[Pharm-policy] Stolberg and Gerth on Generics Stall

[James Love]

Another of Stolberg and Gerth's well researched investigative articles
about the pharmaceutical market.  Jamie

Subject: How Companies Stall Generics and Keep Themselves Healthy

http://www.nytimes.com/library/national/science/health/072300hth-generic-drugs.html

      July 22, 2000

      MEDICINE MERCHANTS: Holding Down the Competition
How Companies Stall Generics and Keep Themselves Healthy
      By SHERYL GAY STOLBERG and JEFF GERTH


            WASHINGTON -- The stakes were high on Feb. 2,
            1998, when Zenith Goldline Pharmaceuticals and
            Abbott Laboratories squared off here in patent
            court. For three years, the companies had been
            fighting about whether Zenith could market a
            generic version of Hytrin, Abbott's
            $500-million-a-year drug for high blood pressure
            and prostate enlargement. Now a federal appeals
            judge would hear them out.

            "Abbott makes a million dollars a day for every
            day it keeps us off the market," Bill Mentlik,
            Zenith's lawyer, argued in court. Without a
            cheaper generic, he warned, "the public is
            losing."

            That argument, though, would soon give way to
            more businesslike concerns. When the courtroom
            oratory ended, the two sides headed to the
            elegant Hay-Adams Hotel, a block from the White
            House, for a private lunch.

            After small talk about the weather and golf,
            Zenith's lawyers proposed an end to the legal
            wrangles: They could become partners in an
            introduction of a generic drug. Abbott's lawyer,
            Kenneth Greisman, declined, court records show.
            His company, he said, preferred "a straight
            numbers deal."

            The deal was sealed on March 31, 1998: Abbott
            would pay Zenith as much as $2 million a month
            not to produce its generic, up to a maximum of
            $42 million. The next day, Abbott agreed to pay
            another rival, Geneva Pharmaceuticals, even more:
            $4.5 million a month, as much as $101 million
            over the life of the contract.

            And so it was not until August 1999 -- when
            Geneva and Abbott, facing an antitrust
            investigation, scuttled their agreement -- that
            Hytrin's generic equivalent, terazosin, finally
            made its market debut.

            That is not what Congress envisioned in 1984 when
            it passed a law intended to keep drug prices down
            by speeding up the entry of generic drugs. The
            Drug Price Competition and Patent Term
            Restoration Act was intended to foster
            competition between brand and generic companies,
            and it has. It was not supposed to prompt rivals
            to join hands in keeping drugs off the market.

            "The law has been turned on its head," said one
            of its authors, Representative Henry A. Waxman,
            Democrat of California. Referring to Hytrin, he
            said, "We were trying to encourage more generics
            and through different business arrangements, the
            reverse has happened."


   [snip]

            To shed light on this trend, The New York Times
            examined hundreds of pages of court records and
            other public documents in Washington and various
            states, and interviewed regulators and drug
            company executives, with a particular focus on
            Hytrin. The review showed how efforts to extend a
            profitable drug's monopoly, as much as the
            pursuit of scientific discoveries, drive
            decisions in one of the world's most lucrative,
            and secretive, industries.

            The Hytrin deal has spawned 13 private antitrust
            lawsuits against Abbott, including the
            Grosskruegers' and others filed by health
            maintenance organizations, pharmacies and drug
            wholesalers. Company officials, citing the suits,
            declined to be interviewed. But records show
            Abbott worked hard to beat back Hytrin generics.

            It filed numerous additional patents on the
            drug's key ingredient, terazosin. It improperly
            listed a Hytrin patent in the Food and Drug
            Administration's registry, according to a federal
            appeals court; the move would have extended
            Hytrin's patent life had the court not ordered
            the patent struck from the registry. Abbott also
            filed lawsuits against five generic drug
            manufacturers, and countersued a sixth.

            No judge ever ruled in Abbott's favor, but the
            maneuvering kept the company's monopoly on Hytrin
            alive for four years after a patent on the key
            ingredient ran out. During that time, Abbott's
            Hytrin revenues totaled roughly $2 billion --
            most of it pure profit.

            The legal fight to protect Hytrin culminated with
            the 1998 cash payments. No one knows how many
            similar deals between drug makers and their
            generic rivals exist; experts say most are kept
            confidential.

            But other agreements have recently come to light
            through government investigations and private
            lawsuits; they involve tamoxifen, the breast
            cancer drug; Cardizem CD, a heart medication;
            K-Dur, a potassium supplement, and Cipro, an
            antibiotic. And these deals, like the Hytrin
            case, are causing consternation among judges and
            regulators, legislators like Mr. Waxman and Vice
            President Al Gore, who said in a recent interview
            that such agreements "perpetrate a fraud on the
            American people by denying them the benefits of
            competition."

  [snip]

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James Love, Consumer Project on Technology    
P.O. Box 19367        | http://www.cptech.org 
Washington, DC 20036  | love@cptech.org       
Voice 202/387-8030    | Fax 202/234-5176     
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