• A complicated legal fight over the Food and Drug Administration's approval of the abortion pill mifepristone could stifle innovation in the biopharma industry.
• If courts affirm U.S. District Judge Matthew Kacsmaryk's decision to suspend the FDA's approval, it could make way for more lawsuits challenging the agency's decision-making related to existing and future drugs. 
• That could deter investments in the development of life-changing drugs, biopharma companies and experts in law and economics said.

A messy legal fight over the Food and Drug Administration's approval of the abortion pill mifepristone poses risks to the biopharma industry that go beyond the single drug.

If a subsequent decision tosses out the pill's approval, it could potentially stifle innovation in the sector and deter investments in the development of life-changing drugs, biopharma companies and experts in law and economics say. 

The ruling Friday by U.S. District Judge Matthew Kacsmaryk of Amarillo, Texas, appears to be the first time a court has suspended the FDA's approval of a medication. The 5th U.S. Circuit Court of Appeals late Wednesday partly granted the Biden administration's request to put the order on hold, making mifepristone available for now but with significant restrictions. 

The Justice Department will seek emergency intervention from the U.S. Supreme Court, it said Thursday.

Nationwide access to mifepristone still hangs in the balance as the case and a similar one in federal court in Washington state both appear likely to escalate to the Supreme Court.

Biopharma companies and experts told CNBC that the legal fight could give way to more lawsuits challenging the FDA's decision-making related to existing and future drugs. 

That outcome would bring uncertainty to a regulatory framework that drugmakers rely on during the expensive and lengthy process of developing medications, they told CNBC. 

"Innovation flourishes in an environment of predictability. Companies know what it is they have to prove and to whom they have to prove it," said R. Alta Charo, a professor emerita of law and bioethics at the University of Wisconsin at Madison. But, she said, Kacsmaryk's decision undermines the FDA's regulatory authority and creates a "very unpredictable kind of environment." 

Drugmakers would have to wrestle over the possibility that a federal judge could decide to invalidate the FDA's approval of their medication at any point, said Darius Lakdawalla, a pharmaceutical economics professor at the University of Southern California. 

He said that kind of legal fight could have an effect similar to that of a drug's patent expiring, which reduces the medication's time on the market and typically translates to a decline in a company's revenue. 

A potential legal challenge is a "risk that effectively reduces the economic incentives of bringing drugs to the market," Lakdawalla said. He said it could cause companies and investors to funnel less money into drug research and development. 

"Pharma companies might restrain their spending and investors might inject less money into the industry because of a reduction in their expected revenues and returns," he told CNBC. 

More than 200 biopharma companies made a similar claim Monday in an open letter calling for the reversal of Kacsmaryk's decision. Developing a drug is already a huge gamble in the industry, they emphasized in the letter. 

"Adding regulatory uncertainty to the already inherently risky work of discovering and developing new medicines will likely have the effect of reducing incentives for investment, endangering the innovation that characterizes our industry," the companies wrote in the letter. The number of companies grew to more than 600 as of Thursday morning, and included top executives at Pfizer, Biogen and Merck. 

Drug companies can invest anywhere from a few hundred million dollars to more than $2 billion to bring a new medicine or vaccine to the U.S. market. That hefty cost is accompanied by an extremely lengthy development process — points the industry has often stressed during debates with lawmakers over how to cut lofty drug prices for consumers. 

It takes at least 10 years on average for a new drug to reach the marketplace after its initial discovery, according to PhRMA, the primary lobbying arm of the pharmaceutical industry. Clinical trials alone take six to seven years on average. 

Yet the likelihood of a drug coming out on the other side of the FDA's rigorous review process is less than 12%, PhRMA estimated.

Paul Hastings, the CEO of Nkarta Therapeutics, acknowledged that seeking drug approval is a grueling process that often ends in rejection. The biotechnology company works to advance the development of cell therapies for cancer. 

But Hastings said biopharma companies still respect the FDA when the agency turns down their drugs. He noted that the approval process is "fully vetted" and "robust." 

Hastings was among the biopharma executives who first issued the open letter. He said the industry is "going to have trouble" if Kacsmaryk's ruling is ultimately upheld. 

"If a non-scientific, politically motivated state judge can overturn a regulatory process of assessing the safety and efficacy of a drug, that will affect how people will look at investing in this industry versus other industries where you don't have people making these kinds of politically motivated judgements," Hastings told CNBC. "It could be disastrous." 

But Hastings said he believes the FDA could prevail in the legal fight, which he said could take time and more action from the biopharma industry. 

"It will definitely take the 500 signatures, the amicus briefs challenging this," he said. "We will continue to be relentless about this because at the end of the day, what is right is right, what is wrong is wrong. We will continue to fight to ensure patients get access to lifesaving medicines."

ReCode Therapeutics CEO Shehnaaz Suliman, who issued the open letter alongside Hastings, highlighted the "unprecedented show of support and galvanizing of an entire industry" around Kacsmaryk's challenge of the FDA's approval. Pfizer-backed ReCode is a genetic medicines company that specializes in mRNA and gene correction therapeutics. 

Suliman offered a more hopeful take on how the legal fight could affect biopharma innovation. 

"It may have the opposite effect, which is to even further embolden people to invest in innovation to stand by FDA authority and to continue to funnel funds into the innovation ecosystem," she said.