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Neil Flanzraich considers himself a reasonably good chess player. Not in Bobby Fischer’s league, of course, but he holds his own in a game against his son, who is a school chess champion. Flanzraich also knows enough about the game to recognize the importance of strategizing and keeping ahead of the competition. His ability to do both are what make the Harvard Law School grad good not only at running the business side of Ivax, a global pharmaceutical company with $1.2 billion in 2001 revenues, but also at understanding the complicated legal issues facing today’s prescription drug market. Since taking over as president and vice chairman of publicly traded Ivax Corp. in Miami four years ago, the bespectacled and balding 58-year-old has helped the company ride out the numerous financial and legal challenges that beset the company even before his arrival. At Ivax, the bottom line is driven as much by the company’s legal efforts as it is by research and development or marketing. It’s in court where Ivax fights against drug giants such as Bristol-Myers Squibb Co. for the right to bring its generic drugs to market. Ivax usually must endure complex, costly and lengthy intellectual property lawsuits in multiple jurisdictions. And every delay comes at a cost of millions of dollars. Flanzraich’s 30 years of experience as in-house and outside legal counsel to prescription drug companies has allowed him to lead his seven in-house lawyers, headed by company general counsel Steven Rubin, through a complicated maze of regulatory and corporate securities challenges. Unlike some of its competitors, in addition to being one of the largest generic drug companies in the world, Ivax has some 700 scientists and physicians working on its own proprietary drugs. The company hopes these will be its next wave of blockbuster products. Among them is a drug to treat brain cancer and another that could apply to other forms of cancer, as well as drugs to treat Parkinson’s disease, multiple sclerosis and Alzheimer’s disease. By marketing a mix of both generic and newly developed drugs, Flanzraich has a unique perspective and insight into the industry. “We understand the need for a company to have some assurance for a period of market exclusivity, given the risks and cost of developing proprietary drugs,” Flanzraich says. Every day a brand company can keep a generic form of its drug from coming to market means millions of dollars more in its coffers. To preserve their profits, big drug companies use complicated regulatory laws to delay approval of generic drugs for as long as possible. The issue is further complicated by intellectual property laws, which allow companies to file patents on everything from the chemicals that make up a drug to the means by which drugs are administered. “You don’t get generic drugs on the market a lot of times without litigation,” says Bill Mentlik, a patent lawyer and litigator with Lerner David Littenberg Krumholz & Mentlik in New Jersey who does work for Ivax. And, because Ivax has interests all over the world — from Latin America to Europe and from China to the Czech Republic — Flanzraich often also burns the midnight oil when deals are to be done. “At times it’s like conducting an orchestra,” said Flanzraich. “I am running an international company with interesting and challenging things happening all over the world. So I have to space my time appropriately. If you haven’t learned how to make that happen, how to manage that process, the products won’t come to market.” THE BATTLE FOR TAXOL Few cases illustrate the extreme measures big pharmaceutical companies will take to stave off generic competition better than Ivax’s fight to create a generic version of the cancer drug Taxol. Fearful of losing its monopoly on a drug that brought it more than $1 billion in annual sales, Bristol-Myers engaged in a multifaceted almost four-year battle with Ivax in an effort to keep the Miami company from launching Onxol, its generic version of Taxol. “Bristol-Myers laid down a minefield,” said Tom Scarlett, a lawyer with Hyman Phelps & McNamara in Washington, D.C., who specializes in Food and Drug Administration matters and who has represented Ivax. “It’s been one of the most complicated drug approval exercises I have ever been involved in, in every respect,” he said. The main ingredient of Taxol was discovered more than 30 years ago in the bark of a Pacific yew tree. The National Cancer Institute devoted millions of dollars to laying the groundwork that would lead to the drug’s development. But lacking in resources to manufacture and market it, the federal government signed a deal with Bristol-Myers in late 1992, giving the company the exclusive right to sell Taxol for five years. After that, other drug companies were to be free to start selling their own version. As the clocked ticked down to the last days of exclusivity, Bristol-Myers pulled a fast one, listing the patent for the drug in the FDA’s Orange Book. Once a patent is listed there, the FDA typically is prohibited for 30 months from approving a generic drug that might interfere with the patent. Ivax found itself in a legal battle almost four years long, stretching from Florida to Washington, New York to California. The skirmish required the work of 20 outside lawyers, tens of millions of dollars in legal fees and countless hours of legal work. Throughout the complex case, Flanzraich and his team tried to predict their adversary’s next move: a tricky feat when you consider that courts in five states were issuing rulings that, at times, conflicted with each other. One day Ivax would be named the victor, the next it had been defeated. “If you have to compare Neil to a general, it would be Patton. He is not a general who sits behind the lines and lets other people go off and do their thing. He is actively involved in the high-level strategy issues,” says Jay Shapiro, Ivax’s former corporate counsel and now managing partner at Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami. TAKING STOCK To the casual observer it was difficult to predict an outcome. The problems were reflected in the company’s stock. For example, last April, a federal appeals court cleared the way for Ivax to keep selling Onxol. Prior to that ruling, Ivax stock was trading in the high $20s. By the end of April, after the ruling, the stock had climbed to nearly $40 per share. “We knew which were the cases that if we won, everything else would fall into place,” Flanzraich says. They did and in January Ivax won another important court victory that essentially put an end to its legal squabble over Taxol. The company was able to get a patent claim to the drug, by a third-party, American BioScience, invalidated which then enabled the FDA to renew and approve sales of Onxol. The Santa Monica, Calif., company entered the fray in August 2000 by claiming that it too held a patent for Taxol, this one relating to the way the drug is administered. Ivax claimed Bristol-Myers and American BioScience had conspired to bring the lawsuits as part of a “collusive effort intended to extend Bristol’s monopoly over Taxol.” Other factors surrounding the sale of Onxol have contributed to the rise and fall of the company’s stock. In September, Ivax announced that sales of Onxol would be “significantly lower” than the previous quarter as a result of the new competition. The news caused Ivax’s stock to tumble 35 percent, hitting a 52-week low of $17.90 per share. On March 8, Ivax shares traded at $17.70. 10 WEEKS, $30 MILLION By law, the first generic drug company to receive FDA approval to market a drug gets exclusive rights to its sale for six months. After that, it’s a free-for-all, with the price dropping over time from 15 percent to as much as 50 percent, forcing the brand name company to slash the price of its drug as well. Ivax first got approval to sell Onxol in September 2000. By March 2001, its exclusivity had run out and other companies began selling their versions of the drug. For Ivax, sales of Onxol through the end of 2000 reached $30 million for the 10-week period ending Dec. 31. In the first quarter of 2001, sales reached about $55 million and by the second quarter were $77 million for the quarter. The company no long releases sales figures for its individual products. Flanzraich says the ends justified the means: “As long as you believe you will prevail and the product is an important one, generally the costs are justified.” “These products can live for years,” he adds. “And while you may not make it up in the first year, it will be a reasonable investment and you will eventually get a reasonable return.” The stakes are just as high for other generic companies. Take Davie, Fla.-based Andrx. Its stock surged 25 percent on March 1 after a federal judge threw out a lawsuit filed against it by British drug maker GlaxoSmithKline. The brand company sued Andrx for patent infringement in an effort to maintain exclusivity over Wellbutrin, used to treat depression, and Zyban, which is used to help people stop smoking. Wellbutrin generated about $1.1 billion in sales for GlaxoSmithKline last year. A MATTER OF PRECEDENT While winning cases is top priority, setting legal precedent also plays an important role for generic drug companies, says Shapiro. He cites one such battle with Eli Lilly and Co. over its blockbuster antibiotic Cefaclor, which is prescribed for flu, pneumonia and other infections. The brand-name drug company tried to prevent Ivax from getting to market with its generic version. Ivax defeated Eli Lilly’s motion for preliminary injunction. In seeking such an order, Ivax had to prove it was likely to prevail and that in the absence of an injunction there would be irreparable harm. The judge accepted Ivax’s argument that when a brand company tries to prevent a generic from getting to market the mere fact that a brand company will lose its market share to a generic does not constitute irreparable harm. The ruling by the chief judge of the U.S. District Court for the Southern District of Indiana was affirmed by the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., which hears patent appeals. “This was a very important precedent that is frequently cited in cases where brand companies are trying to take generics off the market,” Shapiro says. A NEW BATTLE FRONT Bristol-Myers hasn’t limited its efforts to the courts. Last year, it launched a different kind of offensive, this time using legislation instead of litigation to try and maintain its monopoly on a drug. Bristol-Myers blanketed Congress with dozens of lobbyists in an attempt to convince lawmakers that it had conducted costly testing to see whether another of its drugs, Glucophage, was effective in treating children. It tried to do so under a law known as “pediatric exclusivity,” which would have given the company another six months of exclusivity. Annual sales of that diabetes drug in the U.S. alone totaled some $2.5 billion. Because the stakes were so high, Bristol-Myers took its claim a step further and said it should get another three years because it would change the label to indicate the appropriate dosage of Glucophage for children. Because the generics could not include that label, it would have effectively banned them from marketing the drug at all. The generic drug companies fought back with a legion of their own lobbyists, who argued to members of Congress that this was little more than yet another attempt by a big pharmaceutical company to game the system. Congress agreed and signed legislation that would close the loophole Bristol-Myers thought it had found to maintain market exclusivity of Glucophage. In January, Ivax got the green light to market its version of the diabetes drug. “It showed that the message has gotten out that some of these actions are outrageous and some legislation is needed,” Flanzraich says. With 38 generic drugs in the pipeline and three pending FDA approvals, Flanzraich doesn’t have time to rest on his laurels. And he fully anticipates battles with other brand-name companies in years to come. As he puts it: “There is never a dull moment.”

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