[Ip-health] AP: Drug makers delay generics hitting market

[Amy Nunn]

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By THERESA AGOVINO;, AP Business Writer Thu May 25, 6:07 PM ET

NEW YORK - The marketers of the world's second-largest selling drug dodged a
major threat to their revenues two months ago by reaching a deal to keep a
generic competitor at bay until at least 2011.

Now, 10 lawsuits have been filed over the settlement Sanofi-Aventis SA and
Bristol-Myers Squibb Co reached with Apotex Inc., a generic manufacturer
challenging blood thinner Plavix's patent. The suits, filed by businesses,
unions and health plans, allege the deal violates antitrust laws by denying
access to cheap, generic versions of Plavix.

"We want to have a high level of (health) benefits for our members but to do
that we need access to cheap, generic drugs," said Wendell W. Young IV,
president of United Food and Commercial Workers Union Local 1776.

Experts say drug makers are delaying the introduction of cheaper rivals with
deals like the Plavix settlement, in which Apotex agreed to drop its patent
challenge and launch its product at a time approved by the patent holders in
exchange for a payment of at least $40 million.

Other tactics include filing petitions with the USFDA that express concern
about a generic version of one of their products, and arranging to
manufacture an "authorized" generic to cut into the challenger's profits.

Evidence suggests such activities are becoming more common and regulators -
fearing consumers' access to cheaper medications is being stalled by legal
loopholes - are examining the issue.

The FDA is exploring ways to tell if some petitions are delay tactics.
Meanwhile, the Federal Trade Commission announced in March it would study
whether brand name manufacturers are muting competition by authorizing
generic versions of their own drugs that coincide with the launch of a rival
generic.

Generic drugs can be up to 60 percent cheaper than their brand name
counterparts and a powerful weapon in the struggle against exploding health
care costs. Drugs with combined sales of more than $48 billion will lose
patent protection between 2006 and 2010, according to Medco Health Solutions
Inc., a pharmacy benefit management company.

"Brand companies face a product drought so they are going after every
possible tool to delay generic competition" said Kathleen Jaeger, president
and CEO of the Generic Pharmaceutical Association, the industry trade group.
"Any tool they use to delay approval of our products and delay consumers
access to our (cheaper) products is problematic."

Still, some of these arrangements wouldn't be possible without cooperation
from generic companies.

"The generic companies are complicit," said Alex Sugerman-Brozan, director
of the Prescription Access Litigation Project, a nonprofit that sues drug
companies for practices it alleges inflate drug prices and exaggerate
benefits. But he said generic companies may feel forced into such
arrangements because they offer a guaranteed financial benefit and they
can't withstand the economic pressure from big drug companies.

Spokesmen for Bristol-Myers and Sanofi-Aventis declined comment on the
lawsuits. Apotex didn't return a call.

While not commenting on the case directly, Ken Johnson, spokesman for the
Pharmaceutical Research and Manufacturers of America, said in a statement
that resolving litigation allows companies to focus on developing new
medicines.

When the Apotex deal was announced, Sanofi and Bristol-Myers said they
believed the Plavix patent was valid but didn't want to risk the trial,
slated to start in June. Both companies said there is a possibility the deal
won't obtain FTC clearance.

Plavix's revenues totaled $5.9 billion last year. It is Bristol-Myers'
biggest seller, and Sanofi-Aventis' second largest-selling drug.

Consumers will have access to generic Plavix eight months before the
patent's expires in 2011. But an Apotex victory could have resulted in a
generic version years earlier.

In a speech last month, FTC Commissioner Jon Leibowitz said his staff would
examine the deal closely and expressed concern about the mushrooming number
of Plavix-like arrangements.

Leibowitz said that in fiscal 2004, none of the 14 reported agreements
between brand and generic companies contained a payment to the generic
company accompanied by it deferring its product's market entry. So far, for
fiscal 2006, at least seven out of 10 agreements include a payment to the
generic company from the brand company and a delay in the generic's debut.

Two appellate court decisions in 2005 upholding those types of deals appear
to be affecting the market adversely, Leibowitz said. He added that the
rising number of authorized generics may also temper generic firms'
incentive to challenge patents.

Under federal law, the first generic company to file an application to
market a drug that states that either it doesn't infringe on a patent, or
that the patent is invalid, is eligible for a 180-day marketing exclusivity
period. That's when generic companies recoup most of their investment
because they only have to offer a slight discount to the brand.

However, the pharmaceutical company that owns the patent can either launch
its own generic or give a license to another drug maker during that six
month period, depriving the first filer its exclusivity.

An authorized generic can cut the profit of the first filer by 59 percent,
said Gregory Gilbert, an analyst with Merrill Lynch.

"They (authorized generics) undermine the incentives for generic companies
to try to enter early," said lawyer David Balto, an antitrust expert. "If a
generic company knows a brand company can steal their market, they'd be more
willing to settle."

Citizen petitions are another way to block generic entry into the market,
Balto said. Anyone can file a citizen petition to express concern or comment
about any issue facing the FDA, which can't approve a generic drug if
there's an outstanding petition.

Balto said the cost of filing is small, compared to what a drug company can
earn by impeding competition.

Last year, in a speech to the generic industry trade group, FDA Chief
Counsel Sheldon Bradshaw said he'd seen examples of citizen petitions that
appear aimed at delaying generic drug approval. An FDA spokeswoman said the
agency couldn't be more specific about its attempts to prevent such
scenarios.

A survey conducted by Merrill Lynch assessed citizen petitions were filed on
15 drugs that had not yet faced generic competition from 2000 to 2003. Since
then petitions have been filed on 41 such products.

Earlier this year, the FDA denied petitions filed over generic Flonase,
opening the way for a cheaper version of the popular allergy medicine. The
debut was a long time in coming: Flonase's patent expired two years ago.

The reason for the delay is unclear, but Flonase's manufacturer,
GlaxoSmithKline PLC, filed a Citizen Petition the month the drug's patent
expired. Glaxo eventually filed an additional petition.

Glaxo spokeswoman MaryAnne Rhyne said the petitions weren't a ploy to delay
generic competition. She said the FDA had failed to clarify guidelines for
approving generic nasal sprays, and Glaxo wanted to insure the product would
meet safety standards.

Glaxo sued the FDA after it denied the petitions but the case was thrown out
of court.



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