Generic firms & innovators tie up to cut legal costs
In these settlements, the generic company typically agrees to delay its entrance in the market in exchange for certain benefits. Lifestyle woes high in India
By Noemie Bisserbe, TNN |
NEW DELHI: Out-of-court settlement of patent disputes between Indian generic companies and innovator companies are gaining currency with both parties anxious to reduce the risks associated with patent challenges.
“The climate has changed in the last two years,” said Brian Tempest, Ranbaxy Lab’s chief mentor and executive vice-chairman, in an interview with ET. “This change is driven by legal infrastructure... There is more clarity today on what is possible and what is not for an out-of-court settlement,” he added.
Last week, the Delhi-based company settled a dispute over prostate drug Flomax’s patent with Astella Pharma and Boehringer Ingelheim. In July, Ranbaxy Lab had also reached an agreement with GlaxoSmithKline (GSK) for a dispute over herpes medicine Valtrex.
In these settlements, the generic company typically agrees to delay its entrance in the market in exchange for certain benefits, such as licenses to other patents. These agreements may also involve reverse payments, which often remain confidential, in which the innovator company pays the generic drug maker to keep it off the market.
Dr Reddy’s settlement with GSK late last year for instance, allowed the Hyderabad-based company to exclusively distribute an authorised generic version of Imitrex in the US market.
While the Federal Trade Commission (FTC), a law enforcement agency charged by the US Congress with protecting the public against anti-competitive behavior, has in the past taken severe action against certain companies, keeping generic and innovative pharma companies on their toes, the FTC now provides more guidance on the laws on settlement.
As a result, pharma companies are now less apprehensive to enter into out-of-court settlement on drug patent disputes.
“Indian generic companies are under a lot of pressure from investors to improve earnings visibility of their US portfolio. Settling out of court may help them limit revenues volatility,” said Surajit Pal, senior analyst with UTI Securities.
While successful litigation gives the first-to-file company an 180-day market exclusivity for the generic form, these legal battles involve significant risks and costs. According to analysts, legal cost to challenge the patent of a drug with over $1 billion, will cost $10-15 million.
For innovator companies, settling a dispute out of court allows them to protect their patents. “Better issue a license to one generic drug maker, rather than lose its patent and face competition from ten generic companies,” said Mr Pal.
Innovator companies are also under increasing pressure. In a recent ruling in the case between information technology firm KSR and Teleflex, where the US Supreme court set out certain conditions for proving non-obviousness — one of the three conditions to the grant of a patent — in an innovation. “More generic companies could win because of this case,” said Mr Tempest.
After Israel generic drug giant Teva Pharmaceutical Industries, Ranbaxy is the company to have the highest number of patent dispute cases, where it is first to file, pending in the US. “You can’t be a serious global player if you don’t get into patent challenge,” said Mr Tempest.
“The climate has changed in the last two years,” said Brian Tempest, Ranbaxy Lab’s chief mentor and executive vice-chairman, in an interview with ET. “This change is driven by legal infrastructure... There is more clarity today on what is possible and what is not for an out-of-court settlement,” he added.
Last week, the Delhi-based company settled a dispute over prostate drug Flomax’s patent with Astella Pharma and Boehringer Ingelheim. In July, Ranbaxy Lab had also reached an agreement with GlaxoSmithKline (GSK) for a dispute over herpes medicine Valtrex.
In these settlements, the generic company typically agrees to delay its entrance in the market in exchange for certain benefits, such as licenses to other patents. These agreements may also involve reverse payments, which often remain confidential, in which the innovator company pays the generic drug maker to keep it off the market.
Dr Reddy’s settlement with GSK late last year for instance, allowed the Hyderabad-based company to exclusively distribute an authorised generic version of Imitrex in the US market.
While the Federal Trade Commission (FTC), a law enforcement agency charged by the US Congress with protecting the public against anti-competitive behavior, has in the past taken severe action against certain companies, keeping generic and innovative pharma companies on their toes, the FTC now provides more guidance on the laws on settlement.
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As a result, pharma companies are now less apprehensive to enter into out-of-court settlement on drug patent disputes.
“Indian generic companies are under a lot of pressure from investors to improve earnings visibility of their US portfolio. Settling out of court may help them limit revenues volatility,” said Surajit Pal, senior analyst with UTI Securities.
While successful litigation gives the first-to-file company an 180-day market exclusivity for the generic form, these legal battles involve significant risks and costs. According to analysts, legal cost to challenge the patent of a drug with over $1 billion, will cost $10-15 million.
For innovator companies, settling a dispute out of court allows them to protect their patents. “Better issue a license to one generic drug maker, rather than lose its patent and face competition from ten generic companies,” said Mr Pal.
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Innovator companies are also under increasing pressure. In a recent ruling in the case between information technology firm KSR and Teleflex, where the US Supreme court set out certain conditions for proving non-obviousness — one of the three conditions to the grant of a patent — in an innovation. “More generic companies could win because of this case,” said Mr Tempest.
After Israel generic drug giant Teva Pharmaceutical Industries, Ranbaxy is the company to have the highest number of patent dispute cases, where it is first to file, pending in the US. “You can’t be a serious global player if you don’t get into patent challenge,” said Mr Tempest.
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