[Ip-health] The Nasty Patent Games Drug Companies Play To Stop You From Getting Cheaper Drugs

Tahir Amin tahir at i-mak.org
Fri Jan 9 07:36:18 PST 2015


Mike Masnick

The astoundingly wonderful radio program/podcast Radiolab just recently had
an episode called "Worth" <http://www.radiolab.org/story/worth/> -- which
included a few different stories trying to establish how much something is
truly "worth." The first story in the collection talked about how much
extra time in life is worth, as part of a discussion on whether or not it's
reasonable for certain drugs to be priced insanely high. It was an
interesting discussion, mostly revolving around the question of whether
it's "worth" paying tends of thousands of dollars for a drug treatment that
might only extend your life a few weeks. There is just a brief discussion
about whether or not it's appropriate for pharmaceutical companies to
charge the rates that they do -- with the Radiolab team unfortunately
accepting the tired (and incredibly misleading) claim from a drug company
that because drug research includes so many failures, it needs to charge
these ridiculous high rates to make up for all the failures.

This is misleading in all sorts of ways, though that will need to be the
subject of another post at another time. My biggest complaint, after the
story was over, was that it failed in economics 101. It stuck with the
premise that there was a quantifiable single amount that something was
"worth" -- and that price is a reflection of that. This is something that
many people tend to feel, instinctively, but it's not accurate. The value
of something is different to different people and depends on many factors.
The *price* of something may be quite different than the value -- again,
something we've been highlighting
<https://www.techdirt.com/articles/20080121/19180527.shtml> for years

Here's the key bit: the price of something is driven by supply and demand.
When you -- as the program did -- look at price solely based on "value"
you're only looking at the demand side of the equation, and not the supply.
And that's where things get extra tricky in pharmaceutical pricing --
because the supply side is *massively distorted* through patents, which
enable drug companies to artificially limit the supply, driving up prices
to insane levels. In a normal, functioning society, we might recognize that
this is a problem. Deriving pricing for healthcare solely based on demand
is *ludicrous*, and shows a society with very short-term thinking. It
prioritizes short-term narrow profits of drug companies over long-term
contributions from a more healthy populace.

But this is the way of our pharmaceutical industry today. And these
distortions have become something of, well, a drug to the pharma industry.
They've become so fat and happy based on the monopoly rents of patents
artificially limiting supply, that they can't fathom
how to survive without such rents. That crutch has resulted in big pharma
running into some serious problems lately -- because they haven't been
discovering many really valuable new drugs lately. At the same time, many
of their old drugs have seen their patents start to expire.

In response, pharmaceutical companies have been pulling out all sorts of
tricks to try to extend the monopoly rents (rather than actually improving
people's health or their own business model). For a while, we were
discussing "pay for delay"
<https://www.techdirt.com/articles/20091204/0026397198.shtml> schemes, in
which big pharmaceutical companies would sue small generic drug makers...
and then "settle" by paying those generic companies a bunch of cash *not to
compete* with generic drugs for some time. That practice recently became
harder after the Supreme Court said that the FTC can go after such practices
as a form of antitrust enforcement.

But that's not the only game that big pharmaceutical firms have been
playing. A recent lawsuit filed by New York against Forest Labs and its
parent company Actavis revealed that the company was trying to force
Alzheimer's patients onto a new drug
and away from one that they had been using. The only *real* difference in
the two drugs: the length of the patent protection. Basically, the company
was trying to force patients onto a drug that wasn't close to becoming
available in generic forms, which would make it much, much cheaper. From the

* This case is brought to prevent Defendants from illegally maintaining
their monopoly position and inflating their profits at the expense of
patients suffering from Alzheimer's disease. The manipulative tactic that
the Defendants seek to employ here is what some in the industry, including
Defendants' own CEO, have called a "forced Switch." In a forced switch, a
pharmaceutical company that sells a drug facing imminent generic
competition withdraws its drug from the market, forcing patients to switch
to a different form of the drug with patents that expire later. The switch
has the effect of impeding the entry of lower-cost generic drugs. A
physician recently complained to Defendants, aptly describing their
contemplated action as "immoral and unethical." It is also illegal.
Defendants sell a blockbuster drug to treat Alzheimer's disease, called
Namenda. Namenda is Forest's top selling drug, and is protected by patent
and regulatory exclusivities that prevent generic versions from entering
the market until July 2015. But rather than allowing patients with
Alzheimer's to continue to take Namenda and switch to the less expensive
generic version when it becomes available, as contemplated by federal and
state drug laws, Forest instead hatched a scheme that interferes with
patients' ability to make this switch. Defendants' strategy is to
discontinue or severely restrict patient access to its original,
immediate-release version of Namenda, known as Namenda IR, prior to generic
entry in order to force patients to switch to Forest's newer, virtually
identical, extended-release version of Namenda, called Namenda XR. Because
Namenda XR is protected by patents for many years longer than the original
Namenda IR, Defendants' goal is to use the "forced switch" to reap several
more years of monopoly profits than they would have earned otherwise. Under
generic substitution laws, a pharmacist will not be able to substitute
lower-priced generic Namenda IR (known as memantine) for Namenda XR. As a
result, once patients have switched to Namenda XR, it will destroy the
market for the generic form of Namenda IR because of the dramatically
increased burden, cost, and time needed to arrange for patients who have
been switched to Namenda XR to switch back to the original version. *

Thankfully, a few weeks ago, an initial ruling in the case found that Actavis
could not move forward with these "forced switch" plans
and needed to continue making the original drug, Namenda IR,
available. The full
court ruling
[pdf] is fairly detailed in how Actavis has a monopoly on the market for
memantine and is abusing it in anti-competitive ways. The court notes that
merely having a patent isn't necessarily proof of a monopoly -- but in this
case, Actavis absolutely does have a monopoly. Further, it notes that just
because you have a monopoly, it doesn't mean you're abusing it. But...
Actavis does appear to be abusing its monopoly position. It didn't help
that Forest Labs CEO, Brent Saunders (recently moved up to Actavis CEO as
well), was pretty open about this:

* Saunders stated, contemporaneously with the adoption of the hard switch
by Forest, that the purpose of the switch was anticompetitive: to put
barriers obstacles in the path of producers of generic memantine and
thereby protect Namenda’s revenues from a precipitous decline following
generic entry.... He further stated: “if we do the hard switch and we’ve
converted patients and caregivers to once-a-day therapy versus twice a day,
it’s very difficult for the generics then to reverse-commute back, at least
with the existing [prescriptions]. They don’t have the sales force, they
don’t have the capabilities to go do that. It doesn’t mean that it can’t
happen, it just becomes very difficult. It is an obstacle that will allow
us to, I think, again go into to a slow decline versus a complete cliff.”).

Of course, this particular practice, of trying to force people to avoid
generic competition is increasingly widespread. As I was finishing up this
post, I came across a similar, if equally disturbing, story about Pfizer
directly *threatening* doctors
<http://boingboing.net/2014/12/24/pfizer-threatens-pharmacists.html> should
they decide to prescribe generic versions of pregabalin, an anti-epilepsy
drug, that will also go off patent in 2015. But here's the tricky part:
Pfizer holds a different patent on the *same drug* if it's used to treat
pain (rather than epilepsy). Pfizer is claiming that prescribing the
generic version for pain use would lead to serious problems -- even though
it's the same damn drug.

* You will see that, whilst the basic patent for pregabalin has expired and
regulatory data protection for Lyrica expired in July 2014, Pfizer has a
second medical use patent protecting pregabalin's use in pain which extends
to July 2017. Pfizer conducted further research and development on
pregabalin leading to the invention of its use in pain and hence was
granted a second medical use patent for this indication. This patent does
not extend to pregabalin's other indications for generalized anxiety
disorder (GAD) or epilepsy. As a result of the pain patent, we expect that
generic manufacturers will only seek authorisation of their pregabalin
products for use in epilepsy and generalised anxiety disorder and not for
pain, whilst Pfizer's pain patent is in place. Generic pregabalin products
therefore are expected not to have the relevant information regarding the
use of the product in pain in the PIL (Patient Information Leaflet) and
SmPC (Summary of Product Characteristics). In other words, the generic
pregabalin products are expected to carry so-called "skinny labels" and
will not be licensed for use in pain. In the circumstances described above,
Pfizer believes the supply of generic pregabalin for use in the treatment
of pain whilst the pain patent remains in force in the UK would infringe
Pfizer's patent rights. This would not be the case with supply or
dispensing of generic pregabalin for the non-pain indications, but we
believe it is incumbent on those involved to ensure that skinny labeled
generic products are not dispensed and used for pain. In this regard, we
believe the patent may be infringed, even potentially unwittingly, by
pharmacists and others in the supply chain, if they supply generic
pregabalin for the pain indication. Without information, guidance and
practical solutions from the authorities, Pfizer believes that multiple
stakeholders, possibly without realizing, may contribute to patent
infringement which would be an unlawful act. This runs contrary to the
government's established policy of rewarding additional research by the
granting of a second medical use patent. *

As Cory Doctorow notes in the article above, Pfizer here seems to be trying
to take its own "stupid problem" and make it everyone else's stupid

* Weirder still is that Pfizer wants to make their stupid problem into
everyone else's stupid problem. The fact that it's hard to enforce this
kind of secondary patent is Pfizer's business, not doctors'. Doctors' duty
is to science and health, not Pfizer's profit-margins. Scientifically,
there's no difference between the two compounds. Doctors who prescribe
generics leave their patients (or possibly the NHS) with more money to
pursue their other health goals. If your dumb government monopoly is hard
to enforce, maybe you shouldn't be banking on it. But in the world of
corporatist sociopathy, where externalising your costs on others isn't just
a good idea, it's your fiduciary duty to your shareholders, Pfizer's
actions are practically inevitable. *

And this brings us back to the problem discussed at the very top of this
article. The entire pharmaceutical industry has built its business around
the idea of artificially reducing supply -- rather than about providing
more benefit (health). That's *really* screwed up. A good business focuses
on expanding the benefit to users, not limiting it to charge more. Our
patent policy has created incentives for exactly the opposite -- and that
is having a massive impact on the health and well-being of people around
the globe.

Tahir Amin
Co-Founder and Director of Intellectual Property
Initiative for Medicines, Access & Knowledge (I-MAK)
*Website:* www.i-mak.org
*Email:* tahir at i-mak.org
*Skype: *tahirmamin
*Tel:* +1 917 455 6601/+1 646 884 7418/+44 771 853 9472

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