Replies to post #74729 on Biotech Values

[DewDiligence]

MRX TEVA – Starting with the Protonix case, Teva has honed a new tactic: launch “at risk” and only then offer to settle. The asymmetry of the information—wherein only Teva knows how much product has been placed in the channel—greatly favors Teva in these kinds of confrontations.

The Solodyn settlement terms are not exactly bullish for MRX, and I think the commercial prospects for Reloxin are less than stellar.

MRX’s shareholders would probably have fared better if MRX had allowed itself to be munched by Mentor a few years ago; had they done that, MRX would now be part of JNJ. Unfortunately for MRX shareholders, Jonah Shacknai is the kind of CEO who will fight tooth and nail to keep his job no matter what.

[DewDiligence]

Democrats Target Generic-Drug Settlements

[The FTC has been trying to undo patent settlements between branded-drug companies and generic-drug companies for the past decade, but the courts have consistently ruled against the FTC and in favor of the settlements. Now Congress wants to take matters into its own hands.]

http://online.wsj.com/article/SB123843757514670479.html

›MARCH 31, 2009
By JONATHAN D. ROCKOFF

As part of its drive to cut health-care costs, the Obama administration wants to stop the payments pharmaceutical companies make to generic-drug makers to delay the launch of cheap copies.

Democratic lawmakers have talked about passing legislation to outlaw such deals, and President Barack Obama has vowed to stop the deals in his budget. A House Energy and Commerce subcommittee is holding a hearing Tuesday on the issue.

The savings to the health-care system from eliminating such agreements, which are sometimes referred to as "pay to go away," would be significant. Generic drugs can cost as little as a quarter of the price of their brand-name cousins, saving billions of dollars a year in drug costs. The deals can also set the stage for further delays in generic drugs coming to market.

Ten brand-name drugs with about $17 billion in annual U.S. sales are now protected by the agreements, said Scott Hemphill, an associate professor at Columbia Law School, a critic of the deals. The drugs include such blockbusters as Pfizer Inc.'s cholesterol drug Lipitor, he said.

Pfizer said the Lipitor deal didn't contain any of the practices that have been of concern to the Federal Trade Commission, and the deal gave consumers earlier access to a generic version than they might have otherwise received.

Drug companies have successfully argued in court cases that their patents allow them to make the deals. They also say the deals boost their profits and help them invest in new medicines.

The FTC has fought the payments for years. In its latest effort, the FTC filed a lawsuit in February 2008 against Cephalon Inc., of Frazer, Pa. It alleged Cephalon broke antitrust law by making more than $200 million in payments and inducements to four companies to delay their introduction of generic versions of Provigil, Cephalon's lucrative narcolepsy drug, for six years until 2012.

After the deals were struck, Cephalon Chief Executive Frank Baldino Jr. told the Philadelphia Business Journal the company got "six more years of patent protection. That's $4 billion in sales that no one expected."

Cephalon said the deals were legal and will actually give patients early access to generic Provigil, because all its patents on the drug don't expire until 2015. But it also acknowledges using the time before generic Provigil goes on sale to shift patients to a longer-acting version of the wakefulness drug, with a patent running until 2023.

The FTC has filed six suits since 2001 to block deals involving payments by drug companies to generic makers, but it has encountered little success in the courts.

In an interview, FTC Chairman Jon Leibowitz said stopping the arrangements is an agency priority. The deals enrich drug companies, he said, while "consumers are left holding the bag."

In Congress, Sen. Herb Kohl, a Wisconsin Democrat, has proposed a bill barring the deals, and a similar bill was introduced in the House last week by Rep. Bobby L. Rush, an Illinois Democrat.

Similar legislation, including a 2007 measure that Mr. Obama co-sponsored as a senator, has failed in the past. A White House spokesman wouldn't comment on whether the president will support such legislation this year.

Even if the agreements are ever banned in court or by Congress, companies may have already found a way to game it. Ronny Gal, an analyst at Sanford C. Bernstein & Co., pointed to the settlement of a patent dispute earlier this month between Medicis Pharmaceutical Corp. and Teva Pharmaceutical Industries Ltd. as a potential model.

Teva had begun selling generic versions of a Medicis acne drug before legal disputes over the patent were resolved. Under a settlement, Teva agreed to halt further sales of the generic until 2011, but was allowed to keep revenue from the products it had already sold [#msg-36392265].

Mr. Gal estimated Teva earned $25 million from its sale of generic copies of the drug, and said it didn't get a payment from Medicis to resolve the dispute. "This could simply be a wink-and-a-nod way of getting the same amount of money," he said. Teva and Medicis declined to comment.‹