Court Reverses: Paying Competing Drug Companies Not To Compete Is An Antitrust Violation

from the good-for-them dept

A few years ago, we wrote about a ridiculous situation in which big pharmaceutical companies were keeping prices artificially high by paying other drug companies to delay entering the market with generic drugs. The really scary part about this was that the big pharma companies would abuse patent law to force smaller drug companies into these deals. They'd file a patent infringement lawsuit, where they knew they had no leg to stand on, but the infringement filing forces the smaller generic maker into negotiations, where they often agree to a "license" which includes the delay -- but the money flows in the opposite direction of a typical license. In other words, the whole lawsuit and the license is basically a sham to try to hide the agreement to prevent competition in the market. And, of course, as you probably know, when there's no generic competition, drug makers are able to charge absurdly high prices for their drugs. As soon as there's competition, the price often falls by more than 90%. Thus, the big drug companies have plenty of incentive to buy off the competition like this.

Many people have believed that such deals are clear antitrust violations -- and a lawsuit against big pharma Schering-Plough (owned by Merck) tested this theory, only to be dismissed by the district court. That original ruling really twisted logic in a few knots to come to its conclusion -- and the good news is that, two years later, the 3rd Circuit appeals court has reversed the ruling. The ruling is long, but interesting. It starts out by noting that other court's ruling on this matter seem to take the concept of "patent validity" way too far. As we've discussed in other contexts, patent validity says that you have to assume a patent is valid -- but in these cases, the court notes that this unfairly biases the situation in which the bogus patent infringement lawsuits are filed to extract these "pay-for-delay" deals.

First, we take issue with the scope of the patent test’s almost unrebuttable presumption of patent validity. This presumption assumes away the question being litigated in the underlying patent suit, enforcing a presumption that the patent holder would have prevailed. We can identify no significant support for such a policy. While persons challenging the validity of a patent in litigation bear the burden of defeating a presumption of validity, this presumption is intended merely as a procedural device and is not a substantive right of the patent holder.... Moreover, the effectively conclusive presumption that a patent holder is entitled to exclude competitors is particularly misguided with respect to agreements – like those here – where the underlying suit concerned patent infringement rather than patent validity: In infringement cases it is the patent holder who bears the burden of showing infringement.

The court then discusses the Hatch-Waxman Act, which is at the heart of these disputes, noting that its intent (to increase availability of generics) seems to be the exact opposite of what happens with these pay-for-delay deals. But where it gets interesting is that the court says that having one company pay another to delay market entrance should be seen "as prima facie evidence of an unreasonable restraint of trade." This is definitely a big ruling -- though its potential disagreement with other courts may get this issue over to the Supreme Court before too long.

It's nice to see the court get it right after the lower court seemed so confused by the issue.

Filed Under: antitrust, competition, drugs, generics, patents, pay for delay, pharma
Companies: merck, schering-plough

Generics Drive Down Drug Prices In India, TPP Trying To Stop That

from the really-sick dept

Back in March, we wrote about an important development in India, where a compulsory license for Bayer's Nexavar anti-cancer drug was granted. Bayer, of course, is fighting back:

in its 37-page appeal to the Intellectual Property Appellate Board, Bayer has "demanded the withdrawal of the country’s first compulsory license given to Natco Pharma, arguing that a three-fourths reduction in the price of the anti-cancer drug by another Indian firm has made the permit redundant and its patent itself is vulnerable to being revoked," the Economic Times, India’s leading business newspaper, reported on 19 May. Bayer says CIPLA’s new price "will render Natco’s price unreasonable and defeat the purpose of compulsory licensing," according to the newspaper.

As that shows, there's been an interesting twist in this story. Cipla, another Indian manufacturer of generics, has announced that it too is coming out with a version of Nexavar, pricing it at $125 for 120 tablets. That's even cheaper than Natco's price of $163, to say nothing of Bayer's $5,128 for the same course. A key difference is that India's Patent Controller has granted a compulsory licence to Natco, but not to Cipla. In fact, Bayer has said that it is taking Cipla to court over its production of a cheap version of Nexavar.

Bayer is employing some very strange logic here. On the one hand, it is saying that Cipla's cheaper version of Nexavar means that Natco's licence is no longer needed, and should be revoked. On the other, Bayer is suing Cipla because it has produced Nexavar without the compulsory license that Natco has. Clearly, Bayer hopes to get the best of both worlds -- the revocation of Natco's compulsory licence, and a court ruling against Cipla, which would leave Bayer once more as the only supplier of Nexavar.

Bayer seems to be trying to make that outcome more palatable by emphasizing that it has already reduced the price of Nexavar for some people:

Bayer stresses that to facilitate access for patients to innovative treatments, it has had a Patient Access Programme in place since the launch of Nexavar in India in 2008. Bayer says that this programme, last expanded in April 2012, reduces the price for the monthly treatment with Nexavar for qualified persons to about a tenth of the regular pharmacy price (Rs 280,000 or $5,128) for the complete duration of treatment.

But it's not clear how many patients have actually benefited from this program. And in any case, the reduced price of $512 per 120 tablets is still three times higher than Natco's pricing, which would put it out of the reach of many poorer patients. Compulsory licensing, by contrast, has driven down the price to $163, and maybe even to $125 if Cipla is allowed to offer it too. In other words, the availability of indigenous alternatives has caused the price to drop from completely unaffordable levels to ones that are more realistic for the India market -- exactly as generics are supposed to do:

Health advocates and cancer patients are happy that the fight between the big brand-name pharmaceutical producers and local generic drug makers is making cancer drugs cheaper. The vast majority of Indians don’t have any form of health insurance and out of pocket payments continue to be among the highest in the world. Cancer has also become one of the ten leading causes of death in India today. It is estimated that there are nearly 2 – 2.5 million cancer cases at any given point in time in the country.

Against that background, provisions in TPP that will make it much harder for local manufacturers to produce low-cost generics legally are troubling. They represent a clear attempt by the US to prevent the kind of access to vital patented drugs that India's compulsory licensing has permitted. Western pharmaceutical companies and their shareholders may rejoice if that happens, but many of those in emerging economies who are unable to afford life-saving medicines will die as a result.

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Filed Under: access to medicine, drugs, generics, india, tpp
Companies: bayer, cipla, natco

Another Boost For Generics: Brazilian Judge Annuls Patent On Key AIDS Drug

from the keep-taking-the-medicine dept

Last week Techdirt reported on an important decision in India to allow the production of a generic version of a kidney and liver cancer drug, with huge savings for the Indian health system, and major effects in terms of lives likely to be saved. Now Intellectual Property Watch has news of a court case in Brazil that could have equally important consequences for the local use of generics:

Word is spreading of a recent decision by a Brazilian judge to annul a patent on a key AIDS drug, effectively allowing less expensive generic versions into the country, and calling into question other such patents.

Here's why the case is setting a precedent:

A leading feature of the case is that the patent was granted under the "pipeline" process, which allowed "revalidation" of patents granted in other countries while Brazil was modifying its patent law for certain new areas including pharmaceuticals.

The judge in this case ruled that the pipeline process was unconstitutional, according to sources.

The "pipeline" process refers to a mechanism for granting patents in technological fields that had earlier been excluded under Brazilian law, using the date of the first filing for patents elsewhere. This allowed companies to extend the reach of patent monopolies already obtained outside Brazil without needing to go through that country's patent application process.

Lack of constitutionality had been raised back in 2008 because of the way that pipeline patents diminished the public domain:

"The concession of pipeline patents also violates the acquired right of the collectivity by removing from the public domain knowledge belonging to everyone, which once again goes against society’s interest," said Renata Reis, an attorney at the non-governmental Brazilian Interdisciplinary AIDS Organization.

Among the drugs that were removed from the public domain by the pipeline process is the ritonavir/lopinavir combination, the subject of the judge's order annulling Abbott Laboratories' patent. Not surprisingly, the company has said that it will appeal the decision. But if the ruling is upheld it may lead to other patents granted to drugs through the pipeline process being invalidated too.

Taken together with the Indian decision, this latest ruling emphasizes the increasingly important role of generics in global healthcare. That's another reason why both ACTA and the Trans-Pacific Partnership agreement are problematic.

ACTA, for example, allows generics to be seized in transit on the basis of complaints about names that are "confusingly similar" to a brand-name drug. TPP, meanwhile, would bring in a range of measures to make it substantially harder for companies to produce generic versions of patented drugs in signatory nations. The divergence between what the BRICS countries are doing in this area, and what plurilateral treaties like ACTA and TPP seek to mandate, is another reason why it is unlikely the former will ever sign up to the latter.

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Filed Under: access to medicines, aids, brazil, generics, healthcare, patents, pipeline
Companies: abbott labs

'War' On Fake Drugs Really An Excuse To Boost Big Pharma; Putting The Poor At Risk

from the realities-of-patents dept

We've pointed out similar things before, but Oxfam has come out with a new report, claiming that the claims from developed nations about the need to fight "fake drugs," is quite frequently really just an excuse to protect big pharma firms from generic competition. No one is denying that actual fake drugs can potentially be harmful. But, the problem is that the various efforts, including ACTA, to deal with the issue often lump together actual dangerous fake pharmaceuticals with drugs that are simply cheaper but perfectly safe. Oxfam would like to see a legitimate strategy for getting the real fake drugs out of the market, but says the current strategies are all about boosting patent protections, increasing prices for the poor and developing nations and better protecting big pharma against upstart competitors.

The European Union and the United States continue to focus almost exclusively on eliminating counterfeit medicines which form only a small part of this public health problem -- but which are a serious concern for their multinational companies. They have used the crisis in medicine quality in developing countries as an excuse to push for new intellectual property rules that will boost the profits of pharmaceutical giants at the expense of affordable medicines for the poor.

Of course, this becomes important when you realize that ACTA was specifically designed to pressure developing nations into adopting these types of new, more stringent patent and copyright laws. Oxfam is hoping that those countries won't be bullied:

At a time when poor countries struggle to ensure that their populations can get affordable, quality medicines it is outrageous that rich countries and drug companies are pushing 'solutions' that will do more harm than good to patients and public health. It is critical that poor countries ignore rich-country pressure, and focus instead on solutions that will ensure both quality and affordability of medicines.

Filed Under: acta, counterfeits, drugs, generics, health
Companies: oxfam

Drug Rep Accidentally Admits There's No Justification For Massive Markup Over Generics

from the truth-in-emailing dept

Ever wondered why brand name drugs are so much more expensive than generics? Well, so did one Reddit user, who asked what magical qualities made a branded pill worth $500 when the generic was available for $10, and got back a response he wasn't expecting (found via Consumerist), as the rep accidentally emailed him the question that the rep meant to email a superior: In other words, there's simply no good reason. Of course, the monopoly rents afforded to the branded drug maker through patents probably helps. Combine that with the amount of money dumped into highly questionable and dangerous advertising, and you get a bit closer to the answer...

Filed Under: drugs, generics, pricing

Kenya's Anti-Counterfeiting Act Challenged As Violating The Right To Health

from the confusing-generics-with-counterfeits dept

As a bunch of countries continue to negotiate ACTA, the Anti-Counterfeiting Trade Agreement, in secrecy, Kenya already has its own Anti-Counterfeit Act. Michael Geist points us to the news that that particular law is now being challenged in Kenya for violating peoples "right to health." The issue is worth following, because it will almost certainly become an issue assuming ACTA moves forward. Whenever we discuss ACTA, it's inevitable that someone stops by to say that anti-counterfeiting is really, really important to stop dangerous counterfeit drugs from being sold, potentially harming people. Now, I have no doubt that counterfeit drugs may be a serious problem -- but if that's the problem, we should target a narrow attack on that problem alone, not some wider "anti-counterfeiting" effort.

We've already seen that lobbyist-funded and promoted reports on the "counterfeiting problem" are widely exaggerated, and any real "problem" is much smaller than the numbers that get tossed around. Furthermore, recent studies have shown that counterfeit products quite frequently lead to purchases of the real product in the future (i.e., people aren't "fooled" into buying counterfeits -- they know they're buying counterfeits). But that's with things like luxury goods. What about drugs?

Well, we've already seen that big pharmaceutical companies conveniently like to use anti-counterfeiting laws not to stop dangerous counterfeit drugs, but to destroy legitimate generic drugs. It's not about making sure that drugs and people are safe -- but quite the opposite. It's about limiting competition so that these pharma firms can jack up prices even higher.

And that's the issue in Kenya. About 90% of the drugs in Kenya are generics -- for a very good reason. Those drugs are much cheaper and are helpful in saving many lives. The Kenyan anti-counterfeit law makes counterfeiting a criminal issue, rather than a civil one, and gives the power to police and border officials, who have no way of knowing counterfeit from generic, so often label generic drugs as being counterfeits. There are plenty of good reasons to try to stop counterfeit drugs from hitting the market, but if that's the real problem, any solution should be narrowly focused on that specific problem. Unfortunately, since it's quite often the big pharmaceutical lobbyists who help write and push through these bills, that's not how it works at all.

Filed Under: counterfeiting, drugs, generics, kenya, laws

Pay-For-Delay Agreements Again Show How Pharma Abuses Patent Law To Harm Us All

from the this-helps-who-exactly? dept

We've discussed in the past how pharmaceutical patents actually tend to slow down the development of better healthcare solutions, and earlier this year, we mentioned how the EU was growing increasingly concerned about how patent holders were abusing their patents to try to prevent generic competitors from entering the market. Recently, US FTC officials have noticed the same thing and are trying to do something about it -- but are facing tremendous (well organized and well financed) pushback from pharmaceutical lobbyists (the kind who are able to get more than 40 Congressional reps, on both sides of the aisle, to repeat talking points into the Congressional record with no shame).

At issue is the fact that the big pharma firms are paying off generic drug makers to keep them from entering the market -- which in any other market would be a clear anti-competitive activity. How do patents fit into the equation? Well, the big pharma companies are suing the generics for patent infringement, but know they don't have any legal leg to stand on. The filing of the lawsuit is basically just a negotiating ploy, bringing the generic manufacturer to the table. If there were actual infringement, then the generic maker could be barred or would have to pay up. Instead, the money flows the other way. The two parties settle in a "pay for delay" pact, whereby the patent holder pays off the generic maker to stay out of the market, even if there's no real infringement. This basically grants the patent holder extra monopoly time on a drug, which can be worth billions, but makes drugs significantly more expensive for everyone.

Filed Under: generics, patents, pay for delay, pharma