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When patents are about to expire on a brand name pharmaceutical company’s blockbuster drug, the company often looks for a way, any way, to keep its hold on the market and prevent lower-priced generic forms of a drug from cutting into its profits. Because the stakes are so high — often millions of dollars per day for a single drug — the nation’s pharmaceutical giants have stepped up efforts to preserve that monopoly by engaging in legal battles that have tested the limits of the Hatch-Waxman Act. The Act was designed to balance the competing interests of brand-name and generic drug companies by allowing generic drug makers to conduct the testing necessary for Food and Drug Administration approval before a brand-name drug expires, so that once it expires, generics can hit the market running. By law, drug makers get 20 years of patent protection for the medicines they invent. This exclusivity is designed to serve as compensation for the hundreds of millions of dollars spent to develop breakthrough drugs. Drug makers contend such exclusivity is critical to encouraging companies to take the risks required to bring drugs to market. They point to the fact that only one out of five drugs in development will ever make it to drugstore shelves. But critics charge that in their zest to maintain market exclusivity, some big drug companies have engaged in abusive patent extension schemes. They allege that prescription drug companies have managed to find loopholes in the Hatch-Waxman Act and are using regulatory delay tactics to keep generics from selling their less expensive versions of a drug. The first generic version of a brand-name drug to hit the market usually costs 30 percent to 40 percent less than the brand-name drug. As more generic versions become available, the price can drop by as much as 70 percent to 80 percent. In the next three years, 17 brand-name drugs are scheduled to come off patents held by such pharmaceutical giants as Eli Lilly, Schering Plough, Glaxo SmithKline and Bristol-Myers Squibb for drugs used to treat everything from ulcers to allergies, depression to cancer. ( See related chart.) One company in particular, Bristol-Myers Squibb, has been called “the poster child” for such abuse by the Generic Pharmaceutical Association, a Washington, D.C.-based organization that represents generic drug manufacturers and distributors. For years, Bristol-Myers held up the release of a generic version of its blockbuster cancer drug Taxol by challenging generic drug maker Miami-based Ivax Corp. in numerous courtrooms around the country. The company did the same with its diabetes drug Glucophage by unsuccessfully trying to convince Congress to carve out a special exception to the law that would have given it three-and-a-half years more of market exclusivity on a drug that meant $1.7 billion in annual sales to Bristol-Myers. But Bristol-Myers’ efforts to keep generic competition at bay hit new heights when, just hours before its patent was to expire, the company filed a secondary patent on its widely prescribed anti-anxiety drug Buspar. Bristol-Myers began selling Buspar in 1986 and it has been worth $700 million in annual sales to the company. In November 2000, Bristol-Myers issued a press release announcing a “scientific discovery that sheds new light on the optimal use” of Buspar. This metabolite, produced by the body after a patient takes Buspar, was “largely responsible for therapeutic relief and may offer improvements in patient response rates,” the company noted. Bristol-Myers said it would file a new patent covering a method of use of that metabolite produced by the administration of Buspar. Initially, Bristol-Myers attempted to get patent coverage on the metabolite that was broad enough to cover Buspar. But the U.S. Patent and Trademark Office refused to issue one, saying that by law the drug belonged in the public domain. Bristol-Myers then agreed to give up its ability to claim patent coverage for Buspar in exchange for obtaining an expedited patent on the metabolite only, which was permitted, explained Jay Shapiro, managing partner at Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami. Shapiro represents health insurers and third-party payers in class-action lawsuits filed against Bristol-Myers. What was not permitted, said Shapiro, was Bristol-Myers’ efforts to remove Buspar from the public domain under the guise of a new discovery of the metabolite. Bristol-Myers attempted to do this by listing the patent in the FDA’s “Orange Book” claiming it covered Buspar after explicitly telling the patent office that it would not. Shapiro explained Bristol-Myers’ tactic like this: “It’s like if someone figures out there’s an active ingredient in aspirin that cures cancer, and they are able to isolate it and use it to treat cancer, you can’t use that patent to take Bayer off the market.” Bristol-Myers’ tactics are “novel and outrageous and egregious and won’t stand,” said Brad Cameron, a spokesman for Business for Affordable Medicine, a Washington, D.C.-based national coalition of U.S employers, governors and labor organizations who are trying to get Congress to close the loopholes that permit companies such as Bristol-Myers to keep generics from coming to market. By filing the patent in the FDA’s Orange Book just hours before its patent on Buspar was about to expire, Bristol-Myers triggered an automatic 45-day period in which it then could bring patent infringement suits against generic competitors Mylan Pharmaceuticals Inc. and Watson Pharmaceuticals. Bristol-Myers then filed patent infringement suits against the generic drug makers, triggering an automatic stay of the FDA’s approval of the generic form of the drug. Mylan and Watson, in turn, filed suit in federal court against Bristol-Myers asking that it be prevented from listing its patent and asking that the FDA approve the sale of their generic versions of the drug. The cases landed before U.S. District Judge John G. Koeltl for the Southern District of New York who, on Feb. 14, granted Mylan and Watson their motion for summary judgment finding that Bristol-Myers’ patent on the metabolite did not cover Buspar. “The court drew a line and said this is crazy,” said Cameron. In a separate ruling issued the same day Koeltl refused to dismiss antitrust claims filed against Bristol-Myers by Mylan and Watson. Bristol-Myers had argued it was entitled to immunity from the antitrust action under the Noerr-Pennington doctrine. That doctrine holds that parties that petition the government, which may include initiation of litigation, should not be subject to antitrust actions. But Koeltl ruled that Bristol-Myers’ listing of the patent in the Orange Book did not constitute petitioning, rather it was a regulatory requirement. Koeltl’s rulings also clear the way for two national class-action lawsuits against Bristol-Myers to go forward. The suits, filed in March 2001, allege Bristol-Myers illegally extended its monopoly on the production of Buspar by submitting false patent information to the FDA. They claim that as a result consumers and health care providers were forced to pay a higher price than they would have paid had there been a generic version of Buspar available sooner. “We are just beginning to learn more about the lengths to which pharmaceutical companies will go to protect themselves from competition,” said Michael Buchman, a partner at Milberg Weiss Bershad Hynes & Lerach in New York who has filed one of several lawsuits seeking class-action status against Bristol-Myers on behalf of consumers, third-party payers and public interest organizations. Bristol-Myers declined comment. However, those representing the brand-name drug industry say patent protection is essential and that without it the level of innovation that exists today could not continue. They argue that patent disputes are the exception and not the rule. Between 1984 and January 2001, 8,259 generic drug applications were filed with the FDA; of those only 478 involved a patent dispute, according to the Pharmaceutical Research and Manufacturers of America, a Washington, D.C-based organization that represents research based pharmaceutical and biotech companies. “Anytime you have an innovative company spending an average of $800 million to research and develop one new drug, that company is going to fiercely defend its patent. Those companies believe they have something legitimate to protect,” said Jeff Trewhitt, the organization’s spokesman. Though Mylan and Watson won, the delay allowed Bristol-Myers to earn an estimated $253 million in sales of Buspar while it litigated the case. Once Mylan began selling its version of Buspar, sales dropped from $194 million in the second quarter of 2000 to just $89 million for the same quarter in 2001. “The problem is that [drug companies] can buy three or six months or one to two years with a court case by putting these patents up and that’s plenty of time to recoup more money,” said Clay O’Dell, director of public affairs for the Generic Pharmaceutical Association. “For a brand company it’s a legal and financial strategy and it’s a calculated gamble,” he said. Related chart: Expiration Dates:Medication patents set to expire this year, in 2003 or 2004

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