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On the surface, Big Pharma's patent litigation strategy is simple. Blockbuster drugs take in billions of dollars, but they're easy to copy and manufacture. Patents keep copycats away, and they allow drug companies to charge high prices. Naturally, Big Pharma fights to the death over them.
That's where the strategy gets complicated. With the stakes so high, Big Pharma fires up all its creative engines. In the past, branded drug companies would file seemingly absurd patents to extend their monopolies. In order to extend the life of its antianxiety drug BuSpar, Bristol-Myers Squibb Company filed a patent on the drug's metabolite--essentially the chemical created when the body digests the medication. The strategy worked for a time, and Bristol-Myers was able to wring another 127 days out of its drug--or about $250 million--before the patent was invalidated in 2002.
But then came $700 million worth of pain. That's how much Bristol-Myers wound up paying to settle antitrust claims over BuSpar. The case also pushed Congress and the Food and Drug Administration to act. In 2003, Congress amended Hatch-Waxman, the 1984 law that made it easier for generic drugs to enter the market. Now lawyers bringing a patent suit to block a generic company's new drug application are allowed only one 30-month stay preventing the FDA from approving that application. Before the change, multiple stays were allowed, and patent holders--using fairly weak secondary patents--would file several suits, blocking generic entry for years. "The reforms in 2003 closed a lot of the loopholes to delay approval of generic drugs," says Charlie Mayer, a spokesman for the Generic Pharmaceutical Association. The FDA also tightened the rules on the types of patent claims that can trigger the stay. Patents on metabolites, dosage, or packaging no longer do the trick.
Close one door, and another opens. New patent strategies have since popped up. In the following pages, we look at the ways Big Pharma is keeping six of the ten best-selling drugs in the world [see chart below] safe from generic competition. When generic companies seek to enter the market, they still typically get slapped with a patent suit. But nowadays, without the promise of endless 30-month stays, there's more pressure to settle. And that's opened up a whole new host of antitrust problems, as in the recent Plavix case.
Sometimes litigation isn't the weapon of choice, and Big Pharma fights back with its own "authorized generic" drug. That's what happened with Merck & Co.'s Zocor.
Generic companies aren't thrilled with the new competition--and they're calling for more amendments. "If authorized generics are going to undermine the generic drug industry, whose sole purpose is to bring lower-cost drugs to the market, Hatch-Waxman needs to be amended," says Joseph Bennett-Paris, a partner at Merchant & Gould, who represents generic companies. "The whole idea of authorized generics really is a slap in the face to Congress and to the American people, who want cheaper drugs. It's a way for brand companies to maintain their profits."
Simple.
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