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Jay Deshmukh was on the phone one fall day in 2002 with his outside counsel. The trio — Deshmukh, vice president for intellectual property of New Delhi-based generic drugmaker Ranbaxy Laboratories Limited, plus William Zimmerman and Darrell Olson, partners at Irvine, Calif.-based Knobbe, Martens, Olson & Bear — reviews patents and confers daily about their findings. But this wasn’t one of their ordinary conversations. The group thought that not only had they found a legal way to make a generic version of Pfizer Inc.’s Lipitor, but that they’d found a bonanza — a way to defeat the main patent of the world’s best-selling prescription drug. Excited, Deshmukh quickly called his CEO in India with the news. “We never expected to find what we saw,” says Deshmukh. Exactly what they saw, he won’t say. But after notifying the U.S. Food and Drug Administration, Ranbaxy sent a letter on Jan. 10, 2003, to New York-based Pfizer. The letter, which is required by federal law, was addressed to Peter Richardson, Pfizer’s general patent counsel. It laid out Ranbaxy’s arguments about the Lipitor patents, and notified him that the company planned to market a generic version of the cholesterol-fighting drug. In February 2003, Pfizer sued to stop Ranbaxy. The trial began Nov. 30 in Wilmington, Del., federal court before U.S. district court judge Joseph Farnan. A decision is expected within the next several months. In court documents, Ranbaxy claims that the main Lipitor patent does not cover the form of a key ingredient, atorvastatin, used in the drug. Ranbaxy alleges that Pfizer misrepresented that fact to the Patent and Trademark Office when it won an extension on the patent until 2010; the patent was originally scheduled to expire in 2006. (Ranbaxy also argues noninfringement and invalidity of the two patents at issue.) Pfizer general counsel Jeffrey Kindler, while declining to discuss the case in detail, said in an e-mailed response to questions for this story: “Pfizer believes strongly that both the patents to be litigated in the Lipitor case are valid and infringed. This is obviously an important case for the company because Lipitor is our biggest-selling product.” Kindler adds that pharmaceutical companies like his take all the financial risks in researching and patenting new medicines. And, he contends in his e-mail, they “deserve to be rewarded when those risks pay off.” If Ranbaxy wins its assault on the world’s most lucrative drug, the case would have a wide-ranging impact. Lipitor is on track to rake in $10 billion in sales this year; it would be the first drug to ever break that mark. Moreover, Ranbaxy is challenging Lipitor’s primary patent — the basic patent on the ingredients that Pfizer uses in the medication. Generic firms usually challenge secondary patents, which cover things like manufacturing processes, says Trevor Polischuk, a drug industry analyst with medical investment firm OrbiMed Advisors LLC, in New York. But if Ranbaxy prevails, says Polischuk, similar challenges could “shake the very foundation of the pharmaceutical and biotech industries [and] crack the system.” Also at stake, according to Peter Yu, director of the IP program at Michigan State University College of Law, is whether Pfizer can slow down the accelerating trend of smaller generics taking on the big pharmaceutical companies. If Pfizer can’t protect its most prized patent from an upstart like Ranbaxy, then generic makers will push harder to challenge more patents, Yu predicts. Momentum seems to be on the generics’ side right now, as patents expire and health insurers and others struggle to curb escalating drug costs. Global sales of generic drugs grew by 20 percent in 2004, and will reach $50 billion by 2007, according to the Arlington, Va.-based Generic Pharmaceutical Association (GPhA). Pfizer’s Kindler criticizes the generics for their aggressive and early attacks on patents. He says the U.S. patent system encourages investment and innovation, and “it’s extremely important for the future development of lifesaving drugs that we preserve the current system, not weaken it.” A win would be a watershed moment for Ranbaxy. In the United States, once the patent on a brand-name drug expires, generic makers can begin to market their products. However, under the Hatch-Waxman Act of 1984, a generic company that defeats a brand-name drug patent is granted six months to sell its version of the drug exclusively before other companies can introduce their copies. If that happens for Ranbaxy as a result of the Lipitor trial, that could mean billions of dollars for the company. That cash would help finance Ranbaxy’s plan to develop its own name-brand drugs, along with generics. The suit also shines a spotlight on Deshmukh, an obscure, unassuming patent attorney who finds himself playing David to Pfizer’s Goliath. He’s a giant slayer with nerve to spare. Deshmukh has prodded his staid company — which was once content just to wait for patents on name-brand drugs to expire before it tried to sell generics — to brashly take on top-selling drugs like Lipitor and GlaxoSmithKline plc’s Ceftin while they are still on patent. In fact, Deshmukh took Pfizer on while its bet-the-company litigation with Glaxo was still pending. Backed by new outside counsel — Deshmukh switched law firms over the objections of Ranbaxy’s business side — the IP lawyer now sees himself as the architect of Ranbaxy’s current success. Deshmukh says of his IP team, “We are [Ranbaxy's] business model.” It’s pretty heady stuff for an in-house lawyer at a company that the industry has, up until now, regarded as a minor player. If Pfizer, with an estimated $52 billion in sales last year, is “Big Pharma,” as such companies are known in the trade, then Ranbaxy is clearly “Little Pharma.” Lipitor alone delivers ten times the revenue that all of Ranbaxy’s worldwide drug sales (an estimated $1 billion) brought in last year. Ranbaxy doesn’t even rank in the top five generic companies in the world; it is tenth. No wonder some observers at first scoffed at Deshmukh’s chutzpah. But Smith Barney analyst George Grofik told his clients after Pfizer sued Ranbaxy, “After reviewing the relevant court documents … we believe there are significant risks to the Lipitor patent estate.” Grofik changed his rating on Pfizer from “buy” to “hold.” Jay Deshmukh knows a little something about taking risks. Born in India 41 years ago, he came to the United States at 20 to get his master’s degree in chemical engineering at Cleveland State University. He earned his law degree from Case Western Reserve University School of Law while working full-time as a patent agent. After stints at patent law firms in Cincinnati, he joined Ranbaxy in 1998. Since then, Deshmukh’s successful calls have helped catapult Ranbaxy USA from a small $32 million-a-year business in 1998, to a billion-dollar company in 2004. But if he’s nervous about taking big chances, it doesn’t show. Deshmukh, sitting with colleagues in a conference room at the company’s U.S. headquarters in Princeton, N.J., last fall, is calm, open, and friendly. Yet his serene exterior belies an intense, driven personality. Ranbaxy in-house counsel William Hare calls his boss the “Michael Jordan of intellectual property” because he forces others to raise their play to a new level. According to his primary outside IP counsel, that’s nothing new. Knobbe Martens’ Zimmerman recalls their days together at the Cincinnati law firm of Frost & Jacobs a decade ago, working nights, weekends, and holidays. “Jay is one of the most hard-driving, dedicated individuals I’ve ever known,” says Zimmerman. Hired as Ranbaxy’s first and only IP attorney, Deshmukh’s mandate was to help find ways to expand Ranbaxy’s generic offerings while working with the FDA on regulatory matters, according to Charles Caprariello, Ranbaxy’s U.S. vice president of business development. Over time, Deshmukh spurred the company to be more aggressive in its patent challenges. Ranbaxy CEO Brian Tempest calls Deshmukh and his IP team the company’s “sword and shield,” for both its attacks on patents and its protection of Ranbaxy’s new products. He says Deshmukh’s IP group plays a key role in the company’s success. A major part of that success came from Deshmukh’s first trial victory. At the time he was hired, Ranbaxy was developing a generic version of Ceftin, an antibiotic patented and produced by London-based Glaxo. The drug had annual revenues of $403 million in 2001, and its patent was set to expire in 2004. Ranbaxy could have simply sold its version of the drug in India and other countries that do not recognize primary patents (new, more restrictive laws go into effect in India in 2005). But the company was at a crossroads about what it should do in the U.S. Should it wait until the drug went off patent before selling the generic? Or could it find a loophole in the patent and market a version of the drug that was close enough to it to be a generic, but different enough so that it wasn’t covered by the Ceftin patent? Deshmukh thought Ranbaxy’s product was unique enough that it could market its generic as soon as it was ready. He also knew that as soon as the company notified Glaxo of its plans, the drug giant was likely to sue to protect its patent, so Deshmukh quickly looked to make sure he had the right outside counsel to defend the company. Ranbaxy had retained Proskauer Rose, the prominent New York-based firm, as its primary outside counsel when the company entered the U.S. market in the late 1990s. But Deshmukh wanted a firm that focused solely on IP. “I needed to shift [Ranbaxy] management from trying to save money [by avoiding litigation] to using the best lawyers money can buy [to litigate]. You either litigate fully or you don’t litigate,” he recalls. Caprariello says Deshmukh faced considerable opposition from Ranbaxy’s R&D department over the law firm switch, but the lawyer persisted. That department, to which Deshmukh reported, was “comfortable” with Proskauer, says Caprariello. Going to trial over Ceftin, which ultimately cost Ranbaxy $5 million, was a commitment beyond anything the company had done before, Deshmukh says. Charles Guttman, who leads Proskauer’s IP practice, argued in vain that the firm’s broad litigation experience shouldn’t be tossed aside. “I had been working with other people there [at Ranbaxy], and Jay came in and made his decision,” Guttman says. “What can I say? I wish him well.” Deshmukh first searched for a replacement for Proskauer on the East Coast, but he says that most of the top IP firms there were already on Big Pharma’s payroll. So Deshmukh called his friend and prot�g� Zimmerman at Knobbe Martens, a large IP law firm out West. Deshmukh’s opening gambit against Glaxo started badly. After receiving Ranbaxy’s letter, Glaxo sued in federal court and in early 2001 obtained a preliminary injunction that stopped Ranbaxy from going to market. (Glaxo declined to comment on the case.) The pressure on Deshmukh was intense. Zimmerman says, “It was our first case for Ranbaxy, and we had lost our first battle. He never told us, but we knew the substantial pressures on Jay to switch law firms. We sat down with him, and he decided to stick with us for an appeal.” Deshmukh concedes that his job was on the line. Four-and-a-half months later, the U.S. Court of Appeals for the Federal Circuit reversed the trial court’s injunction, saying it saw little chance that Glaxo could prevail at trial. But that good news presented Deshmukh and his team with a new dilemma — whether to launch the generic before the trial concluded, which would give Ranbaxy a head start. Launching early would carry no repercussions as long as Ranbaxy won at trial; but if it lost, under U.S. patent law Glaxo could seek treble damages for willful infringement. Knobbe Martens’ Olson recalls, “There were still substantial issues to be resolved at trial. Ranbaxy was a small growing company, and Glaxo had made a substantial damage request.” (The request remains under seal.) Deshmukh didn’t blink; he advised his bosses to launch, and they did in 2002 as they moved toward trial. The launch ignored the judge’s pretrial warning that if Ranbaxy lost, it would not have the cash to cover Glaxo’s damages. Ten days before the trial started on July 15, 2003, Zimmerman’s wife gave birth prematurely to twins in California. The babies were placed in the neonatal intensive care unit while Zimmerman flew to New Jersey. “It was an excruciatingly slow trial, a torture that lasted over one month and ten days,” Deshmukh recalls. The reward for the torture came when the judge ruled last April in Ranbaxy’s favor. From California, Olson called Deshmukh with the news. “He was ecstatic,” Olson recalls. And before Zimmerman could call his wife, Deshmukh beat him to it. “He thanked her for her sacrifice,” Zimmerman says. “She was the real hero.” Deshmukh’s gamble paid off. His handpicked law firm prevailed; Ranbaxy’s early launch of generic Ceftin helped its U.S. revenues skyrocket from $116 million in 2001 to $290 million in 2002 and $407 million in 2003. Glaxo was barred from collecting any damages and did not appeal. Deshmukh was able to parlay that success in several ways. He moved from being the sole IP lawyer reporting to R&D, to global vice president of intellectual property, reporting directly to CEO Tempest. Deshmukh oversees four other lawyers in the U.S. and in Europe, as well as a large technical staff of patent and chemical experts in India. (Ranbaxy’s New Delhi-based GC spot was unfilled at press time.) Deshmukh says that the company has now established a $100 million threshold of sales; Ranbaxy primarily will look to develop drugs with revenues above that amount. Now, Deshmukh says, “We [the IP department] are the engine that drives the company train.” Just how far and how fast Ranbaxy’s train will travel depends on many circumstances, especially the outcome of the Lipitor trial. In addition to that suit, Ranbaxy is also in the midst of fighting battles on other fronts. In November the World Health Organization removed seven of Ranbaxy’s generic AIDS-fighting medications from its list of drugs recommended for use in Africa. The WHO questioned whether the prescriptions were the true equivalent of proven brand-name drugs; Ranbaxy is currently re-evaluating them. Then Ranbaxy advised doctors to limit prescribing its generic version of Merck & Co. Inc.’s recalled painkiller Vioxx until it conducted further testing. In the meantime Ranbaxy is also repositioning itself as a developer, not just a challenger, of brand-name drugs. Ranbaxy’s Caprariello says the company is using the profits generated by its generics to fund development of these medications. The company wants half of its revenue to come from brand-name drugs by 2007 — a goal contained in Ranbaxy’s mission statement, named Garuda, after a magical bird in Hindu mythology. Part of that strategic shift is a response to the new patent landscape in India. The country has vowed to enforce U.S. patents, starting in 2005. That change is likely to bring in more revenues for brand-name drugmakers. And, if Ranbaxy is successful as a brand-name drugmaker, it could also mean, ironically, that the company may eventually find itself on the other side of a “Dear Patent Holder” letter. But Deshmukh shrugs off the challenge, saying, “I have learned a few things about protecting intellectual property.” Despite Ranbaxy’s push toward branded drugs, generics will continue to play a significant part in the company’s overall strategy. Last year Ranbaxy filed 25 U.S. applications with the FDA to produce generics, and Deshmukh expects another 25 this year. Only generic giant Teva Pharmaceuticals USA, the North Wales, Pa.-based subsidiary of the Israeli drug company, filed more, with 27. Today Ranbaxy offers some 50 generic products, most of which went to market without litigation. “We don’t do willy-nilly patent challenges,” Deshmukh says. A continued emphasis on generics is good news to Ranbaxy in-house lawyer Hare. “If you’re a patent attorney, a generic firm is the place to be,” Hare says. “It’s like playing football, and you’re the team with the ball. It’s a lot more fun than having to defend.”

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