[e-drug] USA Today: Cipro and how drugmakers protect profits

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E-drug: USA Today: Cipro and how drugmakers protect profits
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http://cgi.usatoday.com/usatonline/20011029/3574904s.htm

Cipro saga exposes how drugmakers protect profits 
USA Today, October 29, 2001

With the anthrax attacks rocketing demand for the antibiotic Cipro,
its sole certified supplier, Bayer, agreed last week to sell 100 million
doses of the drug to the federal government at a hefty 46%
discount. That's good news for the government, which will save
$82 million on the Cipro emergency stockpiles it holds to treat
anthrax.

But the deal's not as good for the public, whose Cipro supplies
weren't part of the negotiated discount. And it raises troubling
questions about whether any discount would have been necessary
if Bayer hadn't paid off a potential competitor years ago to keep it
from introducing a cheaper generic version of the drug.

In 1997, Bayer persuaded generic-drug maker Barr Laboratories to
drop a legal challenge to Bayer's patent on Cipro by agreeing to pay
Barr about $28 million a year until the patent expires in 2003.

To most people, that sounds suspiciously like a payoff to avoid
competition, especially considering that drug prices typically drop
25% the first year a brand-name prescription gains generic
competitors. And, indeed, the Federal Trade Commission (FTC) is
looking at the 1997 deal to determine whether it violates antitrust
laws.

Legal or not, the practice is relatively common. In fact, it's just one
of many that drug companies use to prolong the lucrative patent
protection afforded brand-name drugs.

In most cases, that means consumers end up paying far more for
brand-name drugs far longer than the patent laws ever intended.
With roughly $20 billion worth of prescription drugs closing in on
the end of their normal patent lives, the potential costs are
enormous.

As the Cipro example shows, the practices also can have potential
public health implications at a time of national crisis. Until Oct. 18,
Cipro was the only drug federally approved to treat deadly
inhalation anthrax, which meant that the public had been dependent
on a single supplier for treatment.

Patent abuses

Patents aren't supposed to work this way. In fact, they're designed
as a means to encourage innovation. In exchange for substantial
investment costs, companies are guaranteed a monopoly on that
innovation for a fixed amount of time. 

But drug companies have perverted the patent system in an effort
to prolong the guaranteed profits from their monopoly drugs.

In 1998, for example, Abbott Laboratories paid generic maker
Geneva Pharmaceuticals $4.5 million a month to drop its patent
challenge to a hypertension drug. All Geneva had to do was agree
not to compete. Geneva held to the bargain, despite favorable court
rulings on its challenge. The cost to consumers from lost
competition was $100 million a year. After the FTC filed a
complaint about the arrangement, the companies finally agreed to
abandon it.

That's just one of several tricks used to keep low-cost generics off
the market. Among the others:

* "Citizen petitions." Under the law, anyone has the right to
challenge generic competition for a drug, but such petitions are
often submitted not by the public but by the patent-holding drug
firms themselves. Filed just before a patent is due to expire, the
petition triggers a Food and Drug Administration (FDA) review. The
petitions almost never succeed, but until the review is finished,
generics can't come in and compete.

* Last-minute patents. Another trick is for the drug company to file
an entirely new patent on a drug just before a generic is about to be
approved. Under law, that triggers a 30-month delay, while
disputes over the new patent are settled. Bristol-Myers Squibb, for
instance, won a new patent on its antidepressant BuSpar in 2000,
the day before generics were to start shipping, claiming control over
an ingredient created as the drug is digested.

* Lobbying. When all else fails, drug firms have tried, usually
unsuccessfully, to convince lawmakers to grant patent extensions.
Schering-Plough has been trying for years to get Congress to
approve an extension on its big-selling allergy drug, Claritin.  

A new effort

If those weren't enough, a new tactic is being tested. Under current
law, a drugmaker gets a half-year patent extension for testing an
existing drug on children. Another law gives drugmakers 3 years of
exclusive rights for FDA-approved label changes. According to
generic makers, Bristol-Myers is trying to combine the two by
changing the label on its diabetes drug Glucophage to reflect
pediatric study results. If successful, it would pave the way for an
easy 3 1/2 years of extra monopoly profits.

Drug-industry-patent abuses have become so pervasive that the
FTC has embarked on a broad investigation of them. Even
lawmakers are taking notice: Congress has at least two bills that
would rein in some of the worst abuses; the Senate passed its bill
earlier this month.

Trying to squeeze out extra profits is not a surprising business
tactic. Doing so by abusing the patent system, however, is an
affront to consumers who pay the higher bills, and to the public,
which could suffer the consequences in a public health
crisis.Today's debate: Drug prices Consumers are regularly cheated
on patented, big-name drugs.


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