all but eradicated for many years. Today, thalidomide is used on a limited basis in cancer therapy, for it turns out that in combination with other drugs, thalidomide inhibits the growth of certain carcinomas. More recently, various non-steroidal anti-inflammatory drugs (NSAIDs), such as Celebrex and others, have been linked with an increased risk of cardiac arrest and other severe adverse effects, particularly in elderly patients. Once again, that adverse effect was arguably unknown to the pharmaceutical and regulatory community until long after the drugs were broadly marketed and distributed.

The cost of ascertaining, with certainty, how a new technology, such as a drug, radiotherapy, genetic manipulation or radiotherapy will affect all members of a large population of medical consumers can be astronomical, and the ensuing delay in delivering the new technology to the marketplace can result in needless suffering and death. Terminally ill patients can benefit from experimental technologies without much to lose, so the balancing of interests in the delivery of those technologies has led to fast-track approval procedures in use by the FDA. The argument favoring those procedures is superficially logical but inherently callous: if a new medicine kills a patient who was going to die anyway, little is lost and the risk is justified. The problem with this logic is that it can be extended to cover almost any scenario involving a promising new treatment.

The balancing of interests inherent in the formulation of an optimum policy to govern such situations is complicated by the question of whether other efficacious treatment modalities are available. In other words, should a risky new cancer treatment be made available to patients who could obtain some degree of benefit, including extended life expectancies, from existing and potentially less risky technologies?

Human Experimentation And Risk Management

The risk-sharing mechanism of liability insurance is a solution used by most modern societies to create financially viable means of addressing the inherent inequities and social costs associated with activities that are viewed as fundamentally valuable and necessary, but unavoidably fraught with a degree of risk of harm. More than 10 million people are killed each year in automobile accidents in the United States alone, yet we continue to operate automobiles and trucks on America’s roadways, having made the decision that this large number of fatalities is justified by the benefits of that portion of our transportation infrastructure.[3] The vast majority of states have enacted mandatory insurance laws with which all drivers must comply. Many of those “financial responsibility acts” are predicated upon a recognized public policy of avoiding inadequate compensation to victims of motor vehicle accidents. Similarly, a large number of states have enacted mandatory insurance requirements applicable to healthcare providers, including clinical practitioners and hospitals to serve these same goals within the healthcare industry. Many doctors complain of the difficulty of obtaining affordable malpractice coverage, which is noticeably less readily available than automobile insurance.

Biotechnology companies face an even greater difficulty in obtaining adequate insurance coverage to protect against the liability risks associated with the development and marketing of new drugs and devices. Few insurers offer comprehensive liability insurance to these developers, though most of the larger insurers offer a line of “life sciences” policies which, unlike standard commercial general liability insurance, are tailored to the larger and more complex risks of this specialized market. The “risk appetite” for this aspect of the insurance market is generally limited to those larger and more specialized insurers who have the expertise to evaluate the specialized underwriting risks inherent in biotechnology industries, and these companies offer policies with larger liability limits and fewer exclusions, but at a substantially increased cost. Arguably, most biotechnology companies are underinsured without such specialized insurance coverages. The premium costs of these insurance products constitute a noticeable component of the cost of doing business in these fields.

It is virtually impossible for medicine to advance in the absence of experimentation. The economic and social forces driving medical advancement are compelling, yet there is something fundamentally abhorrent about the notion of submitting unwilling or unwitting patients to medical experimentation. Echoing the atrocities of Nazi doctors, such activity carries with it an overtone of sheer cruelty. The dichotomy of these powerfully opposing interests has been managed by society and different ways in the United States during the past hundred years or so. For a time, medical experiments were carried out on prisoners in the penal system or members of the Armed Forces, ostensibly based upon the notion that these people, through crime or conscription, had consigned their bodies to the state.

For example, from 1919 through 1922, state-sponsored testicular transplant experiments were conducted on 500 inmates at San Quentin. From 1941 through 1945, Nazi doctors experimented on prisoners in concentration camps, injecting them with live typhus. At the same time, from 1942 through 1944, the US Chemical Warfare Service conducted mustard gas experiments on several hundred troops. In 1945, as part of the Manhattan Project, three patients at Billings Hospital at the University of Chicago were injected with plutonium. From 1953 through 1960, the CIA experimented with LSD on hundreds of patients at more than 80 facilities as part of a brainwashing research project code-named “MKULTRA.” In 1962, the drug thalidomide was withdrawn from the market after thousands of birth deformities were blamed, in part, on misleading results of animal studies. Thereafter, the FDA required three-phase human clinical trials before drugs could be released into the marketplace.

The human body has a natural tendency towards self-regulation and stabilization known as homeostasis. The regulation and equilibration of each of the major body systems (such as the nervous system, the cardiopulmonary system, etc.) can be traced at its lowest level to molecular interactions among proteins. All human tissue functions at a cellular level, and cells operate and communicate through the production of specialized proteins through a process called transcription. Modern pharmacology research delves ever more deeply into the relationship between the structure of the human genome (the genetic blueprint that defines the manner in which cells produce proteins) and protein interactions. Other chemicals that affect behavior in living tissue are also studied at the molecular and atomic levels. Because the matrix of cause and effect relationships between and among each living system and subsystem is so complex, it is not yet possible for scientists to evaluate the molecular structure of a compound and predict its effect upon an organism as complex as an amoeba, much less a human, without direct experimentation. This leaves no choice but trial and error. For the sake of practicality in business, the phrase error is deleted, and we are left with the term clinical trials.

As social consciousness has risen in this country, involuntary experimentation upon military service members and prisoners has declined, and the necessary subjects have instead been recruited from a population of volunteers. Recruitment of these volunteers has become ever more difficult in the shadow of highly publicized clinical trials litigation, but continues at an ever increasing pace. Estimates suggest that about 7 million people participate in clinical trials funded by the National Institute of Health, with more than 12 million subjects participating in private trials annually, bringing the number of Americans upon whom experiments are performed in a clinical context to 20 million or more.[4]

What are the rights of clinical trials subjects? The question generally devolves to a legal issue, which is the sufficiency of informed consent obtained from the subject prior to the commencement of the trial, and the adequacy of disclosure to the FDA prior to the commencement of human clinical trials research. Litigation often focuses on whether the disclosure of risk attending the process of obtaining informed consent was adequate, or whether the consent process placed “form over substance,” constituting the acquisition of signatures on fine-print forms without explanation. Disclosure of specifically known risks, ensuring true understanding on the part of the subject before signature is given, is the only way to ensure that the subject’s exposure to those risks is truly voluntary. In some cases, it has even been argued that the subjects were known to be lacking sufficient literacy to read and understand the forms they were asked to sign before commencement of experimental treatments.

Convergence and The Future of Biotechnology

In the mind of this author, the three “hottest” emerging biotechnologies are genetic engineering, nanotechnology and artificial intelligence. Altering the cellular and genetic structure of living things and the creation of artificial intelligence are now within man’s technological reach, yet man may lack the wisdom to handle such abilities safely. The law of biotechnology is no longer an insular field, yet the law as a whole is the only means by which society can control the pace and direction of this development. We are in uncharted waters, yet legal scholars, lawyers, judges and lawmakers, as well as regulators and administrators are charged with the responsibility to manufacture reliable “maps” in the form of policy, law and regulation, to protect  the rest of us.

A hundred years ago, no one would have predicted that research in high-energy particle physics (then a purely theoretical form of research based upon mathematics alone) could lead to effective cancer treatments. Today new advances in convergent-beam radiation therapies are routinely used in the treatment of inoperable brain tumors. Much of yesterday’s science fiction has already become fact. There are so many examples of this that a complete listing of the new biotech developments made only this past year would easily fill several volumes. There will be even more developments next year, and still more the year after, for the growth of technology is exponential and will likely remain so for as long as we find a way of avoiding the collapse of society or the extinction of our species.

The coalescence of new technologies has a synergistic effect on the evolution of medicine, agriculture, the cosmetics industry, computing and a host of other disciplines. The era of individual, earthshaking discoveries may be waning in favor of the manner in which previously unrelated technologies have come together to produce whole new applications. For example, the mapping of the human genome and related genetic research have affected not only our ability to modify the genetic structure of crops, but also to understand the manner in which those modifications lead to adverse and unforeseen outcomes in human consumers, as well as the animals they consume. Some believe that several years of genetic engineering to increase the resiliency of wheat to insect attacks has resulted in the wholesale contamination of the world wheat supply — making wheat that insects cannot digest has led to the production of wheat that many humans also cannot digest; accordingly, some believe that gluten allergies and sensitivities are becoming epidemic.

The use of mobile devices was long thought to carry potential risk in the form of radiation-induced brain cancer or other malignancies. Now, smart phones are expected to gradually take the place of physicians and physician assistants in the evaluation, diagnosis and monitoring of a variety of diseases, including diabetes, cardiac disease and even mental disorders such as depression and schizophrenia. As the biometric sensors of such devices become more sophisticated, they will be able to provide real-time telemetry of vital signs, blood chemistry and even brain wave activity to healthcare practitioners and, possibly, artificially intelligent medical management systems that interact with healthcare insurers and their subordinate physicians. It is not a stretch to consider that the technologies someday used to make molecule-sized multiprocessor chips for computers could result in the unwitting release of new toxins and dangerous microscopic machines, or that the cultivation of new forms of bacteria for the production of powerful new antibiotics could cause the next global plague.

Human genetic manipulation, whether accomplished by nanotechnology, viral vectors[5] or stem cells (noting that a variety of additional technologies for the mechanical revision of DNA are under development), carries with it the potential to radically alter the fundamental makeup of the human species. As in the fictitious example discussed above, nanotechnology carries with it the ability not only to substantially modify the body at the cellular or even genetic level, nanotechnology, particularly when based upon the use of self-replicating nanites, opens the door to entirely new kinds of epidemics, as self-replicating nanomachines operate in much the same way as viruses. For this reason, the epidemiological considerations associated with evaluation of new medical technologies have become much more prominent in recent years. Before man was capable of engineering viral structures, the worst he could do was to intentionally spread existing diseases such as anthrax in the practice of biological warfare, which surprisingly dates back to the days of the early Egyptians, who used anthrax to contaminate the livestock of invading enemy forces.

One aspect of the synergistic effect of converging technologies is that regulatory authorities of limited subject jurisdiction are often stymied by the sophisticated combinations of experimental new methods. For example, the FDA does not generally oversee the use of electronic devices such as smart phones equipped with biometric monitors, nor does it invade the province of the Department of Agriculture, which oversees the husbandry of livestock and the cultivation of crops. The Centers for Disease Control have traditionally had little interaction with The Federal Communications Commission. Until recently, the Federal Aviation Administration devoted little attention to the worldwide spread of disease, concentrating instead on the safety of air travel from the standpoint of avoiding air crashes. To some degree, each of these agencies is potentially responsible for some areas of activity within the subject matter of the others in view of the manner in which the various activities within their respective domains interact to produce potential large-scale risks to the public. An epidemic that arises from a genetically engineered virus that was intended to be a vector for the delivery of a genetic therapy could spread through global commerce to all nations of the world. Returning to our doomsday example relating to nanotechnology, the use of nanomachines to remedy cardiovascular disease such as arterial plaque could result in a communicable infestation of the self-replicating machines, which could infest other humans, crops and livestock to irreversibly contaminate the world food supply.

Once such a Pandora’s Box is opened, there may be no going back. Once one of these threats emerges to inflict its agonies upon the world, it may be a race against time to find a solution that is not itself even more threatening. Avoidance is the solution, but who wants to slow progress, when the world is so full of sickness, suffering and death? As a species, we simply have not faced these problems in a real way at any time in the past. The time to do so is now.


Law must equal in sophistication those dilemmas it purports to resolve. Complex technologies entail bewildering causal relationships that simplistic efforts to achieve fairness. As the fruits of medicine, science and engineering grow less intuitive, the implementation of justice demands enhanced understanding which transcends legal precedent.

The coming era will present legal issues demanding solutions of greater ingenuity than any of the past. Ancient principles of common law often fail to apply when issues of modern intricacy are adjudicated. Our constitution, laws and treaties must be applied in order that we may equitably confront that which our inspired forefathers could not divine.

The sagacity to realize this goal must come not from our scientists or industrialists, but rather from those who pass and administer our laws. The wisdom demanded by this task will derive from reason enlightened by sophisticated advocacy.



[1] Societies lacking the requirements for basic survival, such as clean drinking water, adequate nutrition and shelter, as markets with limited profit potential, offer little financial incentive for corporations to commit research, development and marketing resources to deal with these issues, and cynics point out that solutions to those problems would merely contribute to the worldwide health risks posed by global overpopulation. For this reason, global health initiatives, such as those associated with prevention or containment of pandemic and epidemic threats, are generally not self-funding.

[2] Somewhat removed, but superficially similar issues relate to the economics of healthcare and health insurance, medical decision-making and patient rights, but these topics are beyond the scope of this discussion as they relate more to health care than biotechnology.

[3] Source: U.S. National Highway Traffic Safety Administration, Traffic Safety Facts, annual. See also,

[4] Dan Vergano, Drug Trial Deaths “Go Unreported,” USA Today, November 8, 2000, at D12.

[5] Viruses are capable of delivering genetic material into the nucleus of cells, and are therefore promising as a tool for the injection of new genetic instructions into living systems. These delivery systems are referred to as “vectors.”