generics – Techdirt
from the abusing-the-orange-book,-green-with-greed dept
For many, many years we’ve detailed how big pharma companies, who only care about the monopoly rents they can receive on medicine while under patent, have concocted all sorts of scams and schemes to avoid having to compete with generic versions, even after their patents have expired (or been invalidated). But one of their older tricks is apparently popular yet again, though the FTC is now warning pharma that it might finally start cracking down.
If it does, it will just be reinforcing the kinds of actions the FTC used to bring. Twenty years ago, the FTC went after Bristol Meyer Squibb for false listings in the Orange Book. The Orange Book, managed by the FDA, is where pharma companies list the FDA-approved drugs they have under patent, which alerts generic drug companies basically not to make generic versions of those drugs.
But, of course, this creates a very tempting scenario: if pharma can get drugs not actually under patent into the Orange Book, they effectively save themselves from generic competition, and they get to profit massively (at the expense of the public and their need for affordable medicine).
However, despite enforcement against such abuse years ago, it seems that the FTC and the FDA have kinda let these things slip over the past few years. And Big Pharma has really taken advantage of that. Thankfully, it looks like the FTC is finally interested in cracking down on this practice again. In a new policy statement, it warns pharma companies that it’s looking into the abuse of the Orange Book and sham patent inclusions.
Brand drug manufacturers are responsible for ensuring their patents are properly listed. Yet certain manufacturers have submitted patents for listing in the Orange Book that claim neither the reference listed drug nor a method of using it. When brand drug manufacturers abuse the regulatory processes set up by Congress to promote generic drug competition, the result may be to increase the cost of and reduce access to prescription drugs.
The goal of this policy statement is to put market participants on notice that the FTC intends to scrutinize improper Orange Book listings to determine whether these constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act.
Of course, this raises some questions, including why do we make the pharma companies themselves the party responsible for making sure their patents are “properly” listed. Why don’t we have at least some process in place for these listings to be reviewed, whether when they’re submitted to the Orange Book or even if another party (such as the generic drug manufacturers) contest an Orange Book listing.
It seems the dumbest possible system is to assume that the Big Pharma companies will be honest in their Orange Book listings.
And, even though the FTC is now putting these companies “on notice,” the fact that the FTC has brought these cases in the past seems like it should be “notice” enough. Instead, it sounds like the FTC let enough pharma companies get away with this for long enough that the big pharma firms felt cleared to abuse the system this way and to delay competition in the marketplace.
The one thing I find interesting in this statement, is that they note that improperly listing things in the Orange Book may “constitute illegal monopolization.”
The improper listing of patents in the Orange Book may also constitute illegal monopolization. Monopolization requires proof of “the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” This requires proof that “the defendant has engaged in improper conduct that has or is likely to have the effect of controlling prices or excluding competition,” and courts have recognized that improperly listing patents in the Orange Book may constitute an “improper means” of competition. Accordingly, improperly listing patents in the Orange Book may also be worthy of enforcement scrutiny from government and private enforcers under a monopolization theory. Additionally, the FTC may also scrutinize a firm’s history of improperly listing patents during merger review
This seems exactly correct, but notable in that very few people seem to recognize that (1) patents are government granted monopolies, and thus (2) an abuse of the patent system to get a patent or patent-like protections you don’t deserve are therefore an illegal monopoly seems like an important point. I would hope that this could get expanded to other abuses of patent and copyright law as well.
Still, given that we’ve been facing this and multiple other schemes from Big Pharma to delay generics for decades, I’m not sure anything is really going to change just yet, but at least the FTC is waking up (again?) to this issue. Now let’s see if it actually starts bringing cases…
Filed Under: competition, drug prices, ftc, generics, monopoly, orange book, patents, pharma
from the do-the-decent-thing dept
“ Evergreening” refers to the practice by pharmaceutical companies of making small changes to a drug, often about to come off patent, in order to gain a new patent that extends its manufacturer’s monopoly control over it. The first Techdirt post about evergreening appeared almost exactly ten years ago. It concerned the rejection by the Indian Supreme Court of an attempt to “evergreen” the drug Glivec. Now the Indian Patent Office has rejected Johnson & Johnson’s attempt to extend its monopoly on a lifesaving drug for treating tuberculosis, in what is arguably one of the most important wins against evergreening.
Tuberculosis (TB) is a serious illness that kills nearly two million people each year. Drug resistant forms are a major problem, which makes two newer TB drugs – bedaquiline and delamanid – particularly important. However, these drugs are expensive: typically, a course of treatment costs thousands of dollars. Research in 2017 showed that large-scale manufacturing of generic versions would cost just 10-20% of that. Patents prevent these drugs being made more cheaply, which in turn limits the number of people who can be treated with them in poorer countries.
Fortunately, bedaquiline goes off patent this year, something that Johnson & Johnson naturally wants to prevent. Two TB survivors filed a petition with the Indian Patent Office to stop Johnson & Johnson’s attempt to evergreen its Indian monopoly on the drug. The petition was supported by Médecins Sans Frontières/Doctors Without Borders (MSF), which has issued the following update on the move:
the 2019 patent challenge by two tuberculosis (TB) survivors, Nandita Venkatesan and Phumeza Tisile, was successful: the Indian Patent Office rejected the US pharmaceutical corporation Johnson & Johnson’s (J&J) attempt to extend its monopoly in India on the TB drug bedaquiline beyond the primary patent’s expiry this July. Médecins Sans Frontières/Doctors Without Borders (MSF) welcomed this as a significant step toward increasing access to the lifesaving TB drug.
Indian patent law does not allow evergreening of patents and prevents pharmaceutical corporations from abusing the patent system through making minor changes that can further extend their 20-year drug monopolies. Such evergreening practises are explicitly prohibited in the Indian patent system through a health safeguard — Section 3(d).
The rejection by the Indian Patent Office is a huge win for those suffering from TB in India, but potentially the benefits could be even wider. India’s generic drug manufacturers supply many countries with vital medicines at low prices. The hope is that once they start producing bedaquiline more cheaply, it can be sold in countries that have been unable to afford the current version from Johnson & Johnson.
However, there is a problem, once again caused by the threat of evergreening. Although India does not allow evergreening, thanks to Section 3(d) of its 1970 Patents Act, that’s not the case in other countries. Johnson & Johnson could still bring lawsuits to prevent generic versions of bedaquiline being sold where evergreening is permitted. Because of this possibility, the MSF has issued the following call:
Moving forward, J&J must not block the supply of more affordable generic versions of bedaquiline to high TB burden countries and stand by its 2019 statement from the Managing Director in India of Janssen (J&J’s pharmaceutical division), that generic manufacturers will be able to make generic versions of bedaquiline starting in 2023. This means that the US corporation should also urgently withdraw its patents in other countries, including high TB burden countries, where the equivalent of the Indian patent application still remains.
It remains to be seen whether Johnson & Johnson will do the decent thing and allow TB sufferers around the world to receive treatment they have hitherto been denied, or whether the company is so addicted to evergreening – and the profits it brings – that it sticks to its bad old ways.
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Filed Under: big pharma, drugs, evergreening, generics, india, msf, multidrug-resistant tuberculosis, tuberculosis
Companies: johnson & johnson
from the once-a-monopoly,-always-a-monopoly dept
I always find it vaguely amusing when the government realizes that the system of monopoly rights it created is used to restrain competition. The latest is over in the EU, where the European Commission has gone after pharmaceutical giant Teva, for abusing the patent system to limit competition for its multiple sclerosis medicine. Of course, this shouldn’t come as a surprise, we’ve written about Teva a few times, and many of them involve the FTC and various states going after Teva and other pharma companies for sketchy practices to limit competition and inflate prices.
The FTC case was about Teva using “ pay-for-delay” tactics, where its drugs would be on the verge of going off patent, but it would engage in a variety of scammy behaviors, including paying competitors (via bogus lawsuits leading to pre-planned “settlements”) not to enter the market, in order to retain the monopoly for longer than the law allowed.
It appears that Teva was up to similar tricks in Europe. Here’s the summary from the Commission of what Teva did to retain its ability to extract monopoly rents for drugs that were going off patent:
- Misused patent procedures: after the original, basic patent expired, Tevaartificially extended glatiramer acetate’s basic patent protection by filing and withdrawing secondary patent applications, thereby forcing its competitors to file new lengthy legal challenges each time. This scheme is sometimes referred to as the “divisionals game”. This is because the strategy implies filing so-called “divisional patents” which are patents derived from an earlier secondary patent and whose subject matter is already contained in the earlier patent. This artificially prolongs legal uncertainty to the benefit of the patent holder, and can effectively block or delay entry of generic or generic-like medicines.
- Implemented a systematic disparagement campaign targeting healthcare professionals and casting doubts about the safety and efficacy of a competing glatiramer acetate medicine and its therapeutic equivalence with Copaxone.
Of course, all of this seems quite ironic, given that Teva rose to fame by being one of the biggest makers of generic drugs after those drugs went off-patent from other pharma companies. Hell, just last week Teva asked the Supreme Court in the US to hear an appeal on a case regarding whether or not its use of “skinny labels” (marketing generic drugs by leaving out still patented uses) violates patents or not. So, for Teva to be such a giant in the generic market, while simultaneously trying to block other generics from coming to market seems mighty hypocritical.
Filed Under: antitrust, competition, drug patents, european commission, generics, patents, pharma
Companies: teva
from the as-obvious-as-obvious-can-be dept
The idea that there is a link between the exclusivity period on patents and higher drug prices is about as noncontroversial as a view can be. It is the easy question on an ECON 101 exam on monopolies, supply and demand. Yet, somehow, this has come under attack thanks to big PhRMA and their minions. Unfortunately they have found a sympathetic advocate in the Senate who believes the unbelievable.
Sen. Thom Tillis has taken a host of actions trying to unlink the obvious connection between patents and high drug prices, and he is trying to force both the FDA and the USPTO to agree with him that the link is a “ false narrative.” This assertion, of course, is ludicrous. Patents are the backbone of the pharmaceutical industry, and the reason why drug companies make significantly more than other large public companies. Patents give these companies a guaranteed monopoly period, in which monopoly profits are intended to reward them for the risk and investment spent in bringing new drugs to market. These monopoly periods eventually expire, as required by the constitution, and the resulting influx of competition lowers drug prices by about 80% on average.
This social contract is well understood, and almost everyone thinks this is good for society. So I will give Sen. Tillis the benefit of the doubt and interpret his statement as suggesting that there is no link between gaining an extra, and unintended, monopoly period and high drug prices. But even here the body of evidence to the contrary is extensive. I collected a lot of this evidence in a recent tweet thread. However, it is important to understand a little more about the background of what has quickly become an industry practice.
The story of patent thicketing starts with AbbVie. AbbVie created the patent thicket in much the same way Apple created the smartphone – there may have been others before, but none were as successful or as emulated since. AbbVie’s drug Humira was the best selling drug for almost 10 years, but they faced a problem. Internal estimates showed they would lose their exclusivity as early as 2017. They needed a strategy to stall generic entry for as long as possible, and they hired the extremely controversial consulting company McKinsey to help come up with a plan. While several strategies were presented, the patent strategy quickly became the most successful. As one biotech patent attorney put it: if you have a $16 billion-a-year drug, “every month is a good month that you’re on market alone. So you’re going to spend whatever it takes to be as aggressive as possible and get as many patents as possible.”
The strategy is simple even if it sounds like it should be impossible: find as many ways to patent an existing product as possible. This can include creating a staggered rollout of patent applications around formulations, dosing regimen, route of administration (for example, using the drug in an injector pen), dosing regimen for new indications (i.e. new diseases the drug can treat), and manufacturing processes. As one AbbVie internal document put it: “in the eye of biosimilar makers, how would they manufacture Humira?” AbbVie just needs to patent those manufacturing processes, even if they aren’t using them, and biosimilars won’t be able to make the drug.
All of these documents show that drug companies are trying to get new patents, with later expiration dates, on existing drugs for purely financial reasons. This alone proves Sen. Tillis wrong. But is there widespread failure of the patent system that demands a response? Again there is ample evidence that there is.
One study showed that 78% of new patents were associated with existing drugs, not new ones. The same study found that most of the companies who were successful doing this once would try again, with 50% becoming serial offenders. Another study found that most of the patents used to block generic and biosimilar entry represented minimal-to-no additional benefits to patients using the drug.
These delays have costs. One study found that Medicare spent an average of $109 million a year extra due to delayed generic entry. The main cause of delayed competition? Patent litigation. Another study found that one year of improved patent examinations on secondary and tertiary drug patents, to catch bad patents before they issue, saves $8.7 billion in the future. And when Humira went generic in Denmark in 2018, residents saw their prices drop by 82.8%. In the US we’ve faced regular price increases on Humira because it remains patent protected.
These abuses of the patent system may carry additional costs to innovation and safety. A recent study of R&D competition around Covid drugs found that whenever a firm finds it profitable to invest in developing a minor modification, R&D for radical follow-on innovation goes down. This could mean that the incentives created by the availability of patents for existing drugs may actually lower R&D investment in new drugs, as resources chase lower risk and more immediate profits. Some researchers have even found startling signs of negative innovation, or innovation that promotes riskier and less beneficial treatments. This happens when the better treatments are unpatentable. The study shows a company pursuing a treatment that overdoses patients because more appropriate doses were considered obvious under prior art. Overdosing, however, was patent eligible because it was considered non-obvious.
This evidence shows a widespread problem in need of a policy response. Indeed, those calling for reform now include the New York Times, the Department of Health and Human Services, former Trump cabinet member Alex Azar, and many researchers and public interest advocates. Whoever is advising Sen. Tillis on this issue needs to include the full evidence on drug prices and patents. Especially since the Senator appears to be engaging in good faith around efforts to improve patent quality and stop various abuses of the patent system. But without good information, I fear bad policy may result.
Matthew Lane is a Senior Director at InSight Public Affairs where he specializes in competition and IP issues.
Filed Under: biosimilar, drug patents, drug prices, economics, fda, generics, humira, monopolies, patent thicket, patents, thom tillis, uspto
Companies: abbvie
from the whatever-happened-to-that-quid-pro-quo? dept
At the heart of patents lies a quid pro quo. In return for a time-limited, government-backed intellectual monopoly, companies place their inventions in the public domain after the patent has expired. The theory is that granting patents encourages innovation, although there is plenty of evidence that it doesn’t. In the world of drugs, this approach is supposed to allow other pharmaceutical companies to produce generics — low-cost versions of drugs — once they are off patent. People benefit because they can buy drugs at much cheaper prices than when they were still under patent.
But as Techdirt has reported, for many years, Big Pharma companies around the world have been trying to renege on that deal with society. One of the main ways is through “ pay for delay” schemes. A drug company holding an expired patent buys off manufacturers of generics so that it can continue to enjoy monopoly pricing. A new lawsuit brought by 44 states suggests another way Big Pharma may have been cheating the public. It alleges that top pharmaceutical companies, including Teva, Pfizer, Novartis and Mylan, conspired to inflate the prices of over 100 generic drugs by as much as 1000%:
In court documents, the state prosecutors lay out a brazen price-fixing scheme involving more than a dozen generic drug companies and just as many executives responsible for sales, marketing and pricing. The complaint alleges that the conspirators knew their efforts to thwart competition were illegal and that they therefore avoided written records by coordinating instead at industry meals, parties, golf outings and other networking events.
The complaint alleges that there was an agreement to maintain artificially high prices. This was done collectively to ensure that all the companies involved retained a share of the market, but with enhanced profit margins. According to Reuters, Teva, which describes itself as “The World’s Generic Pharmaceuticals Leader”, said in a statement:
The allegations in this new complaint, and in the litigation more generally, are just that — allegations. Teva continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability.
By an interesting coincidence, back in 2015 Teva agreed to pay $1.2 billion to settle a lawsuit brought by the FTC against its subsidiary, Cephalon, over a “pay for delay” scheme to keep competitors from launching low-cost generic drugs. It’s almost as if the generics industry never learns…
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Filed Under: big pharma, drugs, generics, monopolies, patents, pharmaceuticals, price fixing, price inflation
Companies: mylan, novartis, pfizer, teva
from the evergreen-desire-to-hang-to-intellectual-monopolies dept
At the heart of copyright and patents there is — theoretically — an implicit social contract. People are granted a time-limited, government-backed monopoly in return for allowing copyright material or patented techniques to enter the public domain once that period has expired. And yet copyright and patent holders often seem unwilling to respect the terms of that contract, as they seek to hang on to their monopolies beyond the agreed time in various ways.
In the case of copyright, this has been through repeated extensions of copyright’s term, even though there is no economic justification for doing so. In the realm of pharma patents, a number of techniques have been employed. One is “ pay for delay.” Another is the granting of “ data exclusivity.” And a third is the use of “evergreening.” Techdirt wrote about the last of these a while back, so it’s no surprise that companies have continued to “innovate” in this field since then. For example, AstraZeneca is trying to use a variant of evergreening for its anti-cholesterol pill Crestor. As a New York Times article explains:
Crestor is the company?s best-selling drug, accounting for $5 billion of its $23.6 billion in product sales last year. About $2.8 billion in sales were in the United States, where the retail price is about $260 a month, according to GoodRx.com.
Here’s how AstraZeneca hopes to hold on to that lucrative market, even though its patent on the drug is now coming to an end, and it should be entering the public domain:
The company is making a bold attempt to fend off impending generic competition to its best-selling drug, the anti-cholesterol pill Crestor, by getting it approved to treat [a] rare disease. In an unusual legal argument, the company says Crestor is entitled to seven years of additional market exclusivity under the Orphan Drug Act, a three-decade-old law that encourages pharmaceutical companies to develop treatments for rare diseases.
In May, AstraZeneca won approval of Crestor to treat children with the rare genetic disease of homozygous familial hypercholesterolemia (HoFH ). That gives it an additional seven-year patent on the drug, but only for that particular — very small — market. However, the designation means that detailed prescription information about using Crestor to treat children in this way must not be included on the label. AstraZeneca’s clever lawyers are trying to turn that into an extended patent for all uses of the drug:
AstraZeneca immediately petitioned the F.D.A., arguing that if the correct dose for children with HoFH could not be on the generic label, then it would be illegal and dangerous to approve any generic versions for any use at all. That is because doctors might still prescribe the generic for children with HoFH and choose the wrong dose, posing “substantial safety and efficacy risks.”
Needless to say, AstraZeneca was only asking for generic versions to be kept off the market for another seven years for safety reasons, not because doing so would bring it billions more in exclusive sales to the general population. Of course.
The New York Times article goes into more detail about the fascinating legal background to AstraZeneca’s argument here, and notes that other drug companies have tried the same approach in the past, without success. Even if this particular ploy does fail again, we can be sure that pharma companies will be back with other sneaky ways of extending their patent monopolies — implicit social contract be damned.
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Filed Under: blocking, competition, crestor, evergreening, fda, generics, new uses, patents
Companies: astrazeneca
from the because-fuck-you,-that's-why dept
When pharmaceutical companies defend outrageously-priced medicines, they often claim these massive profit margins are there to help them recoup the money dumped into research and development. But that has nothing to do with the high prices. R&D costs are consistently lower than companies portray them. The real reason for exorbitant drug prices is a monopoly granted by patents, which lock out all competitors for years. And when the patent nears expiration, pharma companies extend their monopoly by doing questionable things — like testing high-powered, opiate-based painkillers on children — just to extend the patent protection for another few months.
None of that, however, explains this: (h/t to Techdirt reader pixelpusher220)
Turing Pharmaceuticals of New York raised the price of Daraprim from $13.50 per pill to $750 per pill last month, shortly after purchasing the rights to the drug from Impax Laboratories. Turing has exclusive rights to market Daraprim (pyrimethamine), on the market since 1953.
Daraprim fights toxoplasmosis, the second most common food-borne disease, which can easily infect people whose immune systems have been weakened by AIDS, chemotherapy or even pregnancy, according to the Centers for Disease Control.
In this case, any research and marketing costs have long since been recouped (or at least amortized). The patents behind the drug — all granted between 1951 and 1954 — should be dead. Conveniently for Turing (and other rights holders before it), no company is offering a generic version.
Every time the drug has changed hands (and it’s done it more than once), the price has gone up. But no other company has increased the price quite as much as Turing Pharmaceuticals has. Perhaps that’s because Turing spent a significant amount of money to acquire an exclusive marketing license, but with none of the attendant patent exclusivity.
Impax Laboratories, Inc. (NASDAQ: IPXL) today announced that it has sold its U.S. rights to the Daraprim brand to Turing Pharmaceuticals AG for approximately $55 million.
Turing, of course, realizes this price jump — which puts one month’s supply in the new vehicle range ($45-50,000) at minimum — is going to be tough on those expected to pay for it, but claims to have support in place to help absorb some of the ridiculous increase.
A Turing spokesman, Craig Rothenberg, said the company is working with hospitals and providers to get every patient covered. This includes free-of-charge options for uninsured patients and co-pay assistance programs.
This sounds like exemplary altruism in the face of a presumably unavoidable [hah] increase in price. But a closer look at what Turing is actually doing shows the company will be forcing patients to choose from all of two options:
For inpatient procurement, institutions can no longer order from their general wholesaler. Instead, they must set up an account with the Daraprim Direct program. Once enrolled, orders may be placed with the company until 6 pm Monday through Friday and will be delivered the next business weekday, because there is no weekend delivery at this time.
For outpatient procurement, patients can no longer obtain the medication from their community pharmacy. All prescriptions must be transmitted to a single dispensing pharmacy: Walgreens Specialty Pharmacy. Upon insurance verification and co-pay collection, the prescription will be mailed to the patient’s home, and most prescriptions can be mailed overnight.
This presents a problem for hospitals. Although the drug is low-use (it combats the effects of toxoplasmosis — something that can cause serious issues for those with weakened immune systems, like cancer/HIV patients), it still is needed often enough that the two access routes just aren’t enough.
My institution recently encountered a difficult scenario in which pyrimethamine was attempted to be obtained through the Walgreens Specialty Pharmacy. The patient in question was currently homeless, and therefore did not have a home or address to which the medication could be delivered. Additionally, the manufacturer did not yet have a system in place to address the situation.
This could have been extremely problematic, but fortunately, my institution is affiliated with a Walgreens Specialty Pharmacy and contracted to provide bedside delivery to patients prior to discharge. The patient was able to receive the pyrimethamine as an inpatient.
Turing, of course, defends the increased price by claiming the exorbitant profit margin will result in increased R&D. But let’s take a closer look at what its spokesman is actually saying.
Rothenberg defended Daraprim’s price, saying that the company will use the money it makes from sales to further research treatments for toxoplasmosis.
Translation: this money will be dumped into finding another variation to patent, thus locking out potential competitors and allowing Turing to continue charging whatever it wants for the medication.
They also plan to invest in marketing and education tools to make people more aware of the disease.
Translation: we will market the hell out of this new drug.
This sort of thing isn’t exclusive to Turing. It’s standard MO for all pharmaceutical companies. Rather than engage in meaningful competition, these companies are awarded lengthy monopolies on drugs and treatments by the US government. Turing is no different than Amedra — part of the holding company acquired by Turing along with the Daraprim rights. But when Amedra acquired the rights from GlaxoSmithKline, it somehow managed to keep its price hike to a couple of dollars, rather than several hundred.
This huge price jump has more to do with the man running Turing, Martin Shkreli. Shkreli doesn’t have a background in pharmaceuticals, but he does know how to run a hedge fund. And he’s used this expertise to become highly-unpopular very quickly.
Since founding Turing last year, Shkreli has taken a page from what made Retrophin a high-profile–and controversial–player among small biotech companies. Retrophin’s stated goal was ferreting out value in biopharma by acquiring assets with potential in rare and neglected diseases, a process that can mean acquiring an underused drug and jacking up its cost to take advantage of rare disease pricing.
Here’s one of the moves Shkreli made as the head of Retrophin.
In September 2014 Retrophin acquired the rights to thiola, a drug used to treat the rare disease cystinuria. It was with Shkreli as CEO that Retrophin introduced a 20-fold price increase for Thiola, despite no additional research and development costs incurred by obtaining these right s.
Turing is basically Retrophin 2.0, or more accurately, Shkreli being Shkreli. Shkreli may have still been helming Retrophin at this point, had his own company not ousted him. In August, his former company also sued him, alleging financial impropriety.
It appears that Shkreli is a bit too comfortable operating in gray areas. The market-related shadiness alleged in the lawsuit appears to be just part of Shkreli’s everyday business affairs.
In an uncommon move, Shkreli himself led the Series A financing, and Turing isn’t naming any of its other backers, calling them “preeminent institutional equity investors” and leaving it at that. In a filing with the SEC last week, Turing counted 34 individual participants in its funding round but reported raising just $62.7 million.
This reported total of the funding round didn’t match the claimed total ($90 million). Shkreli had an answer for the missing funding. And that answer was “Shut up.”
A spokesman for the company declined to explain the $27.3 million difference, and further questions about the company’s financials were met with a terse email from Shkreli asking FierceBiotech not to contact Turing again.
However, if you do feel like discussing the 5000% increase in Daraprim’s price, feel free to take your questions to Shkreli himself, who is surprisingly accessible on Twitter. Just know ahead of time that you’re too stupid to understand complicated business stuff, you don’t represent anyone worth talking to, “ everyone else is doing it,” and shut up.
The unasked question has its answer: why did Turning flip the switch on a 5000% price increase? Because it can. And it’s not just the people being prescribed Daraprim that will eat the cost. It will be every customer of every health insurer that covers the rest of the cost of these prescriptions. These additional expenses will eventually result in higher health insurance premiums. And while Turing is offering to help out those with little to no insurance, these costs — whether they’re absorbed by health care institutions or the government itself — will be passed on to the general public as well.
Filed Under: daraprim, drug prices, generics, martin shkreli, monopoly pricing, patents, pharma, pharmaceutical pricing
Companies: turing pharmaceuticals
from the but,-fast-track's-in-place,-so-too-bad,-suckers dept
Over the last few years, we’ve seen leaks here and there of the various chapters of the TPP agreement, but generally ones that are quite out of date. The latest public leak of the “intellectual property” chapter that I’m aware of was done last October by Wikileaks and was the version from the previous May (2014). Now, Politico claims that someone has leaked the May 2015 version, though Politico has not published the document (which, frankly, is pretty lame for a journalism property). But, based on Politico’s report, the agreement still looks to be what everyone’s been saying it would be: a huge gift to giant corporate special interests, such as Big Pharma:
The draft text includes provisions that could make it extremely tough for generics to challenge brand-name pharmaceuticals abroad. Those provisions could also help block copycats from selling cheaper versions of the expensive cutting-edge drugs known as ?biologics? inside the U.S., restricting treatment for American patients while jacking up Medicare and Medicaid costs for American taxpayers. ?There?s very little distance between what Pharma wants and what the U.S. is demanding,? said Rohat Malpini, director of policy for Doctors Without Borders.
In response, the USTR falls back on its standard lame reply, about how draft texts are not “final.” But this is why it’s actually important to post these draft texts publicly, because what the draft Politico saw appears to show is that, whether or not it gets it, the USTR is fighting for policies that would harm poor, sick people, and massively benefit giant pharmaceutical conglomerates.
The highly technical 90-page document, cluttered with objections from other TPP nations, shows that U.S. negotiators have fought aggressively and, at least until Guam, successfully on behalf of Big Pharma.
That bit of information seems rather important in determining whose interests the USTR is truly representing in these negotiations. Remember, that while the final agreement will be posted publicly, the negotiating texts (which show what each side argued for) are being kept secret for four years after ratification — by which point the staff at the USTR will likely have turned over greatly, and whoever is there now can pretend they had nothing to do with the negotiating positions that the US is now locked into.
And, of course, now that fast track is the law, Congress can’t even step in to fix it. They’ll only be allowed an up/down vote on the entire agreement — with tremendous pressure on them to approve the whole thing, even if there are dangerous provisions mixed in the overall agreement.
Of course, we all know that this is why the agreement is secret. It’s not politically feasible for the US government to publicly show that it’s fighting against the health interests of the public and in favor of pharma profits. But it appears that’s exactly what’s happening behind closed doors. And that seems… wrong.
Filed Under: big pharma, biosimilar, competition, drugs, generics, ip, patents, pharma, pharmaceuticals, tpp
from the antitrust dept
For many years now, we’ve been talking about the problematic practice of “pay for delay” in the pharma industry. This involved patent holders paying generic pharmaceutical makers some amount of money to not enter the market in order to keep their own monopoly even longer. There’s a complex process behind all of this, which often involves the larger pharmaceutical company first suing a generic maker, and then “settling” by agreeing to pay a sum of money to the generic maker. But, part of the “settlement” is that the generic drugmaker stays out of the market for longer than they otherwise would have needed to do so. Not surprisingly, the rise of such pay for delay, or “reverse payment” deals, came as a result of the Hatch-Waxman Act from 1984, which was supposed to encourage generic drugs to enter the market. But, because Congress does a really crappy job understanding game theory, those behind the bill failed to realize they were actually setting up incentives for the reverse (we’ll get to how and why in a moment).
Either way, there have been a number of anti-trust lawsuits filed over these practices and finally, in 2013, in a case against Actavis, the Supreme Court ruled that these kinds of deals may violate antitrust laws, and the FTC had every right to use antitrust law against drugmakers. Late last year, the FTC finally put those powers to use (meanwhile, over in Europe, regulators have been going after the same practice).
And yet, even with the Supreme Court weighing in, all is not yet settled. Here in California, there was a separate case, revolving around pharma giant Bayer and the making of its super popular drug Cipro. There were a few different issues raised in this case, focusing mainly on whether California’s state antitrust law could also be used against these deals (rather than just federal antitrust law) and also what “test” had to be used to determine if these deals violated the law (and, as part of that, whether you could presume that any such pay for delay deal must violate antitrust law).
The ruling itself [pdf] is a bit dense, but says that, yes, California’s antitrust law does apply, and Bayer’s efforts may violate antitrust law. But, in the process, it does a pretty good job laying out just how ridiculous the Hatch-Waxman Act was in terms of the incentives it actually set up, compared to the stated purpose of the bill:
The Hatch-Waxman Act illustrates the law of unintended consequences. Congress wrote into the act a substantial incentive for generics to enter markets earlier by offering a 180-day exclusivity period to the first generic filer, and only that filer, to challenge a patent…. The theory was that a generic would be more likely to challenge dubious patents if offered the carrot of an enormously valuable six-month period in which only it and the brand could produce a drug…. Otherwise, ?free rider? problems might arise: every generic would have an incentive to hold back and let some other generic be the one to shoulder the risk and litigation costs associated with challenging a patent.
In other words, somewhat incredibly, Hatch and Waxman basically decided the best way to encourage more non-monopoly-covered drugs on the market was… to grant them more monopolies. Ugh. What is it with politicians falsely assuming that everyone needs a government granted monopoly to do anything?
And, as with most government-granted monopolies, things don’t quite go according to plan:
This solution may well have encouraged more generics to file patent challenges, but not without creating a series of new problems. In other settings, a patentee might have little incentive to buy off a challenger in order to preserve its monopoly and continue reaping monopoly profits, for the simple reason that paying off the first challenger would simply encourage another challenger, and then another, and then another…. Two features of the Hatch-Waxman Act change this dynamic. First, the 180-day exclusivity period created a bottleneck; no one else could receive FDA approval until after its expiration…. Second, other generics tempted to challenge a patent in the wake of a settlement with the first-filing generic would have to wait out an automatic 30-month stay the brand could obtain just by opposing their requests for FDA approval….
This legal regime means that, regardless of the degree of likely validity of a patent, the brand and first-filing generic have an incentive to effectively establish a cartel through a reverse payment settlement….
In other words, since Hatch-Waxman gives one generic company its own monopoly, the incentives are for the patent holder to figure out a way to pay off that company to not actually make use of that monopoly, thus allowing the original pharma company to keep its monopoly even longer.
Hey, how about we don’t deal with the problems of government granted monopolies by piling more government granted monopolies on top of them? Just a thought…
And, because of all of these issues, it also can be used to block challenge to the validity of a pharma patent:
Rather than expend litigation costs on either side, the brand and generic can reach a settlement that reflects the likely validity or invalidity of the patent (stronger patent, smaller settlement; weaker patent, bigger settlement), grants the generic a share of monopoly profits, and leaves the brand the sole manufacturer of the product.
It is likely for this reason that reverse payment settlements, practically unheard of before the Hatch-Waxman Act, have proliferated in the years since its enactment…. This is probably not what Congress intended.
You think?
Either way, that question on the validity of the patent comes into play in the analysis of how antitrust law applies. After all, patents are technically an exception to antitrust law, since they’re a government sanctioned monopoly. But what about an invalid patent?
Courts thus must reconcile the two bodies of law, making ?an adjustment between the lawful restraint on trade of the patent monopoly and the illegal restraint prohibited broadly by? antitrust law….
At the extremes, this is easy. If a patent were known to be invalid, a private agreement nevertheless giving it effect would be plainly illegal…. Conversely, if a patent were known to be valid, an agreement foreclosing competition no more than the statutory monopoly would not restrain trade beyond what federal law permitted, and the rights patent law affords the patentee would supersede any state law prohibition. Difficulties emerge when we move from a hypothetical patent known to be determinately valid or invalid to the real world, where validity may be unclear. When assessing the antitrust implications of an agreement arising from a patent, the truth about the patent?s validity cannot always be known. The issue is how antitrust and patent law should accommodate each other under these conditions of uncertainty.
The ruling notes the importance of being able to regularly test the validity of patents to make sure bad patents don’t stay in place, robbing the public domain (as well as the public of such benefits). Thankfully, the court recognizes that giving a government granted monopoly has tremendous costs, so they shouldn’t just be given out willy-nilly:
Patents carry with them a frequent cost?monopoly premiums the public must bear…. The willingness to pay that cost depends upon a quid pro quo: ? ” ‘the public interest in granting patent monopolies? exists only to the extent that ‘the public is given a novel and useful invention? in ‘consideration for its grant.? ” … Accordingly, patent policy does not support unquestioned protection of every inventor?s rights, but instead favors ?eliminating unwarranted patent grants so the public will not ‘continually be required to pay tribute to would-be monopolists without need or justification.’ ” … Vigorous testing for validity is thus desirable in order to weed out patents that shield a monopoly without offering corresponding public benefits.
And, in the end, the California Supreme Court notes that while it need not follow the lead of the federal Supreme Court in determining if patent law pre-empted antitrust law, the reasoning makes sense. As for which “test” to apply to see whether there is antitrust here, the Court notes that rather than hard-and-fast rules and buckets, the distinctions may be a bit more fuzzy than some assume. So rather than choosing one of the three big “rules” — “rule of reason,” “per se” or “quick look” — the Court notes that there’s more of a “sliding scale.” Instead, it looks at the overall situation to determine if these practices violated antitrust law. The overall analysis is long and detailed, but the court recognizes that what’s going on here and how these efforts can certainly harm the public, creating an “anticompetitive effect.” It lays out a basic process for determining whether or not these agreements are anticompetitive, but rejects the idea that all such pay to delay deals must be anticompetitive (which would have been a nicer standard). Either way, this ruling certainly will make life more difficult for pharmaceutical companies looking to do pay to delay deals, meaning that it’s good for the public and their health.
Filed Under: antitrust, california, cipro, generics, hatch waxman, hatch-waxman act, patents, pay for delay, reverse payments
Companies: bayer
from the the-evilness-of-drug-companies dept
The astoundingly wonderful radio program/podcast Radiolab just recently had an episode called “Worth” — which included a few different stories trying to establish how much something is truly “worth.” The first story in the collection talked about how much extra time in life is worth, as part of a discussion on whether or not it’s reasonable for certain drugs to be priced insanely high. It was an interesting discussion, mostly revolving around the question of whether it’s “worth” paying tends of thousands of dollars for a drug treatment that might only extend your life a few weeks. There is just a brief discussion about whether or not it’s appropriate for pharmaceutical companies to charge the rates that they do — with the Radiolab team unfortunately accepting the tired (and incredibly misleading) claim from a drug company that because drug research includes so many failures, it needs to charge these ridiculous high rates to make up for all the failures.
This is misleading in all sorts of ways, though that will need to be the subject of another post at another time. My biggest complaint, after the story was over, was that it failed in economics 101. It stuck with the premise that there was a quantifiable single amount that something was “worth” — and that price is a reflection of that. This is something that many people tend to feel, instinctively, but it’s not accurate. The value of something is different to different people and depends on many factors. The price of something may be quite different than the value — again, something we’ve been highlighting for years.
Here’s the key bit: the price of something is driven by supply and demand. When you — as the program did — look at price solely based on “value” you’re only looking at the demand side of the equation, and not the supply. And that’s where things get extra tricky in pharmaceutical pricing — because the supply side is massively distorted through patents, which enable drug companies to artificially limit the supply, driving up prices to insane levels. In a normal, functioning society, we might recognize that this is a problem. Deriving pricing for healthcare solely based on demand is ludicrous, and shows a society with very short-term thinking. It prioritizes short-term narrow profits of drug companies over long-term contributions from a more healthy populace.
But this is the way of our pharmaceutical industry today. And these distortions have become something of, well, a drug to the pharma industry. They’ve become so fat and happy based on the monopoly rents of patents artificially limiting supply, that they can’t fathom how to survive without such rents. That crutch has resulted in big pharma running into some serious problems lately — because they haven’t been discovering many really valuable new drugs lately. At the same time, many of their old drugs have seen their patents start to expire.
In response, pharmaceutical companies have been pulling out all sorts of tricks to try to extend the monopoly rents (rather than actually improving people’s health or their own business model). For a while, we were discussing “pay for delay” schemes, in which big pharmaceutical companies would sue small generic drug makers… and then “settle” by paying those generic companies a bunch of cash not to compete with generic drugs for some time. That practice recently became harder after the Supreme Court said that the FTC can go after such practices as a form of antitrust enforcement.
But that’s not the only game that big pharmaceutical firms have been playing. A recent lawsuit filed by New York against Forest Labs and its parent company Actavis revealed that the company was trying to force Alzheimer’s patients onto a new drug, and away from one that they had been using. The only real difference in the two drugs: the length of the patent protection. Basically, the company was trying to force patients onto a drug that wasn’t close to becoming available in generic forms, which would make it much, much cheaper. From the lawsuit:
This case is brought to prevent Defendants from illegally maintaining their monopoly position and inflating their profits at the expense of patients suffering from Alzheimer’s disease. The manipulative tactic that the Defendants seek to employ here is what some in the industry, including Defendants’ own CEO, have called a “forced Switch.” In a forced switch, a pharmaceutical company that sells a drug facing imminent generic competition withdraws its drug from the market, forcing patients to switch to a different form of the drug with patents that expire later. The switch has the effect of impeding the entry of lower-cost generic drugs. A physician recently complained to Defendants, aptly describing their contemplated action as “immoral and unethical.” It is also illegal.
Defendants sell a blockbuster drug to treat Alzheimer’s disease, called Namenda. Namenda is Forest’s top selling drug, and is protected by patent and regulatory exclusivities that prevent generic versions from entering the market until July 2015. But rather than allowing patients with Alzheimer’s to continue to take Namenda and switch to the less expensive generic version when it becomes available, as contemplated by federal and state drug laws, Forest instead hatched a scheme that interferes with patients’ ability to make this switch.
Defendants’ strategy is to discontinue or severely restrict patient access to its original, immediate-release version of Namenda, known as Namenda IR, prior to generic entry in order to force patients to switch to Forest’s newer, virtually identical, extended-release version of Namenda, called Namenda XR. Because Namenda XR is protected by patents for many years longer than the original Namenda IR, Defendants’ goal is to use the “forced switch” to reap several more years of monopoly profits than they would have earned otherwise. Under generic substitution laws, a pharmacist will not be able to substitute lower-priced generic Namenda IR (known as memantine) for Namenda XR. As a result, once patients have switched to Namenda XR, it will destroy the market for the generic form of Namenda IR because of the dramatically increased burden, cost, and time needed to arrange for patients who have been switched to Namenda XR to switch back to the original version.
Thankfully, a few weeks ago, an initial ruling in the case found that Actavis could not move forward with these “forced switch” plans and needed to continue making the original drug, Namenda IR, available. The full court ruling [pdf] is fairly detailed in how Actavis has a monopoly on the market for memantine and is abusing it in anti-competitive ways. The court notes that merely having a patent isn’t necessarily proof of a monopoly — but in this case, Actavis absolutely does have a monopoly. Further, it notes that just because you have a monopoly, it doesn’t mean you’re abusing it. But… Actavis does appear to be abusing its monopoly position. It didn’t help that Forest Labs CEO, Brent Saunders (recently moved up to Actavis CEO as well), was pretty open about this:
Saunders stated, contemporaneously with the adoption of the hard switch by Forest, that the purpose of the switch was anticompetitive: to put barriers obstacles in the path of producers of generic memantine and thereby protect Namenda?s revenues from a precipitous decline following generic entry…. He further stated: ?if we do the hard switch and we?ve converted patients and caregivers to once-a-day therapy versus twice a day, it?s very difficult for the generics then to reverse-commute back, at least with the existing [prescriptions]. They don?t have the sales force, they don?t have the capabilities to go do that. It doesn?t mean that it can?t happen, it just becomes very difficult. It is an obstacle that will allow us to, I think, again go into to a slow decline versus a complete cliff.?).
Of course, this particular practice, of trying to force people to avoid generic competition is increasingly widespread. As I was finishing up this post, I came across a similar, if equally disturbing, story about Pfizer directly threatening doctors should they decide to prescribe generic versions of pregabalin, an anti-epilepsy drug, that will also go off patent in 2015. But here’s the tricky part: Pfizer holds a different patent on the same drug if it’s used to treat pain (rather than epilepsy). Pfizer is claiming that prescribing the generic version for pain use would lead to serious problems — even though it’s the same damn drug.
You will see that, whilst the basic patent for pregabalin has expired and regulatory data protection for Lyrica expired in July 2014, Pfizer has a second medical use patent protecting pregabalin’s use in pain which extends to July 2017. Pfizer conducted further research and development on pregabalin leading to the invention of its use in pain and hence was granted a second medical use patent for this indication. This patent does not extend to pregabalin’s other indications for generalized anxiety disorder (GAD) or epilepsy.
As a result of the pain patent, we expect that generic manufacturers will only seek authorisation of their pregabalin products for use in epilepsy and generalised anxiety disorder and not for pain, whilst Pfizer’s pain patent is in place. Generic pregabalin products therefore are expected not to have the relevant information regarding the use of the product in pain in the PIL (Patient Information Leaflet) and SmPC (Summary of Product Characteristics). In other words, the generic pregabalin products are expected to carry so-called “skinny labels” and will not be licensed for use in pain. In the circumstances described above, Pfizer believes the supply of generic pregabalin for use in the treatment of pain whilst the pain patent remains in force in the UK would infringe Pfizer’s patent rights. This would not be the case with supply or dispensing of generic pregabalin for the non-pain indications, but we believe it is incumbent on those involved to ensure that skinny labeled generic products are not dispensed and used for pain.
In this regard, we believe the patent may be infringed, even potentially unwittingly, by pharmacists and others in the supply chain, if they supply generic pregabalin for the pain indication. Without information, guidance and practical solutions from the authorities, Pfizer believes that multiple stakeholders, possibly without realizing, may contribute to patent infringement which would be an unlawful act. This runs contrary to the government’s established policy of rewarding additional research by the granting of a second medical use patent.
As Cory Doctorow notes in the article above, Pfizer here seems to be trying to take its own “stupid problem” and make it everyone else’s stupid problem:
Weirder still is that Pfizer wants to make their stupid problem into everyone else’s stupid problem. The fact that it’s hard to enforce this kind of secondary patent is Pfizer’s business, not doctors’. Doctors’ duty is to science and health, not Pfizer’s profit-margins. Scientifically, there’s no difference between the two compounds. Doctors who prescribe generics leave their patients (or possibly the NHS) with more money to pursue their other health goals.
If your dumb government monopoly is hard to enforce, maybe you shouldn’t be banking on it. But in the world of corporatist sociopathy, where externalising your costs on others isn’t just a good idea, it’s your fiduciary duty to your shareholders, Pfizer’s actions are practically inevitable.
And this brings us back to the problem discussed at the very top of this article. The entire pharmaceutical industry has built its business around the idea of artificially reducing supply — rather than about providing more benefit (health). That’s really screwed up. A good business focuses on expanding the benefit to users, not limiting it to charge more. Our patent policy has created incentives for exactly the opposite — and that is having a massive impact on the health and well-being of people around the globe.
Filed Under: alzheimer's, brent saunders, demand, drugs, economics, epilepsy, forced switch, generic drugs, generics, health, health care, lyrica, monopoly rents, namenda, namenda ir, namenda xr, pain, patents, pharmaceuticals, pregablin, supply, worth
Companies: actavis, forest labs, pfizer