Senate, courts debate legality of patent settlement deals
NEW YORK —For all its successes, the generic drug industry has had a lot to worry about this year. Its main lobbying organization in Washington, the Generic Pharmaceutical Association, gained a pyrrhic victory with the creation of an abbreviated approval pathway for follow-on biologics in the healthcare-reform bill—the pathway is now law, but with a much longer period of data exclusivity for innovator biologics than the group hoped for—while Teva Pharmaceutical Industries left the organization, as did former president and CEO Kathleen Jaeger. Now, on top of that, one of its most important legal assets is under fire with the hair-thin passage of a ban by a Senate committee two months ago.
Generally, companies seeking to market generic versions of drugs before the expiration of the patents protecting the branded drugs have done so by filing regulatory approval applications containing a paragraph-IV certification, a legal assertion that the patents covering a branded drug are invalid, unenforceable or won’t be infringed by a generic version. When this happens, the branded drug maker will sue the generic drug maker, but the cases often result in a settlement between the two parties that allows the generic drug maker to launch its product after waiting a while, but usually before the patent expires.
For generic drug makers and the GPhA, this is a way to get generic drugs on the market earlier than they would if the cases went to trial or if the generic companies waited until all the patents had expired, as well as a way to avoid the costly legal fees of going to trial. Not only that, but the first company to get the generic version of a drug on the market gets six months in which to directly compete with the branded version, which has been a tremendous source of profit for generic drug makers over the years. But for the Federal Trade Commission, such politicians as Sen. Herb Kohl, D-Wis., and the editorial board of The New York Times, the settlements are sneaky “pay-for-delay” deals in which branded and generic drug makers, normally competitors, conspire to keep cheaper alternatives to expensive branded drugs out of patients’ hands.
The latest political blow to patent settlements came in July when the Senate Appropriations Committee passed a ban on them by a 15-to-15 vote. “The anti-consumer provision was slipped into the Financial Services and General Government appropriations bill in the latest attempt to move forward legislation that has been unable to pass as a freestanding bill,” a GPhA statement in response to the passage read. “Forcing policy changes into an appropriations bill is a procedural facade with highly negative impact; it will result in fewer generics medicines coming to market prior to patent expiration.”
According to a report released in January by RBC Capital Markets, over the last decade, generics companies have prevailed in 48% of patent litigation cases that have gone to trial but in 76% of cases when settlements are included, while more than half of all cases are settled or dropped. Meanwhile, the FTC contended that patent settlements cost consumers $3.5 billion per year and keep generic drugs off the market for an average of 17 months longer than when deals don’t include payment.
But the term “pay-for-delay” might be misleading, however. Under the law, the GPhA’s Jaeger told Drug Store News in an interview earlier this year, a generic drug company is forbidden from delaying launch after the patents covering the branded drug have expired. In addition, the “payment” often isn’t in the form of money, but in the form of an agreement by the branded drug maker not to launch a so-called “authorized generic.” An authorized generic essentially is a branded drug marketed under its generic name, usually through a third-party company, which would give the branded drug company an extra weapon in its marketing arsenal by providing a competitor to the actual generic drug during the latter’s customary six months’ exclusivity. The FTC has spoken in favor of authorized generics, saying they help keep drug prices down overall, while the GPhA opposes them.
But soon after the Senate committee’s political punch in the nose came a legal ice pack. The U.S. Second Circuit Court of Appeals in New York declined Sept. 7 to reconsider a ruling made earlier this year in favor of Bayer and Teva Pharmaceutical Industries subsidiary Barr Labs concerning the companies’ settlement over the anthrax treatment Cipro (ciprofloxacin), affirming that the deal did not violate antitrust laws.
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Re-evaluating Chinese currency remains a bad idea
WHAT IT MEANS AND WHY IT’S IMPORTANT Herbert Hoover is alive and well — and picking up his prescriptions at the local drug store.
(THE NEWS: Retailers urge Congress to reject Chinese currency legislation. For the full story, click here.)
Of course, he isn’t. But if he were, he might have some advice to offer current members of Congress and occupants of the White House based on his experience with the Smoot-Hawley Tariff Act of 1930, which attempted to rescue the U.S. economy by imposing tariffs on imported goods, but instead ignited a trade war that many historians blame for deepening the Great Depression.
The legislation to impose tariffs on Chinese imports as a way to force it to revalue the yuan is based on the assumption that China manipulates its currency to make its manufactured goods more competitive in the U.S. market. Thus, the reasoning goes, if China were to revalue the yuan, it would help American manufacturers by making Chinese imports more expensive and American goods more competitive in China, thereby helping to ease the U.S.-China trade deficit, which totaled $226.9 billion last year and has so far reached more than $145 billion this year, according to U.S. Census data.
But it’s not that simple. In 1930, the United States manufactured most of its own consumer goods; but that’s no longer true, and the bulk of consumer goods, from toys to digital cameras, now come from China. Also frequently lost in the melee is the fact that most of the supposedly Chinese goods are not Chinese at all, but rather products with American, Japanese, Korean and European brands that are assembled in China. Unlike in the 1970s and 1980s, when such Japanese companies as Sony were eating the lunch of such American counterparts as General Electric, the “Made in China” label now graces the products of both.
For that reason, if legislators imposed big tariffs on Chinese goods or if China dramatically revalued the yuan, it would simply force retailers to pass the extra costs to consumers. So after picking up his prescriptions, Hoover would find the digital camera he had planned to buy from behind the counter noticeably more expensive. While this would not likely lead to another Great Depression, it would certainly diminish consumers’ purchasing power.
As for the manufacturing jobs, many experts have said they would simply migrate to cheaper countries rather than returning to the United States. This trend already is under way in textiles, as many clothing companies have started moving factories from China to such countries as Bangladesh in response to the increasing costs of manufacturing in China.
Perrigo seeks approval for generic Zegerid OTC, Schering-Plough files suit
ALLEGAN, Mich. Perrigo has filed for regulatory approval of a generic version of an over-the-counter medication for frequent heartburn, prompting a lawsuit from the branded version’s manufacturer.
The company announced Friday that it had filed for approval for omeprazole and sodium bicarbonate in the 20 mg/1,100 mg strength. The medication is a generic version of Zegerid OTC, made by Schering-Plough HealthCare, a subsidiary of Merck.
Schering-Plough filed a lawsuit Monday alleging patent infringement in the U.S. District Court for the District of New Jersey to prevent Perrigo’s commercialization of the product.
Zegerid had sales of around $60 million during the 12-month period ended in the “most recent month,” according to SymphonyIRI Group.
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