Blue Chip Drug Dealing: As underhanded as illicit drug dealing
Imagine if you will, that you have just invented a new plumbing device. Lets call it the foo-foo flange. And your foo-foo flange looks set to generate sales of $4 billion dollars over the next 6 years.
But on the horizon are four major competitors. And even though your foo-foo flange patent looks set to protect you for the next 6 years, for the sake of a minor alteration to the original design, these competing companies are in a position to challenge your foo-foo flange, with their own version.
A generic foo-foo flange, called the fo-fo flange. So what are you going to do about it?
This is just the situation pharmaceutical giant Cephalon found itself in recently, with regard to its popular lifestyle ‘go’ pill Provigil. And how they went about getting around this small problem has pharmaceutical consumers in the United States up in arms.
Essentially, to stop its competitors bringing a cheaper, generic version of Provigil to market, Provigil’s manufacturer Cephalon has stumped up an intoxicating $200 million dollars, which its paid between 4 smaller generic drug manufacturers, and in doing so its bough Cephalon another 6 years of patent protection, guaranteeing sales of $4 billion dollars for an investment of just $200 million.
And whilst it may sound like good business if your name is Frank Baldino Jr, who is Cephalon’s CEO, its proven to be a bitter pill to swallow for consumers in the US.
The legal “pay to go away” agreements potentially add up to billions of dollars in additional profits for drug makers but drive up health care costs at the expense of sick Americans. Using the agreements, the holder of a drug patent due to expire soon pays another company to keep a similar, but much cheaper generic drug it has developed off the market.
According to a Wall Street Journal report, agreements such as this protect 10 brand-name drugs with annual sales of about $17 billion.
Courts have upheld their legality, but that has not stopped the Federal Trade Commission from trying again. It is using antitrust laws to challenge Cephalon Inc.’s payment of $200 million to induce four companies to delay their generic versions of Cephalon’s Provigil, a narcolepsy drug, until 2012.
The Journal quoted Cephalon Chief Executive Frank Baldino Jr. saying the company got “six more years of patent protection. That’s $4 billion in sales that no one expected.”
FTC Chairman Jon Leibowitz said the deals leave consumers “holding the bag.” The FTC has lost other challenges but Congress is considering a legislative ban. President Obama would bar the deals in his budget.
Patent holders contend they maintain the profits needed to continue research and development of new drugs. The arrangements benefit both companies financially, but as is often the case in big business, consumers lose out.
No change there then?