[Ip-health] Compulsory license of Drug-Eluting Stent (DES) patents

[James Love]

In 2004, Abbott defeated a proposed compulsory license of its patents
on the AIDS drug ritonavir. But in 2005-2006, they benefited from
compulsory licensing of patents held by Guidant, on Drug-Eluting
Stents.  In 2005, J&J sought to acquire Guidant, a potential
competitor in the market for Drug-Eluting Stents DES.   The company
acquiring Guidant was required to license DES patents to a potential
entrant, as set out in a November 2005 agreement with the FTC, which
included obligations to license DES patents to Abbott.  When J&J was
outbid by Boston Scientific, the FTC again required licensing of the
patents to Abbott, the second time as a divestiture to Abbott.

http://www.ftc.gov/opa/2006/04/bostonscigui.htm
The FTC April 20, 2006 press release from the Boston Scientific
acquisition of Guidant Corporation.

------
This from the (perhaps more interesting) 2005 FTC decision regarding
J&J attempted acquisition of Guidant:

http://www.ftc.gov/os/caselist/0510050/051102comp0510050.pdf

See also the Federal Register notice:

67706 Federal Register / Vol. 70, No. 215 / Tuesday, November 8,
2005 / Notices

* The proposed Consent Agreement  effectively remedies the proposed
acquisition=92s anticompetitive effects in  the market for DESs.
Pursuant to the proposed Consent Agreement, the  combined J&J/Guidant
is required to license Guidant=92s intellectual property surrounding
the RX delivery system

* Abbott is a well-known and respected pharmaceutical and diagnostics
company that has a number of vascular devices on the market already
or in development. It has experience with both drugs and vascular
devices, a highly regarded DES design, a strong and growing vascular
sales force, and the necessary manufacturing capabilities. Abbott,
therefore, is poised to become a strong competitor in the DES market
when it enters in the second half of 2007, approximately the same
time as Guidant=92s anticipated date of  entry. Access to the RX
delivery system  will allow Abbott to replace Guidant as  the third
entrant into the DES market  with an RX delivery system.


67706 Federal Register / Vol. 70, No. 215 / Tuesday, November 8,
2005 / Notices

FEDERAL TRADE COMMISSION

[File No. 051=D00050]

Johnson & Johnson; Analysis of
Agreement Containing Consent Order
To Aid Public Comment

AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.


67707 Federal Register / Vol. 70, No. 215 / Tuesday, November 8,
2005 / Notices


Drug-Eluting Stents

A DES is a medical device typically consisting of a thin, metallic
stent coated with an antiproliferative drug and a polymer, mounted on
a delivery system. Interventional cardiologists use DESs to treat
coronary artery disease, a condition caused by the build up of plaque
deposits within one or more coronary arteries leading to reduced
blood flow. DESs work by propping open the clogged artery or arteries
and eluting a drug, which helps prevent the renarrowing of the
artery, called restenosis. DESs are the most effective minimally-
invasive method for treating coronary artery disease, and other
products and procedures are not economic substitutes for DESs.

    [snip]

DESs are medical devices that are regulated by the United States Food
and Drug Administration (=91=91FDA=92=92). Performing the necessary clinica=
l
testing and navigating the approval process for the FDA can be
burdensome and time-consuming. As such, DESs sold outside of the
United States but not approved for sale in the United States do not
provide viable competitive alternatives for U.S. consumers.

The U.S. market for DESs is highly concentrated; currently only two
firms, J&J and Boston Scientific, have products on the market.
Guidant=92s DES program is still in development, but it is anticipated
to be one of at least three entrants, along with Medtronic, Inc. and
Abbott Laboratories, likely to enter the U.S. market by the end of
2007. Guidant is the only anticipated entrant with rights to the
intellectual property necessary to market a DES with the RX delivery
system, the dominant delivery system in the United States. Developing
and receiving FDA approval for a DES is difficult, time-consuming and
expensive. It can take hundreds of millions of dollars of research
and development, significant funding for clinical trials, and an
extensive amount of time to even reach the stage of seeking FDA
approval. The regulatory process itself can also be time-consuming as
the FDA reviews the volumes of materials and data a company submits
in support of its application for approval. Considering all these
factors, entry into the manufacture and sale of DESs is impossible to
achieve within two to three years.

In addition to the regulatory barriers facing firms seeking to enter
the DES market, there are substantial intellectual property barriers
an entrant must overcome. Firms must invent around or obtain licenses
to patents covering nearly every aspect of a DES, including the
design of stents, stent delivery systems, and the drugs and polymers
used on DESs. Due to the difficulty of entry, firms must commit to
entering the market years in advance of any anticipated entry, and
timely and sufficient entry in response to a small but significant
price increase is impossible.

The proposed acquisition would cause significant competitive harm in
the market for DESs by eliminating Guidant as the only potential
competitor with the ability to offer a DES on an RX delivery system.
As a third RX entrant into the DES market, Guidant likely would
increase competition and reduce prices for DESs. Although two other
firms, Abbott and Medtronic, are poised to enter the market in the
same approximate time frame as Guidant, their lack of access to the
RX delivery system makes it unlikely that either company could be a
substantial competitive constraint on the DES market in the near
term. The proposed

67708 Federal Register / Vol. 70, No. 215 / Tuesday, November 8,
2005 / Notices

acquisition therefore decreases the number of potential DES suppliers
with access to the RX delivery system from three to two until at
least late 2008, when Guidant=92s key patents relating to the RX
delivery system begin to expire. (The relevant Boston Scientific RX
patents begin to expire this year).

The proposed Consent Agreement  effectively remedies the proposed
acquisition=92s anticompetitive effects in  the market for DESs.
Pursuant to the proposed Consent Agreement, the  combined J&J/Guidant
is required to license Guidant=92s intellectual property surrounding
the RX delivery system at no minimum price to an up-front buyer with
a DES program in development no later than ten (10) days after the
acquisition is consummated. Through the course of the investigation,
Commission staff gathered a great deal of information about each of
the companies developing DES products. In particular, staff
investigated potential divestiture candidates and concluded that
Abbott was among the companies well-positioned to replicate the
competitive impact Guidant was likely to have absent the proposed
acquisition. The parties have selected Abbott as the up-front buyer
for the divestiture package. Abbott is a well-known and respected
pharmaceutical and diagnostics company that has a number of vascular
devices on the market already or in development. It has experience
with both drugs and vascular devices, a highly regarded DES design, a
strong and growing vascular sales force, and the necessary
manufacturing capabilities. Abbott, therefore, is poised to become a
strong competitor in the DES market when it enters in the second half
of 2007, approximately the same  time as Guidant=92s anticipated date
of  entry. Access to the RX delivery system  will allow Abbott to
replace Guidant as  the third entrant into the DES market  with an RX
delivery system.

   [snip]
---------------------------------
James Love, CPTech / www.cptech.org / mailto:james.love@cptech.org /
tel. +1.202.332.2670 / mobile +1.202.361.3040

"If everyone thinks the same: No one thinks."  Bill Walton"