California, the District of Columbia, and seventeen other states have filed suit against Abbott Laboratories for allegedly entering into a scheme to block the generic version of the cholesterol lowering drug TriCor, reported the East Bay Business Times.

The East Bay Business Times reported on the suit as follows:

The prosecutors are suing Abbott as well as two subsidiaries of Brussell-based Solvay — Fournier Industrie et Sante SAS and Laboratoire Fournier SA — in federal district court in Delaware. The prosecutors say the pharmaceutical companies illegally attempted to monopolize the market for drugs containing the ingredient fenofibrate, which regulates cholesterol and triglyceride levels. Abbott licenses from Fournier American rights to the drug and Solvay sells the drug on the European market. . . .

According to the AG’s office, the companies made trivial changes to the formulations of TriCor, and marketed those while withdrawing the original drug from the market. The companies deleted references to the original forms of the drug from national drug databases, according to prosecutors, making it more difficult for a generic version of TriCor to obtain generic status. Meanwhile, the prosecutors say, Fournier obtained patents covering the variations of TriCor, and then filed patent infringement lawsuits against generic companies that tried to compete. The litigation triggered mandatory 30-month periods in which the Food and Drug Administration could not approve generic versions of TriCor.

The companies intend to fight the charges, according to the East Bay Business Times, and argue that they have not engaged in any wrongdoing.

The California Biotech Law Blog will be following this story as it unfolds.

The Washington Post ran a column today by Jon Leibowitz of the Federal Trade Commission, which addresses a suit recently filed by the agency against Cephalon, Inc., which will test the legality of the practice of entering into “pay for delay” settlements.

Liebowitz describes the  “pay for delay” settlement controversy at the root of this case as follows:

When these troubling deals first came to light in the late 1990s, the FTC fought them — and stopped them cold. Between 2000 and 2004, no brand and generic companies entered pay-for-delay deals; in other words, companies resolved patent disputes without anticompetitive payoffs.

Unfortunately, that success is under siege. Two federal appeals courts — in rulings that conflict with the analysis of a third appellate court — have found that a brand-name drug company facing a patent challenge is free to pay any amount to keep a generic producer from entering the market until the patent expires. These rulings depart from the spirit of Hatch-Waxman and our nation’s antitrust laws, and they harm consumers by subverting the competition at the heart of our free-market system.

Courts that have sided with pharmaceutical companies believe, in essence, that even an infirm patent gives its owner the right to pay competitors not to compete. . . .Not surprisingly, after two courts blessed such payoffs, the frequency of these settlements has increased sharply. In fiscal 2006, fully half of all pharmaceutical patent settlements (14 of 28) contained such payments. Brand-name manufacturers, seeing the potential to continue reaping monopoly profits, have taken advantage of this apparent judicial leniency. . . .

This dispute clearly puts Hatch-Waxman to the test: should a patent owner have the right to pay to keep a competitor out of the market until the patent expires?

Clearly, insurers and the public would say yes.  According to Liebowitz, Cephalon made an additional $4 billion dollars as a direct result form entering into this “pay for delay” settlement–this is money that came directly out of the pockets of insurers and patients.  As a member of the public who lost my health insurance following the collapse of my former law firm just over four years ago, when my former employer terminated COBRA at the six month mark, leaving me in the position of having to pay full price for prescription medications, I know all too well how expensive it can get to pay for prescription medications, when no generic is available.   There is definitely an impact on the public at large, insurers, and individuals when they have to foot the bill for a more expensive medication.

On the other hand, as an IP lawyer, I can’t help but scratch my head a bit over this case: the FTC is effectively taking issue over a patent owner trying to protect its exclusivity until the patent expires.  Isn’t that the patent owner’s right?

Not according to the FTC.  The FTC’s position is that patent owners do not have the right to enter into these types of settlements–that such deals violate the spirit of Hatch-Waxman and antitrust law.

It makes perfect sense to me why certain courts have sided against the FTC on this particular issue, and also why the FTC anticipates this case going to the Supreme Court.   According to Liebowitz, however, a bill is also making its way through Congress that would prohibit such agreements.  The FTC, of course, supports this legislation.

The California Biotech Law Blog will keep you posted as this battle unfolds.