INNsight articles by Gregory Glass

After the settlement of the Plavix case officially fell apart on July 31, 2006, there has been a great anxiety expressed over what happened, why it happened, and what may happen next to Sanofi-Aventis, Apotex, and the other players in the Paragraph IV community.  We will try to bring some clarity to these questions and offer some scenarios that may play out in the future.

Background

Things started innocently enough back in March 2002 when Sanofi-Aventis (and Bristol-Myers Squibb) sued Apotex in New York to defend the primary patent for its product Plavix®(clopidogrel).  From all appearances, Apotex appeared to be first to file its Abbreviated New Drug Application (ANDA) with a Paragraph IV certification (in effect, challenging the validity of the patent), and if things fell according to plan for it, would entitle Apotex with a 180 days generic exclusivity in the U.S. market.

The case was followed by several other ANDA filers including Dr. Reddy’s Lab, Teva, Watson, and Cobalt.  As is the situation in many Paragraph IV cases, these later-filed cases were stayed, meaning that they would sit and wait out the litigation between Sanofi-Aventis and Apotex and accept the result of that case as their own.

Many of these Paragraph IV cases plod along, and this case was no exception.  When filed, the statute invokes the 30 month stay which prevents the US Food and Drug Administration from approving the ANDA until 30 months expires (or the case finishes with certain results before 30 months).  In this case, the Judge did not extend the 30 months, so in January 2006, the FDA approved of Apotex’s ANDA, and the trial was set for June of 2006.

At-Risk Launch Avoided – Settlement Announced

At this juncture, Apotex had a choice.  Being approved, it had the right to launch its product “at-risk” meaning that it could ultimately lose its patent case (either at trial or on appeal.) If so, then Apotex would be liable for damages it then caused for infringement which, given the sales of Plavix, could have reached billions of dollars (US).

After Apotex displayed some posturing, the parties announced a settlement in March 2006.  As part of the settlement, Sanofi-Aventis would pay Apotex and agree not to compete in the generic market through an authorized generic, and Apotex could launch its product two months before the scheduled patent expiration (later increased to five months upon further negotiation.)  By law, this agreement had to be approved by the US Federal Trade Commission, and in addition in this case, several states also had to approve the terms of the settlement.

Settlement Falls Apart – But Make Sure You are Clear on This

To make the long story short, the settlement terms expired on July 31, 2006 where either party could walk away from it if the FTC hadn’t yet approved it by that date.  In late July, several states rejected the deal, and the official line was that this settlement represented a “delay” in the entry of the generic product.  In early August, Apotex gleefully announced the launch of the product, and the case will resume in New York.

When other Paragraph IV cases settle under similar circumstances – and there have been several notable settlements of late – it begs the question as to why would the Plavix settlement be deemed “illegal” and not the others.

Well, the answer starts back in March 2005 when the 11th Circuit Court of Appeals ruled in a case called FTC vs. Schering-Plough.  In this case, the FTC held the position that a settlement payment to the generic and a “delay” in the launch of the generic product (in this case, K-Dur) automatically violates US anti-trust law.  The Court outright rejected this position.  In fact, one reading of the opinion might lead to the conclusion that the Court ridiculed the FTC position in holding that one must look at other factors such as strength of the patent, market dynamics, costs, etc to determine whether a settlement is illegal.

The FTC applied to the US Supreme Court for an appeal, but the Supreme Court rejected the request on June 28, 2006 which triggered several events.  First, the next day, some US Senators introduced a bill into Congress eliminating payments to generics in patent case settlements. Second, the government raided the office of Bristol-Myers claiming some sort of criminal illegality in the transaction.  Third, the FTC testified before Congress on July 20, 2006 restating its same position that payments to generics to settle a case, along with a “delay” in market entry, is illegal. 

Broad Implications

So, it appears that the Plavix case got swept up in the politics of the matter which is the subject of another essay.  However, we can conclude here with some issues this case raises in the long-term.  First, will the FTC actually be able to push through its position, banning settlements that include a payment to a generic?  If so, will any cases be settled?  If not, will that bring a great deal of market uncertainty and increased risk to both brands and generics in patent cases if the sure bet of a settlement is eliminated? 

Second, if this position is upheld, does that mean all pending or recent settlements are now void?  Do we now revisit old cases that have been closed in the past couple of years after they settled? 

Third, what is “delay” and who is on the hook for this policy?  This is an interesting question to ask if nothing else.  The FTC and “pro-competition” supporters have defined market delay of the generic as not launching after it is approved.  But that does not reflect reality because it assumes the patent in question is invalid, not enforceable and/or not infringed.  What if Apotex loses the pending case?  It is liable for damages.  If policy encourages at-risk launches (that is, generic products launching before the court case is resolved) so as not to “delay” market entry, who pays if it is ultimately found that the patent is valid and infringed after all?