Suspect claims in Teva’s suit against Cipla

Patent infringement cases are inevitable in the pharma industry. Lawsuits are filed more often than new drugs are discovered and every modification of a drug results in more patents and, predictably, more infringement suits. These take years to be settled, but since the damages awarded by the courts can be astronomical in the US, well-heeled drug majors have an incentive to pursue aggressive litigation. Legal costs don’t matter much to the big firms, since their market monopoly allows them to rake in millions, if not billions, of dollars in profit.

Developments in recent months may well alter the course of litigation, and it could perhaps make the drug patent battles less problematic for Indian generics, for whom the US is the most lucrative market. This is the entry of the US Federal Trade Commission (FTC) in the knotty question of patents. FTC’s primary role is to enforce consumer protection laws aimed at preventing fraud and unfair business practices, but it also enforces federal anti-trust laws that “prohibit anticompetitive mergers and other business practices that could lead to higher prices, fewer choices, or less innovation.” Possibly because of the Joe Biden Administration’s interest in bringing down healthcare costs, FTC is now looking at drug patents from the latter aspect.

In September last year, it cracked the whip on drug companies, asking eight of them to withdraw improperly listed patents in the federal registry of approved drugs. This is the Orange Book, where the drugs and pharmaceuticals approved as both safe and effective by the US Food and Drug Administration (FDA) are listed after innovator companies file New Drug Application (NDA). The Orange Book is the holy grail of drug companies. It helps generic-drug makers assess which of the innovator drugs can be made safely and effectively as generic alternatives. The snag is that many of these patents are intended to create a thicket that makes it difficult for competitors to cut through. This delays cheaper generics and has become a cause of concern for FTC in recent months.

And it is here, with the Orange Book, that Israeli firm Teva’s suit against Cipla begins, as do many of the cases involving generic firms. Apart from innovator companies, generics manufacturers planning to market and sell a generic drug must file what is termed an Abbreviated New Drug Application or ANDA with FDA to prove that its drug is a bio-equivalent to the original drug. If ANDA is approved, the generic drug will be listed in the Orange Book.

When generic firms list their ANDA for a specific drug, it is usually the signal for the innovator company to launch legal action, claiming infringement of patents so that competitively priced generics are kept out of the market. In 2020, based on an Orange Book listing, Teva Pharmaceutical Industries said Cipla’s proposed generic version of its Qvar inhaler, used to treat asthma, infringed six patents. Teva sought a court injunction against the manufacture of Qvar generics until the patents expire in May 2031 and in January 2032. If Cipla chose to enter the market before that, Teva demanded cash compensation. At the time, Qvar’s sales in the first half of 2020 were US $97 million, according to the company. Cipla countered that Teva’s patents were either invalid or would not be infringed.

The patent suit has since then wound its way through the courts, but FTC’s September announcement put drug companies on notice, when FTC chairperson Lina Khan said patent abuse to stop competition would be dealt with strictly. It warned that the agency would scrutinise and act against improper patent listings in the Orange Book to ensure cheaper versions of branded drugs, including asthma inhalers and epinephrine auto-injectors, were not delayed, according to a Bloomberg report.

FTC appeared to be getting tough with the patenting practices of innovator companies when it issued warning letters to the companies after issuing a policy statement, with the support of FDA, on the same lines. Both actions underscored FTC’s determination “to use all its tools to halt unlawful business practices that contribute to high drug prices”. Significantly, it would include FDA’s regulatory process for disputing a brand company’s patent listing and potentially pursuing relief under the anti-trust laws.

This should have provided cheer all round, but it begs the question of why FTC has not acted so far to curb such practices. The rot in the US system has continued for decades, as FTC’s statement reveals. The September policy statement says FTC examined the anti-competitive effect of improper Orange Book listings as part of a 2002 study, when “it identified numerous instances in which the 30-month stay was used to block competition”.

The strategy of getting a 30-month stay is what Teva is using to stop Cipla in its tracks, in what appears to be a brazen defiance of the FTC warning. Of the eight firms put on notice by FTC in September, Teva is the only one to continue on its belligerent path. In February, it sued Cipla for allegedly infringing 12 of its asthma treatment patents, seven of which have been targeted by FTC.

The question is whether the new-found resolve of FTC will deter pharma companies on misuse of patents for the Orange Book listing. News reports say three of the eight firms have pulled most or all of their FTC-targeted listings. This includes GlaxoSmithKline, which has pulled out three of its four patent listings in the Orange Book.

On the other hand, companies like Teva and Boehringer Ingelheim International are continuing to assert their patent claims, say legal experts. All that it will entail is just the cost of litigation. Drug companies appear to be betting on their assessment that FTC will not sue them if they refuse to retract. There is also a question mark over how far FDA would go to help FTC in its campaign to weed out wrongful patents. As one drug company said, it was up to to change its regulations on listing.

What may put more pressure on drug companies is anti-trust suits filed by private funds. A Massachusetts workers’ health fund has filed such suits against Boehringer and Teva. The class action suit says Teva manipulated the US patent and drug-approval process to maintain a monopoly for its Qvar asthma inhaler for nearly a decade by keeping out cheaper generics. It says the Israeli firm piled up improper patent applications for slightly tweaked products, and also engaged in false litigation to block competition from cheaper generic makers. Boehringer has already cut the prices of its inhalers in the wake of the class action suit. Monopolies are clearly on notice.

This was first published in the 1-15 April, 2024 print edition of Down To Earth Magazine

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