[Ip-health] New York Times: A Generic Drug Tale, With an Ending Yet to Be Written

[Thiru Balasubramaniam]

August 15, 2006


  A Generic Drug Tale, With an Ending Yet to Be Written

By STEPHANIE SAUL
<http://topics.nytimes.com/top/reference/timestopics/people/s/stephanie_sau=
l/index.html?inline=3Dnyt-per>

The opening chapters of a draft autobiography sit amid the hundreds of
pill bottles and mound of legal documents in Bernard C. Sherman=92s
office. It will be the story of a brainy kid born in Toronto who becomes
Canada=92s richest generic drug mogul.

Though a work in progress, it has the makings of a page turner. One
chapter will recount how an employee from a brand-name drug company
offered to sell him secret files. Another, he says, will describe how
Mr. Sherman caught a rival stealing the recipe for a blockbuster generic
developed by his company, Apotex.

But what promises to be the book=92s most riveting chapter is still
unfolding. It is the part where Mr. Sherman seemingly outsmarts two big
drug companies, Bristol-Myers Squibb
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=3Dhttp://custo=
m.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=3DBMY>
and Sanofi-Aventis
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=3Dhttp://custo=
m.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=3DSNY>,
to market the first generic form of the big-selling drug Plavix five
years before its patent expires. And it could conceivably end with
someone in jail.

=93They couldn=92t see that maybe certain things were going to end them up
in prison,=94 Mr. Sherman said last Friday during an interview in the
Toronto building where his generic Plavix copy is being made.

Despite his reputation as a shrewd, combative businessman, Mr. Sherman
looks every bit the scientist with wiry gray hair, glasses and a pallor
suggesting he rarely spends time outdoors. His white lab coat bears his
nickname, Barry.

The Justice Department is investigating whether Bristol-Myers and Sanofi
tried to conceal from authorities part of a deal they were negotiating
with Mr. Sherman to settle a lawsuit to decide the validity of their
patent. That deal, subject to federal and state approval, would have
preserved the companies=92 lucrative monopoly for five more years and kept
Plavix prices high.

Mr. Sherman contends =97 and letters he mailed to Congress in July seem to
support him =97 that he negotiated the settlement on the assumption that
the Federal Trade Commission and state attorneys general would never
approve it. Mr. Sherman says he negotiated only to extract favorable
concessions from Bristol-Myers and Sanofi that would take effect even
without the government=92s approving the deal.

Leveraging those concessions, Mr. Sherman=92s company began shipping its
version of Plavix in the United States last Tuesday, after government
regulators did indeed reject the patent settlement.

By the end of last week, Mr. Sherman said that hundreds of millions of
dollars=92 worth of his generic Plavix was on the United States market,
potentially undermining the brand-name product, which had American sales
of $3.5 billion last year.

Apotex=92s generic version is selling for about 10 to 20 percent less than
typical $4-a-day Plavix, which is widely used to prevent recurrences of
heart attacks and strokes. Bristol-Myers announced yesterday that the
company was giving rebates to its customers in an attempt to counter
Apotex=92s generic price

Bristol-Myers and Sanofi, which say they have done nothing improper,
filed for an injunction against Apotex in federal court in Manhattan
yesterday, seeking to block further sales of the generic drug.

In an e-mail message to Bristol-Myers=92s 43,000 employees worldwide, the
chief, Peter R. Dolan, said that if the legal steps failed to protect
the Plavix patent, the generic incursion might jeopardize financing for
additional clinical trials of the drug. It could also lead to
=93potentially irreversible price decreases, customer good will impact and
potential layoffs,=92=92 Mr. Dolan wrote.

A Lehman Brothers
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m.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=3DLEH>
analyst, C. Anthony Butler, said yesterday that Bristol and Sanofi had a
better than 50 percent chance of winning the court injunction. But Mr.
Sherman insists that the odds are in his company=92s favor.

In an interview at Apotex=92s stainless steel and glass headquarters in
Toronto, Mr. Sherman declined to provide many details about the
investigation, saying he expected to testify before a federal grand jury
in Washington in September or October.

But he hints that there are incriminating e-mail messages and maybe
other documents that may be the reason federal agents searched
Bristol-Myers=92s offices on Park Avenue in Manhattan last month.

In a court hearing on Aug. 4, a lawyer for Bristol-Myers and Sanofi,
Evan R. Chesler, accused Mr. Sherman of sabotaging the patent deal by
giving false information to the government, which set off the criminal
investigation.

=93All I know,=92=92 Mr. Sherman said, =93is whatever I=92m saying to the
authorities is the truth and the whole truth.=94

Meanwhile, high-volume production of clopidogrel, the generic name for
Plavix, is continuing at Apotex=92s headquarters and at another sleek
manufacturing plant in Toronto. In a 13 hours last Friday, the company=92s
mechanized manufacturing line churned out four million of the pink tablets.

As the founder of Canada=92s largest pharmaceutical company, with more
than 5,000 employees, Mr. Sherman is among the country=92s richest men
with a net worth that magazines estimate at nearly $4 billion. He and
his wife, Honey, give millions to charity each year. The Shermans have
four children, two who say they are interested in joining the business.

=93I don=92t even know what I=92m worth,=94 Mr. Sherman said. =93It=92s a p=
rivate
company.=92=92 But he added with a wry smile: =93It=92s worth more today th=
an it
was last week. I can tell you that.=94

Mr. Sherman said that his company=92s sales, more than $1 billion last
year, could almost double if the marketing of generic Plavix went well.

Mr. Sherman, 64, grew up in Toronto and studied at the Massachusetts
Institute of Technology
<http://topics.nytimes.com/top/reference/timestopics/organizations/m/massac=
husetts_institute_of_technology/index.html?inline=3Dnyt-org>,
receiving a doctorate in astronautics. But he had no career plan.

=93I was lost in terms of what I wanted to do,=94 he said.

He decided to follow in the footsteps of his uncle, who had a small
generic drug company in Canada and died while Mr. Sherman was at M.I.T.
After acquiring and running his uncle=92s company, he started Apotex in
1974 in a 5,000-square-foot building with used equipment.

=93The first tablet
<http://tech2.nytimes.com/gst/technology/techsearch.html?st=3Da&query=3Dtab=
let&inline=3Dnyt-classifier>
press was bought used for a couple hundred dollars,=94 Mr. Sherman
recalled. =93I did everything in those days from cleaning the floor to
writing the checks.=94

Yet, the climate for generic drug makers was hospitable in Canada, with
its universal health care programs. A compulsory licensing law made it
easier for generic companies to manufacture and sell medications that
were still under patent.

In 1980 Apotex became the first company to sell a generic version of
Inderal, then a popular drug for high blood pressure
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopic=
s/bloodpressure/index.html?inline=3Dnyt-classifier>
and heart problems.

=93That gave us the funds necessary to invest and to continue to grow,=94
Mr. Sherman said.

Another big step came in 2003, when the company was the first to market
a generic form of Paxil, the antidepressant sold by GlaxoSmithKline
<http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=3Dhttp://custo=
m.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=3DGSK>.
That was an =93at-risk launch,=94 industry jargon meaning that the generic
company sells its drug before patent litigation is concluded.

Mr. Sherman=92s company ultimately won the Paxil patent litigation. The
episode gained him a reputation as someone who was willing to expose his
company to large financial damages in the event he lost a patent case.

In one of the concessions he wrested from Bristol-Myers and Sanofi,
though, the companies agreed to waive their right under federal law to
seek triple financial damages if they should ultimately prevail against
Apotex in the Plavix patent dispute.

Mr. Sherman is no stranger to controversy. In 1995, an offshore
mail-order drug company tied to Mr. Sherman ran afoul of United States
regulators for selling drugs in the United States without approval. The
company pleaded guilty to shipping unapproved drugs and was fined
$500,000. Mr. Sherman says that his only role in the company was to
supply the drugs and that neither he nor Apotex did anything unlawful.

In 1998, a University of Toronto physician who was conducting clinical
research on an Apotex drug to treat a rare disorder called thalassemia
accused the company of suppressing results that indicated problems with
the drug. Mr. Sherman agreed to be interviewed on =9360 Minutes=94 to defen=
d
his company.

Because the broadcast segment included Mr. Sherman calling the
researcher =93nuts=94 on camera, it is still referred to within Apotex as
the =93 =9160 Minutes=92 debacle.=94 But the Apotex drug, deferiprone, has =
now
been approved in more than 30 countries.

For Mr. Sherman, getting generic Plavix and other products on the market
seems to have become something of a crusade. While many other generic
companies are cutting financial deals with brand-name manufacturers that
keep generics off the market and extend the brand monopoly, Mr. Sherman
says he is against such deals.

=93I get steamed by those sort of things,=92=92 he said. =93We=92re working=
 hard
to bring things to market and we=92re getting all these games played.=94

D=92Arcy Jenish, a Canadian journalist who wrote an industry-authorized
book, =93Trials and Triumphs,=94 about Canadian drug makers, says that
Bristol-Myers and Sanofi should have been warier about negotiating with
Mr. Sherman.

=93Barry would never be in cahoots with the brands,=94 Mr. Jenish said. =93=
I
think he passionately believes that what he=92s doing is bringing
lower-cost prescription drugs to the public, and if he doesn=92t, nobody
else will.=94

Mr. Sherman has been involved in litigation with Bristol-Myers and
Sanofi since 2002. But it was not until early this year, after the Food
and Drug Administration
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nd_drug_administration/index.html?inline=3Dnyt-org>
approved Apotex=92s formulation for generic Plavix, that the brand-name
companies sought to negotiate in earnest.

In March, the parties announced a deal in which Bristol-Myers and Sanofi
would pay Apotex a minimum of $40 million and give the company the right
to sell generic Plavix months before their patent was set to expire in
2011.

Mr. Sherman said it was because he never believed the deal would be
approved that he insisted on concessions if it was not.

His main goal, he said, was to reduce the sizable risk that generic
companies typically face when they sell at risk =97 namely, the threat of
triple damages, based on three times a generic drug=92s sales.

Bristol-Myers and Sanofi negotiated away most of that threat, agreeing
to limit damages to 50 percent of Apotex=92s sales if their agreement was
rejected.

The companies also agreed to give Mr. Sherman five days on the market
before they would seek a preliminary injunction to stop him, giving
Apotex time it has used to flood drugstores with its version of Plavix.
A hearing on that request for an injunction is scheduled for Friday.

Mr. Sherman=92s contention that he had not expected regulators to approve
the patent settlement is supported by a letter he wrote to three United
States senators on July 7, criticizing the growing tendency of generic
makers to cut deals with big drug companies.

=93Before turning to the essential point of this letter,=94 Mr. Sherman
wrote, =93I must comment on the well-publicized perception that Apotex has
entered into an anticompetitive settlement with Sanofi/BMS concerning
clopidogrel (Plavix). That perception is incorrect. Apotex has
negotiated only to remove barriers to immediate launch. To achieve that
objective, we entered into a somewhat bizarre arrangement that will
enable immediate launch, if and when F.T.C. refuses to approve a
settlement.=94

The letter =97 addressed to Senator Charles E. Grassley
<http://topics.nytimes.com/top/reference/timestopics/people/g/charles_e_gra=
ssley/index.html?inline=3Dnyt-per>,
Republican of Iowa, and the Democrats
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atic_party/index.html?inline=3Dnyt-org>
Charles E. Schumer
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umer/index.html?inline=3Dnyt-per>
of New York and Herbert H. Kohl of Wisconsin =97 accurately predicted that
the refusal would come within weeks.

The whole story will be in his autobiography, Mr. Sherman says, or it
might emerge sooner, as the facts unfold about Plavix.

=93In due course,=92=92 he said, =93you=92ll have it all.=94