Several days ago Bristol-Myers Squibb, Sanofi-Aventis and Apotex, Inc. announced a settlement regarding Plavix.  Some background: Plavix is used to prevent blood clots that can lead to heart attack or stroke.  The key patents are held by Sanofi and the drug is jointly marketed by Bristol and Sanofi.  According to this article, worldwide sales of Plavix in 2005 were “over $6 billion” and “Bristol’s take from Plavix sales accounts for about 30% of its earnings per share” and Sanofi’s take “contributes up to 15% to its earnings per share, according to Prudential Equity Group.”

According to an excellent post at Patent Baristas, the first patent covering Plavix was filed in 1983 and expired in July 2003.  A second patent was filed a few years later and is due to expire in 2011.  (The post has additional in-depth analysis of the patents and their differences and similarities.) 

Several generic manufacturers filed Abbreviated New Drug Applications (an “ANDA”) for FDA approval, with Apotex being the first to file (which, as discussed below, gives it the 180 day exclusivity period under Hatch-Waxman).  Basically, if the patent on the branded drug has not yet expired, the generic ANDA applicant must notify the branded drug patent owner of the generic manufacturer’s ANDA and certify, when appropriate, that the patents covering the patented drug (listed in the FDA’s “Orange Book”) are either invalid or not infringed by its generic version of that product.  This is called a “Paragraph IV Certification.”

The branded drug owner, upon receiving a Paragraph IV Certification from a generic ANDA applicant, has 45 days to initiate a patent infringement suit against the applicant.  If no action is initiated within 45 days, the expedited process for FDA approval of the generic drug moves forward.  If a patent infringement suit is brought within the 45-day time-frame, however, FDA approval of the ANDA is automatically postponed until the earliest of the expiration of the patents, the expiration of 30 months from the patent holder’s receipt of notice of the Paragraph IV Certification, or a final judicial determination of non-infringement. 

Under the Hatch-Waxman Act, the first applicant submitting an ANDA with a Paragraph IV Certification for a generic version of a pioneer drug receives a 180-day period of marketing exclusivity before other ANDAs for the same generic drug can be approved by the FDA.  The 180-day period begins when the first ANDA applicant either (a) begins selling the generic drug, or (b) obtains a final judgment of non-infringement in a patent infringement suit, whichever occurs first.  As the first ANDA applicant will likely have to deal with expensive and burdensome patent infringement litigation, the 180 day exclusivity period without other generic competition serves as an inducement to encourage generic drug manufacturers to introduce their products.

Here, Apotex filed its ANDA first and certified that the second, later filed, patent covering Plavix was invalid (I believe that Dr. Reddy’s Laboratories, Teva Pharmaceuticals Industries and Cobalt Pharmaceuticals have filed or have announced they intend to file ANDAs for generic versions of Plavix).  FDA approval was granted in January of this year.

Sanofi and Bristol brought a patent infringement suit.  It was this patent infringement suit that was settled.  Based on blog reports (here and here) and news reports (here, here and here) it appears that as part of the settlement Sanofi and Bristol will give Apotex a royalty-bearing license and Apotex will not market a generic version of Plavix in the U.S. market until September 2011.  If, however, another generic manufacturer successfully challenges the Plavix patent, then Apotex can begin marketing its generic version of Plavix.  The settlement is subject to antitrust review by the Federal Trade Commission and the state attorneys general.  According to this article, “Indeed, Bristol and Sanofi said that there was a “significant risk” of not getting antitrust clearance by the FTC and state attorneys-general for Tuesday’s settlement. The litigation with Apotex over the patent would restart if such clearance was denied.”

Will the FTC and state attorneys general clear this settlement?  It is unclear.  The parties have admitted that there is a chance antitrust clearance will not be granted.  Several years ago, the odds of the FTC challenging this settlement would have, arguably, been higher.  In 2000, the FTC challenged two somewhat similar agreements, one against Abbott Laboratories and Geneva Pharmaceuticals, Inc. and one against Hoechst Marion Roussel, now Aventis, and Andrx Corp.  In 2001, it challenged an agreement between Schering-Plough Corporation, Upsher-Smith Laboratories, and American Home Products Corporation.

The first two settled, but the third one – involving Schering, Upsher-Smith and American Home Products and the drug K-Dur – did not.  And the details of the third one are similar to the facts here.

In 2001, the FTC objected to an agreement between Schering Upsher-Smith and American Home Products Corporation relating to Schering’s potassium chloride supplement K-DUR.  According to the FTC’s 2001 press release:

The Commission’s administrative complaint alleges that Schering, the maker of K-Dur 20, a widely prescribed potassium chloride supplement, illegally paid Upsher-Smith and American Home Products millions of dollars to induce them to delay launching their generic versions of the drug beyond any delay they might have agreed to without such payments. The agreements, the FTC said, have cost consumers more than $100 million. … The FTC’s complaint alleges that in June 1997, Schering and Upsher-Smith agreed to settle the patent infringement lawsuit with an agreement through which Schering would pay Upsher-Smith not to enter the market. Under this agreement, Upsher-Smith would sell neither the product for which it had filed with the FDA, nor any other generic version of K-Dur 20 (without regard to whether Schering had any basis to claim infringement), until September 2001. In exchange, Schering paid Upsher-Smith $60 million.  …  According to the FTC, Schering’s agreement with Upsher-Smith in turn acted as a bottleneck that prevented other potential generic competitors from entering the market.

After some litigation, the case landed up before the U.S. Court of Appeals for the 11th Circuit.  In March 2005, the 11th Circuit ruled against the FTC, finding that “[s]imply because a brand-name pharmaceutical company holding a patent paid its generic competitor money cannot be the sole basis for a violation of antitrust law.”  (You can find the decision here, courtesy of Patently-O).  The court found that: 

neither the rule of reason nor the per se analysis is appropriate in this context.  We are bound by our decision in Valley Drug where we held both approaches to be ill-suited for an antitrust analysis of patent cases because they seek to determine whether the challenged conduct had an anticompetitive effect on the market. 344 F.3d 1294, 1311 n.27.  By their nature, patents create an environment of exclusion, and consequently, cripple competition. The anticompetitive effect is already present. “What is required here is an analysis of the extent to which antitrust liability might undermine the encouragement of innovation and disclosure, or the extent to which the patent laws prevent antitrust liability for such exclusionary effects.”  Id. Therefore, in line with Valley Drug, we think the proper analysis of antitrust liability requires an examination of: (1) the scope of the exclusionary potential of the patent; (2) the extent to which the agreements exceed that scope; and (3) the resulting anticompetitive effects. Valley Drug, 344 F.3d at 1312. 

(Footnotes omitted.)

The Court reviewed the facts of the K-DUR case and found no antitrust liability.  The practical effect of this decision is that it is now very difficult for a party (either the FTC, state attorneys general or private parties) to challenge a patent settlement on the basis of the terms of the settlement itself (for example, because the settlement includes a reverse payment); plaintiffs will have the show that the generic product does not infringe the brand name company’s patent (for example, by showing that the patent is not valid).

The FTC filed a petition for certiorari (see this excellent Patently-O post for an excellent description of the certiorari petitions) and in October 2005 the Court requested the Solicitor General to submit a brief.  I believe the Court has yet to rule on the petition for certiorari.

The 11th Circuit decision could affect the FTC’s decision in the case.  On the other hand, as evidenced by its decision to petition for certiorari, the FTC clearly disagrees with the 11th Circuit’s decision.  It will be interesting to see how the FTC and the state attorneys general decide this issue, especially as the decision (or decisions, as the FTC and one or more of the state attorneys general could reach different conclusions) could indicate whether the FTC has shifted in its analysis of these types of agreements.

Technorati Tags: Plavix, Bristol-Myers Squibb, Sanofi-Aventis, Apotex, antitrust, FTC, K-Dur, Schering, Upsher-Smith, American Home Products

Share on Facebook

Comment feed: RSS 2.0. You can leave a response, or trackback from your own site.