[Ip-health] WSJ: Drug Firms Face Growing Pressure Over Extensions of Their Patents

[Mike Palmedo]

http://online.wsj.com/article/0,4286,SB1016488062225991680-generic,00.html?collection=wsjie/30day&vql-string=(generic)<in>(article-body)

Drug Firms Face Growing Pressure
Over Extensions of Their Patents

By CHRIS ADAMS and GARDINER HARRIS 
Staff Reporters of THE WALL STREET JOURNAL


WASHINGTON -- Republican Gov. William Janklow of South Dakota bows to no
one as a fan of business and the profit motive -- except when it comes
to drug companies. They are "gouging people," he says flatly.

Mr. Janklow is among 10 governors from both parties, tired of high
prescription-drug costs burdening states' Medicaid budgets, who have
joined a fight to block patent extensions for lucrative brand-name
pharmaceuticals. The National Governors Association also surprised drug
companies last month with a policy statement calling for congressional
hearings.

The governors' backing of a coalition of employers and unions -- dubbed
Business for Affordable Medicine -- is making possible the once-unlikely
prospect of a major overhaul of the 1984 generics law that opened a
wider door to cheap generic drugs.

Even some within the brand-name industry wonder if some changes aren't
needed. The 1984 law that essentially gave birth to the modern generics
industry, known as Hatch-Waxman for its main congressional sponsors,
also permitted brand-name drug-makers a slew of defenses to slow or
block the introduction of generic competitors.

Executives at three of the top 10 manufacturers -- Merck & Co.,
Pharmacia Corp. and Eli Lilly & Co. -- have expressed concern about
other companies' aggressive patent-extension tactics. Worried that
perceived abuses could lead to a broader dismantling of their patent
protections, they privately suggest they could support a crackdown
against some techniques to extend patents.

But such sentiments are being drowned out by the rest of the industry,
which fears any bill that opens up Hatch-Waxman. The brand-name industry
overall insists the law's protections provide the financial incentives
the companies need to keep doing costly research.

The industry also has invested a lot in campaign contributions and
lobbyists, and has been able to thwart the generics industry's past
attacks. Even some pro-generic lawmakers, including the statute's
original sponsor, Democratic Rep. Henry Waxman of California, are leery
of seeking pro-generic changes because of concern that brand-name
companies would manage to make the law more favorable for themselves.

President Bush hasn't addressed this issue and right now has no plans
to, spokesman Scott McClellan said. But he added, "If Congress also has
ideas about ways to lower drug prices by increasing competition, then
those ideas should be looked at as well."

The National Governors Association called for congressional hearings on
whether brand-name drugmakers are manipulating the patent system to keep
generics rivals at bay. "I think people are entitled to their patents,
but I also think you have to play by the rules in life. If you don't,
that's cheating, and that's what's happening right now," Mr. Janklow
says.

Democratic Gov. Howard Dean of Vermont, a doctor, spearheaded the
governors' effort, but the participation of Republican Govs. Janklow and
Mike Foster broadened its reach. One hope is that Mr. Foster can win
over his fellow Louisiana Republican, Rep. Billy Tauzin, chairman of the
House Energy and Commerce Committee, which has jurisdiction over the
law.

That is far from assured: A Tauzin aide says "it's too early to tell how
this will play out," but adds that the chairman would prefer to address
high drug prices "without reopening Hatch-Waxman." On the Senate side,
Massachusetts Democrat Ted Kennedy, the Health, Education, Labor and
Pensions Committee chairman, hasn't put it among his priorities either.

But with many states facing budget deficits, the governors complain that
patent extensions are adding big bucks to their Medicaid costs.

Vermont's Gov. Dean says states could end up paying an extra $600
million a year if companies get extensions for all 17 drugs with patents
expiring between now and 2004, based on the calculations of state
Medicaid directors. Mr. Foster joined the coalition after estimates that
Louisiana would pay an extra $10.6 million next year alone -- and after
complaints about rising drug costs from one of Louisiana's big
employers, Georgia-Pacific Corp.

Pharmaceutical Research and Manufacturers of America, the brand-name
companies' trade group, recently issued a blistering statement vowing to
oppose the generics industry's attempt at "the theft of innovation,"
promising to use "every ounce of strength ... we can muster." Changing
the law, it warned, would be a "devastating blow to America's patients,"
jeopardizing drug safety.

Since the 1984 law's passage, generics manufacturers' share of drugs
sold, by volume, has risen to 49% last year from 19% for 1984, PhRMA
says. "Hatch-Waxman has largely worked," says spokesman Jeff Trewhitt.
Generic-drug companies say that long-term market trend is beside the
point. What matters, they say, is that their market penetration has
stagnated during recent years as brand-name companies got increasingly
aggressive at getting their patents extended.

Moreover, "if you look at the ones they fight on, it's the massive
blockbusters that can save everybody a lot of money," says Jake Hansen,
vice president of government affairs for Barr Laboratories Inc., of
Pomona, N.Y.

Under Hatch-Waxman, a generic-drug maker has to show federal regulators
that its product has the same active ingredients and other properties as
the existing brand-name drug. If so, it can bypass the sort of costly
clinical research and animal tests that the brand-name company
originally performed.

But what especially rankles the generics makers is that, if a generic
drug is headed to the market, a brand-name company can cite its patent
listing in the Food and Drug Administration's "Orange Book" to raise
challenges. That delays the generic drug's entry for as many as 30
months while the fight is decided. According to generics companies,
brand-name makers file frivolous Orange Book patents.

Brand-name manufacturers also commonly file so-called citizen petitions
raising safety questions about a potential competitor. While drug makers
say the petitions are filed in good faith on serious patient-safety
issues, between 1990 and 2000, 80% were substantially rejected by the
FDA or were withdrawn; meantime, the generic versions were delayed.

Democratic Sen. Charles Schumer of New York and Republican Sen. John
McCain of Arizona last year introduced a bill to block such tactics. For
instance, it would require citizen-petitioners to better substantiate
their challenges, and to prove they aren't raising questions for
anticompetitive reasons. The bill failed to make it to a committee vote.
Last week, officials from several insurance and consumer groups met with
staffers from four congressional offices -- two in the House, two in the
Senate -- to discuss strategy for passing the bill.

Meanwhile, supporters hold out hope that lawmakers in an election year
may end up scurrying to find ways to help lower drug costs for retirees.
Chris Jennings, a former health-policy adviser to President Clinton who
now is a consultant to the generics industry, says optimistically of
lawmakers' calculus, "If you haven't delivered on a drug benefit, you
need to have done something on cost containment."