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Britain Accuses GlaxoSmithKline of Conspiring With Rivals

April 19, 2013 by Leave a Comment

The Office of Fair Trading alleged that GlaxoSmithKline had abused its dominant position in the market, kept prices artificially high and denied “significant cost savings” to Britain’s state-run health provider, the National Health Service.

The case centers on efforts by three companies, Alpharma, Generics (U.K.) and Norton Healthcare, to market an alternative to Seroxat, GlaxoSmithKline’s brand of paroxetine.

The three were warned by GlaxoSmithKline that their generic equivalents would infringe a patent. To resolve the dispute, each of the rivals concluded one or more agreements with GlaxoSmithKline, the Office of Fair Trading said.

“The O.F.T.’s provisional view is that these agreements included substantial payments from GlaxoSmithKline to the generic companies in return for their commitment to delay their plans to supply paroxetine independently,” the regulator said. The agreements with the three companies collectively spanned the years 2001 to 2004, it said.

GlaxoSmithKline said it believed “very strongly” that it had “acted within the law, as the holder of valid patents for paroxetine, in entering the agreements under investigation.”

“These arrangements resulted in other paroxetine products entering the market before GSK’s patents had expired,” the company said. “We have cooperated fully with the Office of Fair Trading in this investigation.”

The company noted that European Union regulators had reviewed the agreements twice and decided to take no action.

At the time Seroxat was one of GlaxoSmithKline’s best-selling drugs and was used to treat, among other conditions, depression and anxiety disorders, the Office of Fair Trading said.

“The introduction of generic medicines can lead to strong competition on price, which can drive savings for the N.H.S., to the benefit of patients and, ultimately, taxpayers,” said Ann Pope, senior director of services, infrastructure and public markets at the Office of Fair Trading. “It is therefore particularly important that the O.F.T. fully investigates concerns that independent generic entry may have been delayed in this case.”

The action Friday was the first step in formal proceedings: the issuance of a Statement of Objections. The parties involved, which include the three generic companies, can then make written and oral responses.

“No assumption should be made at this stage that there has been an infringement of competition law,” Ms. Pope said. “We will carefully consider the parties’ representations to the Statement of Objections before deciding whether competition law has in fact been infringed.”

If ultimately found to be in breach of antitrust law, a company can in theory be fined up to 10 percent of its worldwide revenue, though financial penalties rarely reach those sorts of levels.

Article source: http://www.nytimes.com/2013/04/20/business/global/britain-accuses-glaxosmithkline-of-conspiring-with-rivals.html?partner=rss&emc=rss

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Merck Settles Investor Suits Over Cholesterol Drug

February 14, 2013 by Leave a Comment

Merck said it had recorded a $493 million charge to cover the cost of the settlement. Merck earned $6.66 billion in net income last year on revenue of about $47 billion based on generally accepted accounting principles. So that charge is only 7.4 percent of last year’s profits.

Investors filed two lawsuits against Merck and Schering-Plough, which jointly sold Vytorin. The suits asserted that the companies had known for nearly two years that a clinical trial of the drug failed to show that it was any better than a statin drug at limiting the buildup of plaque in arteries, but they did not make the results public until 2008.

The companies’ stock dropped significantly after those results were released and a panel of cardiologists recommended the drug be used only as a last resort.

Under Thursday’s agreement, Merck will pay $215 million to resolve a class-action suit involving Merck defendants and $473 million to resolve a suit against Schering. Lawyers for plaintiffs in the suit against Schering said the settlement was the largest ever in a securities class action against a drug company.

“The settlement is even more gratifying because it underscores the value of private civil litigation to protect shareholder rights,” Christopher McDonald, one of the lead lawyers representing investors, said in a statement. Vytorin combines the statin drug Zocor, also sold by Merck, with the anticholesterol drug Zetia. Several studies — including the one in question — have failed to show that Vytorin or Zetia is more effective than statins, most of which are available as low-cost generics and have been shown to reduce the risk of heart attacks. Zetia has been shown to lower the so-called bad cholesterol, but whether it reduces heart disease is still not known.

Sales of Vytorin and Zetia have fallen since 2007, when they brought in a combined $5 billion, but they are still among Merck’s top-selling drugs. In 2012, Zetia brought in $2.6 billion and Vytorin $1.8 billion, according to company filings.

In settling the lawsuits, Merck did not admit any wrongdoing and said both companies had acted responsibly in connection with the clinical trial, which is known as the Enhance study. Schering and Merck merged in 2009.

A jury trial was scheduled to begin in early March.

“This agreement avoids the uncertainties of a jury trial and will resolve all of the remaining litigation in connection with the Enhance study,” Bruce N. Kuhlik, executive vice president and general counsel of Merck, said in a statement. “It is in the best interests of the company and its shareholders to put this matter behind us, and to continue our focus on scientific innovations that improve health worldwide.”

Daniel Berger, a lawyer whose firm represented the Dutch pension fund ABP, said the size of the settlement was noteworthy because many such suits are accompanied by a criminal or government investigation but there was none in this case.

“This was a case that we built ourselves,” he said. In 2009, the companies paid $41.5 million to settle class-action lawsuits from consumers and insurers over the same issue. Also that year, the companies paid $5.4 million to state attorneys general investigating consumer protection cases involving Zytorin and Zetia.

In their heyday, Zetia and Vytorin were heavily promoted by Merck and Schering despite continued skepticism by cardiologists that the drugs were effective. Zetia, also known as ezetimibe, was approved by the Food and Drug Administration in 2002 based on studies that showed that it lowered bad cholesterol 15 to 20 percent. Vytorin was approved in 2004. The drugs provided a comfortable source of revenue for Merck after its Zocor lost patent protection and faced competition from low-cost generic alternatives.

In 2007, about 800,000 prescriptions for Zetia and Vytorin were written each week. They made up nearly 20 percent of the market for cholesterol-lowering drugs. But by that fall, cardiologists began to complain and to question the drugs’ efficacy after the companies refused to release the findings of the Enhance trial.

Merck suffered another setback involving Zetia last year when the F.D.A. rejected its application for a drug that would combine Zetia with the active ingredient in Lipitor, a statin made by Pfizer that is now available as a generic. In January, Merck said that it had provided new information to the agency and was resubmitting the drug for approval.

Article source: http://www.nytimes.com/2013/02/15/business/merck-settles-investor-suits-over-cholesterol-drug.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Generic Drug Makers Facing Squeeze on Revenue

December 4, 2012 by Leave a Comment

They call it the patent cliff.

Brand-name drug makers have feared it for years. And now the makers of generic drugs fear it, too.

This year, more than 40 brand-name drugs — valued at $35 billion in annual sales — lost their patent protection, meaning that generic companies were permitted to make their own lower-priced versions of well-known drugs like Plavix, Lexapro and Seroquel — and share in the profits that had exclusively belonged to the brands.

Next year, the value of drugs scheduled to lose their patents and be sold as generics is expected to decline by more than half, to about $17 billion, according to an analysis by Crédit Agricole Securities.“The patent cliff is over,” said Kim Vukhac, an analyst for Crédit Agricole. “That’s great for large pharma, but that also means the opportunities theoretically have dried up for generics.”

In response, many generic drug makers are scrambling to redefine themselves, whether by specializing in hard-to-make drugs, selling branded products or making large acquisitions. The large generics company Watson acquired a European competitor, Actavis, in October, vaulting it from the fifth- to the third-largest generic drug maker worldwide.

“They are certainly saying either I need to get bigger, or I need to get ‘specialer,’ ” said Michael Kleinrock, director of research development at the IMS Institute for Healthcare Informatics, a health industry research group. “They all want to be special.”

As one consequence of the approaching cliff, executives for generic drug companies say, they will no longer be able to rely as much on the lucrative six-month exclusivity periods that follow the patent expirations of many drugs. During those periods, companies that are the first to file an application with the Food and Drug Administration, successfully challenge a patent and show they can make the drug win the right to sell their version exclusively or with limited competition.

The exclusivity windows can give a quick jolt to companies. During the first nine months of 2012, sales of generic drugs increased by 19 percent over the same period in 2011, to $39.1 billion from $32.8 billion, according to Michael Faerm, an analyst for Credit Suisse. Sales of branded drugs, by contrast, fell 4 percent during the same period, to $174.2 billion from $181.3 billion.

But those exclusive periods also make generic drug makers vulnerable to the fickle cycle of patent expiration. “The only issue is it’s a bubble, too,” said Mr. Kleinrock. He said next year, the generic industry would enter a drought that was expected to last about two years.  Of the drugs that are becoming generic, fewer have exclusivity periods dedicated to a single drug maker.

In 2013, for example, the antidepressant Cymbalta, sold by Eli Lilly, is scheduled to be available in generic form. But more than five companies are expected to share in sales during the first six months, according to a report by Ms. Vukhac.

Heather Bresch, the chief executive of Mylan, the second-largest generics company in the United States, said Wall Street analysts were obsessed with the issue. “I can’t go anywhere without being asked about the patent cliff, the patent cliff, the patent cliff,” she said. “The patent cliff is one aspect of a complex, multilayered landscape, and I think each company is going to face it differently.”

Jeremy M. Levin, the chief executive of Teva Pharmaceuticals, the largest global maker of generic drugs, agreed. “The concept of exclusivity — where only one generic player could actually make money out of the unique moment — has diminished,” he said. “In the absence of that, many companies have had to really ask the question, ‘How do I really play in the generics world?’ ”

For Teva, Mr. Levin said, he believes the answer will be both its reach  — it sells 1,400 products, and one in six generic prescriptions in the United States is filled with a Teva product  — and what he says is a reputation for making quality products. That focus will be increasingly important, he said, given recent statements by the F.D.A. that it intends to take a closer look at the quality of generic drugs. Mr. Levin also said he planned to cut costs, announcing last week that he intended to trim from $1.5 to $2 billion in expenses over the next five years.

Article source: http://www.nytimes.com/2012/12/04/business/generic-drug-makers-facing-squeeze-on-revenue.html?partner=rss&emc=rss

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