Some lessons from the Plavix patent challenge
Drug makers continue to battle in Court for the rights to sell (Apotex) or prevent the sale (BMS, Sanofi-Aventis) of a generic version of the blockbuster blood-thinner Plavix. Meanwhile, the FTC vows to keep fighting the kind of settlement deals BMS and Apotex tried to reach before a group of state Attorneys General gave it the thumbs-down and despite FTC’s highly publicized failure earlier this year to derail a settlement between Schering-Plough and two generics manufacturers.
When faced with such important and potentially confusing matters concerning patent challenges to innovators’ drugs, I turn to my colleague Greg Glass, editor of the Paragraph Four Report and an occasional guest author at Pharma’s Cutting Edge, for the big picture. Greg hasn’t let us down. Below he gives us the skinny on the some take-home lessons from the Case That Brought Down a Pharma CEO.
FJC
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Over the summer, as many of you know, the deal between Apotex and Sanofi-Aventis/Bristol-Myers fell apart, and Apotex launched its generic product. To label these events as “highly unusual” would be an understatement, and they are so bizarre that I cannot help myself but to discuss them. While many things have been brought out from under the shadows, it is clear that there is some important information we still do not know, and can these events be applied to pending and future settlements? First, let’s review some key facts from this past summer, some of which the press reported. Follow me on this as this gets a bit detailed…• On June 26, the U.S. Supreme Court denies the request of the Federal Trade Commission to review the Schering-Plough case, which rejected its position that a brand can’t pay a generic to settle a PIV case, among other things.• The next day, U.S. Senators introduce a bill that would prohibit a Paragraph IV (“PIV”) patent case settlement if the generic company receives anything of value and postpones marketing of its product.
• On July 20, the FTC testifies before Congress about the problems of PIV settlements though it admits that legislating settlement terms (and removing payments to generic companies) would be “challenging.”
• In late July, Attorneys General from several states reject the Plavix settlement.
• On July 27, agents from the federal government raid the office of Peter Dolan, CEO of Bristol-Myers, seeking evidence of anti-competitive behavior in the Plavix deal.
• On July 31, the FTC had yet to approve or reject the settlement, so it expired, allowing Apotex to launch.
• On August 4, Medco Health Solutions mentions that it expects to get a generic clopidogrel in stock in August.• A few days later, Apotex launches “at-risk” though we later learn that most, if not all of, the risk had been bartered away by BMS as well as its right to file an immediate injunction. Apotex CEO Barry Sherman reportedly negotiated such terms because he figured the FTC would never accept such a deal. (One must assume he was gleeful.)
• After the injunction is considered, the Court in New York sides with the brands, mildly suggesting that Apotex may not have that great of a case after all. However, the Court does not go as far as making Apotex remove product that is on the market.• On September 12, Peter Dolan is removed as CEO; presumably because he did not keep the BMS Board informed of the deal every step of the way and allowed an executive to negotiate, by himself, with Barry Sherman. As you have undoubtedly noticed, the connected dots start with the Schering-Plough case which is seemingly unrelated. However, I am not a huge believer in coincidences when it comes to politics, and it raises the first question.What is the current FTC position on settlements? It appears that the FTC is still taking the position that any payment to a generic company, along with a “delay” in the launch of a generic product is a per se violation of antitrust law. It took the same position to Court and lost (see Schering-Plough). Now it appears to be using the legislative process to promote its position.
If the agreement was such a clear violation of antitrust law, why didn’t the FTC reject it? Because it couldn’t, in all good conscience, given the results in Schering-Plough. In this situation, FTC could wait it out, knowing that the deal would expire at the end of July if it didn’t act.
So, why did the settlement fall apart? This is a great question which we may not fully know the answer. Clearly, this appears to be more about politics and money than anything else and appears to have been used to make a point about the broader issue of drug pricing. The FTC, some states attorneys general, and some senators can now boast (to senior citizens voters) that they are fighting to get less expensive drugs to market. It is an election year. The fact that some states rejected the agreement also makes you wonder if their decision was entirely independent of the FTC.Are other settlements at risk for falling apart? Lately, we have seen many PIV settlements, but these are not likely at risk though there are similarities between these settlements and the Plavix agreement. Barr Labs had the right idea when it settled Adderall XR® in August by announcing that it would reach the market with a generic before the challenged patent expires. Though this was also true for Plavix, it frames the issue to negate the “generic was delayed” argument. It may also help to toss in other items like cross licenses and co-promotion deals to make the PIV case a smaller part of a larger transaction. Remember that how these settlements are portrayed and positioned may be important than what terms they contain. Frankly, the Plavix settlement terms really weren’t that much different than most others and somehow those other agreements were deemed “okay” while the Plavix settlement was “bad.”So, the FTC is giving up on its position. Right? Well, not really. During its testimony in front of the Senate, the FTC admitted that it was looking at other settlements which suggests that they might bring the same argument again, in the hopes of winning in a different circuit, thus increasing the odds of the Supreme Court hearing the case as there would then be a conflict in the circuits if the FTC position prevailed. One would expect it to wait until a case can surface in the 9th Circuit which may be more sympathetic to the broader issue of access to generic medicines. So, it may not be giving up. Will the Senate bill, dictating terms of settlement agreements, become a law? I don’t know, but I sure hope not. Though the drug industry is highly regulated, last time I checked, the U.S. operated on a sort-of free market system. One of the last things we need is for elected legislators to be a de facto part of the negotiations between two companies trying to settle a private patent dispute. If this is fair game, what’s next?How should a company approach a settlement of a Paragraph IV case? If you believe the accounts of what happened to Peter Dolan, the safest approach would be to have all executives involved, copy the Board on everything, and never let an executive negotiate alone. Of course, the more people involved, the more likely the chances for a leak of a pending settlement.
