[Ip-health] The Problem with "Managed" Competition

Priti Radhakrishnan priti.radhakrishnan at gmail.com
Fri Aug 3 09:24:29 PDT 2012

Interesting post on the problem with "managed" competition. Priti

BMS sues Mylan (Matrix) Labs for selling generic version of HIV drug
Atazanavir to PAHO

Bristol-Myers Squibb (BMS) has filed a breach of contract complaint against
Mylan Laboratories in the US District Court, Southern District of New York.
At the heart of the complaint is the procurement of the generic version of
a HIV medicine from India by Pan American Health Organization (PAHO), which
was then supplied to Venezuela. The drug atazanavir was manufactured in
India where no patents have been granted to Novartis or BMS on the drug or
its manufacturing process and was supplied to Venezuela where BMS, again,
does not have any granted patents.

A copy of the complaint is available

On April 17, 2011, Mylan Labs and BMS entered into a commercial agreement
on the key HIV drug atazanavir, now recommended by WHO as the first option
for second-live treatment. Generic atazanavir is manufactured in India
where no patents have been granted on the drug [Note: atazanavir patent
applications are under examination in India and have been opposed by civil
society and generic companies including by Mylan (Matrix) Labs itself.]

Under the 2011 agreement with BMS, Mylan acquired an assurance of
immunity-from-suit to manufacture, distribute and sell atazanavir in
certain developing countries, mostly restricted to Sub-Saharan Africa and

According to the complaint, in November 2011 Mylan sought permission from
BMS to supply generic atazanavir in Venezuela – a country not included in
the territories listed in the agreement. BMS refused because it had been
supplying branded atazanavir (Reyataz) to the government of Venezuela for
at least 5 years.

BMS alleges that Mylan violated their agreement by provided PAHO with over
a year’s supply of atazanavir for use in Venezuela and estimates lost
profits on sales to be in excess of 15 million USD. Furthermore, BMS claims
that as a consequence of Mylan’s actions, its “negotiation strength with
the Venezuelan government going forward has been severely damaged.”

Excerpts from the agreement provide details of the non-assert arrangements
as well as limits of the “immunity-from-suit” provisions, including the
following language:

“*3.1 For the avoidance of doubt, the immunity from suit, as referred to
herein, shall provide to Company a defense against a suit or other
enforcement of the Intellectual Property on any ground of infringement
arising from Company’s exercise of the grant in accordance with the terms
and conditions of this Agreement.*

*a. Subject to the terms and conditions set forth herein, BMS grants to
Company immunity from suit under the Intellectual Property for the: (i)
manufacture of Products by Company or Company Affiliates in the Territory;*
* (ii) sale or other distribution of Products by Company or Company
Affiliates, or their authorized distributors and agents, within the
Territory; and (iii) use of Products obtained from Company or Company
Affiliates, or their authorized distributors and agents, for treating
HIV/AIDS in the Territory.*

*b. The immunity from suit provided by this Agreement shall not prevent the
exportation of Products to or distribution of Products within countries
outside the Territory where Patents do not exist. However, the immunity
from suit shall not extend to patents and patent applications not
explicitly included within the Patents, nor shall it extend to know-how not
explicitly included within the Know-How rights, nor shall it extend to
Patents outside the Territory.”*

Particularly problematic is the definition of Patent in the agreement that
includes not only granted patents but pending patents applications as well.
BMS does not have any granted patents in Venezuela but seeks to bar Mylan
Labs from supplying the drug based on claims of two pending patent
applications: VN 2005-000854 and VN1999-000084.

However, a preliminary search of the status of the patents on the SAPI
Autónomo De La Propiedad
 database indicates that the VN1999-000084 application which covers the
bisulfate salt of Atazanavir was rejected by the Venezuela Patent Office
and the decision is under appeal by BMS. The VN 2005-000854 is an
application for a process to make the bisulphate salt and is undergoing
patent opposition proceedings in Venezuela. The search results are
available here<http://donttradeourlivesaway.files.wordpress.com/2012/08/sapi2.pdf>

Use of the broad definition of “Patent” sets up strong restrictions on the
immunity-from-suit, especially given the common practice of originator
companies registering series of secondary patent applications on the same
drug in numerous jurisdictions which does not indicate whether the patent
applications are undergoing opposition or if the likelihood of being
accepted or deemed valid is actually low.

Other voluntary licenses (VLs) are likely to have similar overly broad
definitions (licenses on HIV medicines like rilpivirine and raltegravir are
also expected to have an over broad definition of patents). The terms of
such agreements are ritually kept secret in spite of the implications on
patient access and public health. This case not only highlights the risks
associated with closed negotiations but is illustrates the litigation to
which generic companies may similarly be subjected for supplying middle
income developing countries.

Big pharmaceutical companies are advancing voluntary licenses with Indian
generic firms as the cornerstone of their access programs. This dispute
between BMS and Mylan highlights the danger of such voluntary licenses that
are applied as a means of controlling the generic competition by limiting
the geographical scope of supplying the drugs and raises questions about
the ability of VL arrangements to meet the objectives of improving access
to essential medicines across the developing world.

This court case is a wakeup call particularly for the Indian generic
industry which has recently signed a spate of VLs without actually
considering the impact of the terms of the contracts.
Posted on: http://donttradeourlivesaway.wordpress.com/

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