[Ip-health] Economist: The bitterest pill

[Jean Blaylock]

The bitterest pill

Jan 24th 2008 | NEW YORK
>From The Economist print edition
http://www.economist.com/business/displaystory.cfm?story_id=3D10567536

Drugs firms have found new ways to keep generic medicines at bay

=93IF WE have the feeling that something is rotten in the state, then let's=
 take the opportunity to find out.=94 So said Neelie Kroes, the European Co=
mmission's competition commissioner, seeking to justify a spectacular raid =
last week on big pharmaceutical companies. Officials are investigating whet=
her sellers of expensive branded pills conspired together to delay the laun=
ch of cheap generic rivals. America's Federal Trade Commission (FTC) is als=
o looking into it.

Many of Big Pharma's biggest blockbusters will soon lose their patent prote=
ction. Deloitte, a consultancy, estimates that $55 billion of products will=
 go off patent in 2009 and will then face competition. At the same time, ph=
arma bosses are being asked to defend patents in costly legal battles again=
st an increasingly confident and litigious generics industry. As generics f=
irms evolve from mere copycats into innovators in their own right, many suc=
h firms=97led by Israel's Teva, India's Ranbaxy and Dr Reddy's Laboratories=
=97are vigorously challenging patents.

The best way out for the established drugs industry would be to find lots o=
f clever new blockbusters to replace the ones going off-patent. But as the =
industry's sagging share valuations suggest, the new-drugs pipelines at big=
 firms have run dry. So their managers are relying on two controversial new=
 strategies. First, they are settling the lawsuits brought by generics firm=
s, sometimes paying them to delay launching cheap pills. Novartis, a big Sw=
iss firm, recently made a private settlement for Dr Reddy's to drop a lawsu=
it in return for the Indian firm delaying the launch of a generic rival to =
Exelon, its Alzheimer's remedy. This month it emerged that GlaxoSmithKline =
(GSK), a big British pharmaceutical firm, has also settled a patent lawsuit=
 with Ranbaxy concerning the generics firm's launch of a cheap version of I=
mitrex, GSK's migraine reliever.

Under American laws designed to encourage generic drugs, which save money f=
or patients, the first generic maker to win regulatory approval for its ver=
sion of any given branded drug is supposed to enjoy a six-month monopoly. T=
his promised pot of gold was designed to support small generics firms=97but=
 Big Pharma has found a loophole. It is pre-emptively launching generic ver=
sions of its own branded pills, which wipes out those six months of monopol=
y profits and undermines the economics of generics firms.

Merck, a big American pharmaceuticals firm, is soon expected to launch an a=
uthorised generic version of Fosamax, an osteoporosis drug that is due to l=
ose patent protection in February. A recent survey of global branded-drugs =
firms by Cutting Edge Information, a consultancy, found that a third of the=
m had launched authorised generics between 2005 and 2007=97and the number w=
ill grow to 44% between 2008 and 2010. Pfizer has set up an in-house divisi=
on to handle such generics.

The recent steps taken by regulators in America and Europe to investigate B=
ig Pharma looks like good news for generics firms=97unless, that is, some o=
f them turn out to have been complicit in the alleged dirty tricks. Earlier=
 this month, America's FTC extended its probe to include generics companies=
. And during last week's raid by European investigators, one of the firms t=
argeted was Teva, a generics pioneer. The generics industry is defiant, arg=
uing that it remains the consumer's best friend despite its settlements wit=
h the enemy. Kathleen Jaeger, head of the Generic Pharmaceutical Associatio=
n, insists that officials must avoid taking action that =93sweeps the bad s=
ettlements in with the good settlements=94. It remains to be seen whether t=
he upstart pillmakers have been playing for time or selling out.





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