[e-drug] Economist: Seeking a cure for legal headaches

["E-DRUG" <e-drug@healthnet.org>]

E-Drug: Economist: Seeking a cure for legal headaches
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Apr 18th 2005
>From The Economist Global Agenda

The world's leading drugmakers face a growing threat from generic-drug
manufacturers, a faltering pipeline of future blockbuster medications
and a poor public image. Several court cases are highlighting their
battles to stay healthy in the long term

FOR an industry that purports to make its customers well, "Big Pharma"
has its fair share of ills. Last week, Eli Lilly saw off a legal assault
by generic drugmakers on one of its blockbuster medicines, giving heart
to other patent-holders that face similar attack. But an adverse
decision for the big drug firms in a case to be heard before America's
Supreme Court on Wednesday April 20th could add time and expense to the
development of blockbuster drugs-just as the supply of potential new
medicines rebounds. And soon, personal-injury lawsuits related to Vioxx,
a failed blockbuster sold by Merck of America, will come to court,
showing the potentially huge costs of getting things wrong.

Big drug companies are struggling with a central plank of their business
model: patent protection for branded drugs. A judge ruled last week that
Eli Lilly's patent on Zyprexa, a treatment for schizophrenia, remained
valid despite attempts by three generic-drug companies-America's Ivax,
Israel's Teva Pharmaceuticals and India's Dr Reddy's Laboratories-to
persuade him otherwise. The "composition of matter" case turned on the
fundamental molecular build of the drug. The judge decided that
olanzapine, the active ingredient in Zyprexa, was suitably dissimilar to
another compound developed by Lilly that is now out of patent
protection.

The result is a huge relief for Lilly. Zyprexa provided it with $4.4
billion in sales last year, a third of its total. And Lilly knows
suffering at the hands of generic drugmakers. In 2000, when its patent
on Prozac was cut short by three years after a court ruling in favour of
non-brand predators, its shares plunged by 30% in a day. But it may yet
need a handful of its famed anti-depressant: an appeal in the Zyprexa
case seems likely.

The ruling will cheer several other companies facing similar assault in
America. Pfizer's Lipitor, a cholesterol medicine, and Plavix, a blood
thinner produced by Bristol-Myers Squibb and Sanofi-Aventis, will have
their patents challenged later this year or early next.

In general, composition-of-matter lawsuits are considered harder to win
than other avenues of attack employed by generic drugmakers to hack away
at the thicket of patents that guard blockbuster medicines. That is
because branded drugmakers deem patents covering molecular structure to
be their most prized, and thus work harder to make them bomb-proof and
fight harder when they are threatened. The outcome of the two cases
later this year will shed more light on where the balance of power lies
between Big Pharma and the generic upstarts.

The case coming before the Supreme Court this week will highlight
another area of weakness for the big drug companies. New drug launches
have slowed to a trickle in recent years. The number approved by
America's Food and Drug Administration (FDA) fell to a low of 18 in 2002
compared with an average of 59 in the previous three years, though the
number rebounded to 34 in 2004. The costs of testing new drugs have
spiralled in recent years, and if Integra LifeSciences prevails in its
case against Merck, a German drug firm (no longer related to its
American namesake), these could escalate.

The case concerns exemptions on patent protection for certain compounds.
Drugmakers are allowed to use compounds patented by rivals if it hastens
FDA approval for their own drugs. However, in a case first brought
before the courts in 1996, Integra claims that Merck infringed its
patent on peptides by using them more widely than merely to assist in
securing approval for a new medicine.

Merck is supported by many of the big drug companies-despite being the
alleged patent-infringer in this case; Lilly, Wyeth and Pfizer have
filed supporting briefs to the Supreme Court. The drug giants fear that
a victory for Integra would make drug development more complicated,
perhaps adding several years and many millions of dollars before
products could come to market.

Disreputable or misunderstood?
Big drug companies have also suffered several blows to their reputations
in recent months. Quite apart from a general public perception that they
are vastly profitable because they charge too much for their wares, they
have been hurt by the forced withdrawal of high-profile drugs and a
growing suspicion among consumers about their ethics.

In a court hearing last week, the American Merck argued for the
dismissal of the first personal-injury lawsuit brought against Vioxx, a
heart medicine. Merck withdrew the drug in 2004 after it was linked to
increased risk of heart problems in some patients. The case, the first
of many, will come to court in May, and Merck will have to pay out an
estimated $15 billion if all the claims against it are successful. And
last week Pfizer was forced to withdraw Bextra, a painkiller that
contributed 2.4% of its revenues in 2004, after it was linked to a rare
but fatal skin complaint.

Eliot Spitzer, New York's attorney-general, launched a lawsuit last year
against GlaxoSmithKline (GSK) for allegedly suppressing data linking
anti-depressants to the risk of suicide in children. This prompted
initiatives by some drug firms to disclose clinical-trial results. GSK
is facing a class-action lawsuit in America from investors who allege it
concealed problems with Paxil, an anti-depressant.

The failure of a single blockbuster can have serious consequences for a
drug firm's finances and reputation. An adverse court ruling can delay
future blockbusters-and the threat from generic competitors is anyway
never far away. At the moment, the world's pharmaceutical giants seem to
be holding their own in court. They will be glad that the hefty profits
on offer in the business have enabled them to retain the very best legal
counsel. But smart lawyers alone will not keep them on top.