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New York City has filed three suits in the past two weeks seeking to recover millions of dollars by piggybacking on the success that generic drug makers have had in breaking patents on brand-name drugs. The latest, filed Monday, seek to recover amounts the city paid through its Medicaid program for the anti-depressant Paxil and Augmentin, an antibiotic. The city charges that it paid inflated prices because the maker of the drugs, GlaxoSmithKline, used bogus methods to extend the drugs’ patents. Ten days earlier, the city had sued the Purdue Pharma Co. claiming it had used similar tactics to sell its painkiller, OxyContin, at an artificially high price. All three suits seek to build on the success generic drug companies have had in winning rulings invalidating patents on the three drugs. The decisions invalidating patents on Augmentin and Paxil have been affirmed by the U.S. Court of Appeals for the Federal Circuit. The patent on OxyContin was lifted by a ruling in the Southern District of New York, which is being appealed to the Federal Circuit. In all three cases, the city contends that the drug companies used spurious tactics to extend their patents on the drugs, a process it labels as “evergreening” the patents. Corporation Counsel Michael A. Cardozo, in a statement issued Tuesday, said the city will soon file another major suit attacking a different “fraudulent” practice in the pharmaceutical industry that has also led to overcharges. A patent gives a manufacturer of a brand-name drug protection from competition for at least 17 years. As long as a valid patent is in place, a company producing a generic drug — the chemical equivalent of a brand-name drug — is barred from competing. The financial stakes can be enormous. There are estimates that prescription drug sales in 2002 amounted to $192.2 billion. A Congressional Budget Office study conducted in 1998 concluded that generic drugs could produce savings for consumers, insurance companies and others of $8 billion to $10 billion a year. In the context of the city’s lawsuits, that translates to millions of dollars in potential damages. In 2002, the city paid $14.7 million to cover the costs of Augmentin for the poor on Medicaid and $23.1 million for Paxil. Similarly the city paid $5.5 million for OxyContin. The city pays 25 percent of the cost of the Medicaid program, with the balance paid by the state and federal governments. The city has not yet calculated the amount of its damages. But once computed, they will reflect the amount it would have saved had the lower-priced generic drug been permitted to be sold. Since the city claims the drug companies tactics violated the federal antitrust laws, it is seeking treble damages. GlaxoSmithKline did not comment. Timothy Bannon, special counsel for Purdue Pharma, said the company is “confident” it will prevail in the Federal Circuit and that New York City’s and similar lawsuits will be dismissed. Bernard Persky, the city’s lead lawyer in the drug cases, said court rulings stripping pharmaceutical companies of their patents provide “an incredibly fertile area for the recovery of overcharges resulting from monopoly prices unlawfully obtained.” Persky, a partner at Goodkind Labaton Rudoff & Sucharow, said consumers, insurance companies and governmental entities have frequently sued seeking the recovery of overcharges in the wake of rulings invalidating patents on drugs. Jonathan Low-Beer, the senior lawyer from the Corporation Counsel’s Office working on the lawsuits, agreed that patent rulings have caused recovery actions “to really explode in the last couple of years.” “The courts appear to take a dim view of many of the practices of brand-name manufacturers in this area,” he said. When rulings come down, invalidating drug companies’ patents, he said, the city “will try to recover any amounts it has been overcharged.” In the last two years, all 50 state attorney generals have participated in two mega-settlements of overcharge claims stemming from patent litigation between generic and brand-name companies, said Persky. In one of those cases, Persky reported, the attorneys general obtained a $100 million settlement from Bristol-Meyers Squibb after its patent on Buspar, an anti-anxiety drug, was invalidated. The settlement covered the state’s losses under their Medicaid programs as well as overcharges for purchases made by state prisons and hospitals. A portion of the settlement also covered overcharges paid by consumers, he added. As an example of “evergreening,” the city says in its Paxil lawsuit, that the original patent would have expired in 1992, but that GlaxoSmithKline filed a dozen subsequent patents that would have extended its monopoly rights for 27 years to 2019. In addition, the complaint asserts that GlaxoSmithKline has filed at least nine lawsuits against generic companies that were attempting to invoke a 1984 law, the Hatch Waxman Act, to compete with Paxil. Under Hatch Waxman, each time GlaxoSmithKline sued a generic competitor its monopoly was extended, through a statutory stay, for another 30 months. Under legislation passed in December, brand-name companies are now limited to one 30-month stay even if they bring multiple infringement suits against generic competitors. OUTSIDE EXPERTS The city retained Goodkind Labaton to handle the Paxil and Augmentin cases because of the need for expertise in a specialized area of litigation, Low-Beer said. Goodkind Labaton, for instance, is representing both Suffolk County and the United Federation of Teachers on claims that they overpaid for Augmentin. For similar reasons, the city retained Kirby, McInerney & Squire, whose partner Joanne M. Cicala is lead counsel on the OxyContin lawsuit. Both firms are working on contingency basis, Low-Beer said. Rulings invalidating patents in these cases have spawned three sets of multi-district litigations. The three courts assigned to handle the litigations are situated in districts where a ruling was initially issued invalidating a patent. For that reason, the city’s OxyContin case was filed in the Southern District of New York; the Paxil case in the Eastern District of Pennsylvania; and the Augmentin case in Eastern District of Virginia.

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