pharma – Techdirt (original) (raw)

FTC Warns Pharma Companies That It May Go After Them For Sham Patent Listings Designed To Delay Generic Competitors

from the abusing-the-orange-book,-green-with-greed dept

For many, many years we’ve detailed how big pharma companies, who only care about the monopoly rents they can receive on medicine while under patent, have concocted all sorts of scams and schemes to avoid having to compete with generic versions, even after their patents have expired (or been invalidated). But one of their older tricks is apparently popular yet again, though the FTC is now warning pharma that it might finally start cracking down.

If it does, it will just be reinforcing the kinds of actions the FTC used to bring. Twenty years ago, the FTC went after Bristol Meyer Squibb for false listings in the Orange Book. The Orange Book, managed by the FDA, is where pharma companies list the FDA-approved drugs they have under patent, which alerts generic drug companies basically not to make generic versions of those drugs.

But, of course, this creates a very tempting scenario: if pharma can get drugs not actually under patent into the Orange Book, they effectively save themselves from generic competition, and they get to profit massively (at the expense of the public and their need for affordable medicine).

However, despite enforcement against such abuse years ago, it seems that the FTC and the FDA have kinda let these things slip over the past few years. And Big Pharma has really taken advantage of that. Thankfully, it looks like the FTC is finally interested in cracking down on this practice again. In a new policy statement, it warns pharma companies that it’s looking into the abuse of the Orange Book and sham patent inclusions.

Brand drug manufacturers are responsible for ensuring their patents are properly listed. Yet certain manufacturers have submitted patents for listing in the Orange Book that claim neither the reference listed drug nor a method of using it. When brand drug manufacturers abuse the regulatory processes set up by Congress to promote generic drug competition, the result may be to increase the cost of and reduce access to prescription drugs.

The goal of this policy statement is to put market participants on notice that the FTC intends to scrutinize improper Orange Book listings to determine whether these constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act.

Of course, this raises some questions, including why do we make the pharma companies themselves the party responsible for making sure their patents are “properly” listed. Why don’t we have at least some process in place for these listings to be reviewed, whether when they’re submitted to the Orange Book or even if another party (such as the generic drug manufacturers) contest an Orange Book listing.

It seems the dumbest possible system is to assume that the Big Pharma companies will be honest in their Orange Book listings.

And, even though the FTC is now putting these companies “on notice,” the fact that the FTC has brought these cases in the past seems like it should be “notice” enough. Instead, it sounds like the FTC let enough pharma companies get away with this for long enough that the big pharma firms felt cleared to abuse the system this way and to delay competition in the marketplace.

The one thing I find interesting in this statement, is that they note that improperly listing things in the Orange Book may “constitute illegal monopolization.”

The improper listing of patents in the Orange Book may also constitute illegal monopolization. Monopolization requires proof of “the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” This requires proof that “the defendant has engaged in improper conduct that has or is likely to have the effect of controlling prices or excluding competition,” and courts have recognized that improperly listing patents in the Orange Book may constitute an “improper means” of competition. Accordingly, improperly listing patents in the Orange Book may also be worthy of enforcement scrutiny from government and private enforcers under a monopolization theory. Additionally, the FTC may also scrutinize a firm’s history of improperly listing patents during merger review

This seems exactly correct, but notable in that very few people seem to recognize that (1) patents are government granted monopolies, and thus (2) an abuse of the patent system to get a patent or patent-like protections you don’t deserve are therefore an illegal monopoly seems like an important point. I would hope that this could get expanded to other abuses of patent and copyright law as well.

Still, given that we’ve been facing this and multiple other schemes from Big Pharma to delay generics for decades, I’m not sure anything is really going to change just yet, but at least the FTC is waking up (again?) to this issue. Now let’s see if it actually starts bringing cases…

Filed Under: competition, drug prices, ftc, generics, monopoly, orange book, patents, pharma

European Commission Says Pharma Company Teva Abused The Patent System To Violate Antitrust Laws

from the once-a-monopoly,-always-a-monopoly dept

I always find it vaguely amusing when the government realizes that the system of monopoly rights it created is used to restrain competition. The latest is over in the EU, where the European Commission has gone after pharmaceutical giant Teva, for abusing the patent system to limit competition for its multiple sclerosis medicine. Of course, this shouldn’t come as a surprise, we’ve written about Teva a few times, and many of them involve the FTC and various states going after Teva and other pharma companies for sketchy practices to limit competition and inflate prices.

The FTC case was about Teva using “pay-for-delay” tactics, where its drugs would be on the verge of going off patent, but it would engage in a variety of scammy behaviors, including paying competitors (via bogus lawsuits leading to pre-planned “settlements”) not to enter the market, in order to retain the monopoly for longer than the law allowed.

It appears that Teva was up to similar tricks in Europe. Here’s the summary from the Commission of what Teva did to retain its ability to extract monopoly rents for drugs that were going off patent:

Of course, all of this seems quite ironic, given that Teva rose to fame by being one of the biggest makers of generic drugs after those drugs went off-patent from other pharma companies. Hell, just last week Teva asked the Supreme Court in the US to hear an appeal on a case regarding whether or not its use of “skinny labels” (marketing generic drugs by leaving out still patented uses) violates patents or not. So, for Teva to be such a giant in the generic market, while simultaneously trying to block other generics from coming to market seems mighty hypocritical.

Filed Under: antitrust, competition, drug patents, european commission, generics, patents, pharma
Companies: teva

New Study Shows That High R&D Costs Don’t Explain High Drug Prices

from the the-billion-dollar-pill-nonsense dept

For years, defenders of pharma patents loved to claim that the reason that they needed patents and the reason they had to charge extortionate rates for drugs was because of the high cost of R&D for new drugs. The numbers keep going up. When I first started covering pharma patents, the number bandied about was 600millionpernewdrug.Thenitjumpedto600 million per new drug. Then it jumped to 600millionpernewdrug.Thenitjumpedto800 million. Then 1billion.ThelatestI’veheardthemclaimingisanaverageof[1 billion. The latest I’ve heard them claiming is an average of [1billion.ThelatestI’veheardthemclaimingisanaverageof1.5 billion per new drug.

The number has always been bunk. Back in 2004 (at which time pharma companies were claiming 800millionperpill),MerrillGooznerwroteanexcellentbook,called“[The800 million per pill), Merrill Goozner wrote an excellent book, called “[The 800millionperpill),MerrillGooznerwroteanexcellentbook,called“The800 Million Pill” which completely rips this number to shreds, and shows how massively inflated it is. While the book is a bit out of date now, it’s still a really interesting read, and shows how almost every major new successful drug was mostly funded by the federal government (i.e., your tax dollars) with the pharma companies shouldering a tiny, tiny fraction of the purported costs. Similarly, the book “Against Intellectual Monopoly” showed that the costs claimed by pharma companies was greatly exaggerated, and often the vast majority of the money came from taxpayer funds, with only a tiny bit being taken on by private industry. In addition, much of the cost is from the clinical trials, and there’s an argument that that is also something that would benefit greatly from federal funding (there are plenty of stories of sketchy behavior by pharma firms when it comes to some clinical trials).

Anyway, given all that, there’s a new study out that highlights (in a different way) that the claims of high drug prices being due to high R&D costs is pure bullshit. The study did something I’m surprised no one has done before: compared drug prices with the price of R&D on those drugs. If the high cost of development was really what was driving the high drug prices, there should be some correlation there, right?

The researchers compared data on R&D costs with drug prices. They found no relationship between what pharmaceutical companies spend on R&D and what they charge for new medicines. The authors also assessed whether the therapeutic value of a product was associated with its price, but found no association there either.

“Our findings provide evidence that drug companies do not set prices based on how much they spent on R&D or how good a drug is. Instead, they charge what the market will bear,” said senior author Inmaculada Hernandez, PharmD, PhD, associate professor at Skaggs School of Pharmacy and Pharmaceutical Sciences.

Of course, that finding shouldn’t really be a surprise to anyone. Of course pharma companies are going to charge “what the market will bear.” But, therein lies the problem: we don’t have an actual market for most of these drugs. Patents create monopolies, meaning a total lack of competition, which allows pharma companies to set monopoly rents. Combine that with the US’s arcanely bizarre healthcare system, where patients have no idea how much drugs cost, and everything is opaque because insurance companies maybe pay some of it, and patients might get totally random bills at some later date, and its easy for “the market” to no longer function the way a market should function.

But, at the very least, don’t just accept the claim that drugs cost a lot because pharma has to spend a lot on R&D. All of the evidence suggests that’s ridiculous.

Filed Under: drug prices, patents, pharma

Too Little, Too Late, WTO Finally Eases Patent Rights On COVID Vaccines

from the like-it-even-matters-now? dept

In what definitely feels like a case of way too little, way too late, the WTO last week finally decided to grant the TRIPS waiver on COVID vaccines, allowing others to make more of the vaccine without violating patent rights. The WTO has long had this ability to issue a patent waiver as part of its Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. The idea is that in an emergency, when patents or copyrights are getting in the way of real harm, the WTO can say “hey, let’s grant a waiver to save people.”

You would think that a global pandemic where people are dying would be an obvious time to use such a waiver grant, but that’s because you’re not an obnoxious IP maximalist who cares more about their precious monopoly rents than the health and safety of the global populace. The big pharma and medical device companies freaked out about the possibility of a waiver, and even worse, Hollywood also flipped out about it, with their typical worry that any proof that removing an intellectual monopoly might be good for the world cannot be allowed.

It took forever, but in May of last year (already a year and a half into the pandemic), the US agreed to support the TRIPS waiver. This caused much gnashing of teeth among the maximalists, and then it still took over a year before this agreement was reached, and of course, now it’s both greatly watered down, and very much too late to make much of a difference. But kudos Hollywood and pharma lobbyists. You let thousands of people die, but you sure protected your IP. Good work!

But experts said the proposal was weakened significantly over months of negotiations. They said they did not expect the final agreement to encourage manufacturers in developing countries to start producing Covid vaccines, in part because it does not address the trade secrets and manufacturing know-how that many producers would need.

Even worse, the agreement is limited just to vaccines, and does not apply to either testing or therapeutics — both of which are way more important today than vaccines.

Even as this version is basically close to useless, Big Pharma continued to freak out.

The industry’s main lobbying group, the Pharmaceutical Research and Manufacturers of America, sharply criticized Friday’s agreement. Stephen J. Ubl, the group’s head, called it one in a series of “political stunts” and said it “won’t help protect people against the virus.” He noted that the industry had already produced more than 13 billion Covid vaccine doses.

Yeah, it won’t help protect people because you and your lobbyists spent two years trying to block it, so that when this finally happened it was way too late, and even when it did happen, you watered it down and limited it to the point of uselessness. The “political stunt” was yours, Stephen. I hope all those dead people were worth it.

And, of course, you have the WSJ journal to jump in… and laughably claim this was “Biden’s gift to China.”

The World Trade Organization was created to protect free-trade rules to spread prosperity. Now it’s becoming a vehicle to raid U.S. innovation. See Friday’s agreement by the WTO’s 164 members that lets developing countries, including China, steal intellectual property for Covid vaccines.

The White House is flogging the deal as a diplomatic victory. But it’s an enormous defeat for U.S. national interests that will benefit China and set a precedent that erodes intellectual property protection. This won’t be the last time global grifters seek to pilfer U.S. technology.

What are you even talking about? If it took two and a half years in the middle of a pandemic to get an agreement on life saving vaccines, that still has massive limits, and is both way too little and way too late, the idea that this is setting a precedent that “erodes intellectual property protection” is idiotic to the point of laughable.

And, again, all this does is remove some patent barriers (not other manufacturing barriers) on vaccines that are saving lives. Yes, it may help save lives in China, but is the Wall Street Journal editorial board really arguing that we should let them die because they’re Chinese? It sure sounds like it.

In short, there’s nothing legally binding to stop China from stealing U.S. mRNA technology, using it to develop its own vaccines including for other diseases, and then selling the shots under their own brands. The agreement lasts five years so it could potentially cover a future combined mRNA vaccine for Covid, flu and respiratory syncytial virus.

Newsflash to the WSJ editorial board: I know that you’re among those pushing the idea that the pandemic is over, but it is not. Keeping the world healthy, including in China (which the US economy still relies on heavily) is good for the US economy too. When China runs into problems with the pandemic, then you get more supply chain problems that are currently a huge part of the economic difficulties in the US. Maybe that’s fine for you because it’s another thing you can falsely blame on Biden, but this editorial is literally complaining that this minor reduction in patent rights might help Chinese people stay alive. It’s pretty disgusting.

Filed Under: china, covid, covid vaccines, pharma, trips, trips waiver
Companies: wall street journal

Techdirt Podcast Episode 119: Does Pharma Really Need Patents?

from the let's-dig-in dept

It doesn’t take many stories of people suffering due to unaffordable medicine to make you question the state of pharmaceutical patents, but the arguments in their defense are loud and frequent. Most are variations on the same theme: without the promise of a monopoly, important drugs would never be researched and developed. But does this argument truly hold up? It’s come up as a tangent in previous episodes of the podcast, but this week we’re dedicating a full episode to questioning the popular defenses of pharma patents and looking for a better way forward.

Follow the Techdirt Podcast on Soundcloud, subscribe via iTunes or Google Play, or grab the RSS feed. You can also keep up with all the latest episodes right here on Techdirt.

Filed Under: patents, pharma, podcast, research

US, Australia & Canada Decide Screw Over Poor Nations Because Big Pharma's Not Happy With TPP

from the isn't-that-nice dept

With the conclusion of the negotiations for the Trans Pacific Partnership (TPP) agreement now in place, there has been some ridiculous whining from the pharmaceutical industry which got almost everything it wanted in the agreement, but wasn’t quite able to get a few things, including a 12 year patent-like exclusivity on biologics. And, because of that hissy fit, apparently, the USTR and its counterparts in Australia and Canada have agreed to help out Big Pharma in another arena. Jamie Love is reporting that this week there’s a meeting at the WTO this week to explore granting a special exemption on patent rules for developing nations (i.e., those who often need drugs the most, while also being the least likely to be able to afford them). It’s silly to enforce patents in these countries, because doing so would not only lead to almost no business at all, but (more importantly) because lots of people will die or, at the very least, suffer needlessly.

But, because Big Pharma is upset about the TPP, the USTR and others have decided that they “can’t” agree to anything that might upset Pharma. Talk about a bunch of captured government officials…

On Friday, 9 October 2015, Ambassador Punke met with representatives from 15 countries (including 5 Ambassadors) from the LDC Group. Ambassador Punke clearly indicated that the US could not agree on an indefinite exemption because certain stakeholders in the United States were quite upset with concessions made by USTR during the final stages of the Trans-Pacific Partnership (TPP). Informed sources noted that the US indicated that “the TPP did not deliver as expected on IP and so we are under a lot of pressure not to give in more on IP.”

How far the pharma industry has come from the days when George Merck declared: “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”

And, really, how do the folks who work at the USTR sleep at night knowing that they’re doing this for no reason other than to help out the profits of a few giant companies at the expense of the public?

Filed Under: developing nations, drug prices, ldc, patents, pharma, pharmaceuticals, tpp, wto

Company Acquires Rights To Drug Used By AIDS/Cancer Patients; Immediately Raises Per Pill Price From Under 14To14 To 14To750

from the because-fuck-you,-that's-why dept

When pharmaceutical companies defend outrageously-priced medicines, they often claim these massive profit margins are there to help them recoup the money dumped into research and development. But that has nothing to do with the high prices. R&D costs are consistently lower than companies portray them. The real reason for exorbitant drug prices is a monopoly granted by patents, which lock out all competitors for years. And when the patent nears expiration, pharma companies extend their monopoly by doing questionable things — like testing high-powered, opiate-based painkillers on children — just to extend the patent protection for another few months.

None of that, however, explains this: (h/t to Techdirt reader pixelpusher220)

Turing Pharmaceuticals of New York raised the price of Daraprim from 13.50perpillto13.50 per pill to 13.50perpillto750 per pill last month, shortly after purchasing the rights to the drug from Impax Laboratories. Turing has exclusive rights to market Daraprim (pyrimethamine), on the market since 1953.

Daraprim fights toxoplasmosis, the second most common food-borne disease, which can easily infect people whose immune systems have been weakened by AIDS, chemotherapy or even pregnancy, according to the Centers for Disease Control.

In this case, any research and marketing costs have long since been recouped (or at least amortized). The patents behind the drug — all granted between 1951 and 1954 — should be dead. Conveniently for Turing (and other rights holders before it), no company is offering a generic version.

Every time the drug has changed hands (and it’s done it more than once), the price has gone up. But no other company has increased the price quite as much as Turing Pharmaceuticals has. Perhaps that’s because Turing spent a significant amount of money to acquire an exclusive marketing license, but with none of the attendant patent exclusivity.

Impax Laboratories, Inc. (NASDAQ: IPXL) today announced that it has sold its U.S. rights to the Daraprim brand to Turing Pharmaceuticals AG for approximately $55 million.

Turing, of course, realizes this price jump — which puts one month’s supply in the new vehicle range ($45-50,000) at minimum — is going to be tough on those expected to pay for it, but claims to have support in place to help absorb some of the ridiculous increase.

A Turing spokesman, Craig Rothenberg, said the company is working with hospitals and providers to get every patient covered. This includes free-of-charge options for uninsured patients and co-pay assistance programs.

This sounds like exemplary altruism in the face of a presumably unavoidable [hah] increase in price. But a closer look at what Turing is actually doing shows the company will be forcing patients to choose from all of two options:

For inpatient procurement, institutions can no longer order from their general wholesaler. Instead, they must set up an account with the Daraprim Direct program. Once enrolled, orders may be placed with the company until 6 pm Monday through Friday and will be delivered the next business weekday, because there is no weekend delivery at this time.

For outpatient procurement, patients can no longer obtain the medication from their community pharmacy. All prescriptions must be transmitted to a single dispensing pharmacy: Walgreens Specialty Pharmacy. Upon insurance verification and co-pay collection, the prescription will be mailed to the patient’s home, and most prescriptions can be mailed overnight.

This presents a problem for hospitals. Although the drug is low-use (it combats the effects of toxoplasmosis — something that can cause serious issues for those with weakened immune systems, like cancer/HIV patients), it still is needed often enough that the two access routes just aren’t enough.

My institution recently encountered a difficult scenario in which pyrimethamine was attempted to be obtained through the Walgreens Specialty Pharmacy. The patient in question was currently homeless, and therefore did not have a home or address to which the medication could be delivered. Additionally, the manufacturer did not yet have a system in place to address the situation.

This could have been extremely problematic, but fortunately, my institution is affiliated with a Walgreens Specialty Pharmacy and contracted to provide bedside delivery to patients prior to discharge. The patient was able to receive the pyrimethamine as an inpatient.

Turing, of course, defends the increased price by claiming the exorbitant profit margin will result in increased R&D. But let’s take a closer look at what its spokesman is actually saying.

Rothenberg defended Daraprim’s price, saying that the company will use the money it makes from sales to further research treatments for toxoplasmosis.

Translation: this money will be dumped into finding another variation to patent, thus locking out potential competitors and allowing Turing to continue charging whatever it wants for the medication.

They also plan to invest in marketing and education tools to make people more aware of the disease.

Translation: we will market the hell out of this new drug.

This sort of thing isn’t exclusive to Turing. It’s standard MO for all pharmaceutical companies. Rather than engage in meaningful competition, these companies are awarded lengthy monopolies on drugs and treatments by the US government. Turing is no different than Amedra — part of the holding company acquired by Turing along with the Daraprim rights. But when Amedra acquired the rights from GlaxoSmithKline, it somehow managed to keep its price hike to a couple of dollars, rather than several hundred.

This huge price jump has more to do with the man running Turing, Martin Shkreli. Shkreli doesn’t have a background in pharmaceuticals, but he does know how to run a hedge fund. And he’s used this expertise to become highly-unpopular very quickly.

Since founding Turing last year, Shkreli has taken a page from what made Retrophin a high-profile–and controversial–player among small biotech companies. Retrophin’s stated goal was ferreting out value in biopharma by acquiring assets with potential in rare and neglected diseases, a process that can mean acquiring an underused drug and jacking up its cost to take advantage of rare disease pricing.

Here’s one of the moves Shkreli made as the head of Retrophin.

_In September 2014 Retrophin acquired the rights to thiola, a drug used to treat the rare disease cystinuria. It was with Shkreli as CEO that Retrophin introduced a 20-fold price increase for Thiola, despite no additional research and development costs incurred by obtaining these right_s.

Turing is basically Retrophin 2.0, or more accurately, Shkreli being Shkreli. Shkreli may have still been helming Retrophin at this point, had his own company not ousted him. In August, his former company also sued him, alleging financial impropriety.

It appears that Shkreli is a bit too comfortable operating in gray areas. The market-related shadiness alleged in the lawsuit appears to be just part of Shkreli’s everyday business affairs.

In an uncommon move, Shkreli himself led the Series A financing, and Turing isn’t naming any of its other backers, calling them “preeminent institutional equity investors” and leaving it at that. In a filing with the SEC last week, Turing counted 34 individual participants in its funding round but reported raising just $62.7 million.

This reported total of the funding round didn’t match the claimed total ($90 million). Shkreli had an answer for the missing funding. And that answer was “Shut up.”

A spokesman for the company declined to explain the $27.3 million difference, and further questions about the company’s financials were met with a terse email from Shkreli asking FierceBiotech not to contact Turing again.

However, if you do feel like discussing the 5000% increase in Daraprim’s price, feel free to take your questions to Shkreli himself, who is surprisingly accessible on Twitter. Just know ahead of time that you’re too stupid to understand complicated business stuff, you don’t represent anyone worth talking to, “everyone else is doing it,” and shut up.

The unasked question has its answer: why did Turning flip the switch on a 5000% price increase? Because it can. And it’s not just the people being prescribed Daraprim that will eat the cost. It will be every customer of every health insurer that covers the rest of the cost of these prescriptions. These additional expenses will eventually result in higher health insurance premiums. And while Turing is offering to help out those with little to no insurance, these costs — whether they’re absorbed by health care institutions or the government itself — will be passed on to the general public as well.

Filed Under: daraprim, drug prices, generics, martin shkreli, monopoly pricing, patents, pharma, pharmaceutical pricing
Companies: turing pharmaceuticals

Could A Hedge Fund Manager Trying To Short Stocks Of Pharma Companies With Bad Patents Derail Patent Reform?

from the that-would-suck dept

A few months ago, we wrote that it looked like much needed patent reform had stalled out in Congress, despite expectations that it would fly through Congress easily this year, having the strong support of both the majority party in Congress and the President. And this year, unlike last year, the trial lawyer lobby wouldn’t be able to intervene. Of course, the one big obstacle — as with every time patent reform is proposed — would be the pharmaceutical industry. But even that seemed like it shouldn’t be a huge problem because nearly all of the (relatively mild and fairly weak) reforms proposed really targeted trollish behavior, using overly broad patents to shake down innovative companies. Whether or not you approve of the way drug companies use patents, the trolling issue is a bit outside of that industry’s concern, and thus it was believed that while pharmaceutical companies might whine a little bit, they wouldn’t really stand in the way.

Except… something changed. As Julie Samuels explains in a blog post detailing the state of patent reform as it stands today, a Wall Street hedge fund guy got the pharma industry all riled up, by making use of a provision in the previous patent reform law to play some silly Wall Street game:

Enter Kyle Bass. The well-known hedge fund manager?s most recent enterprise involves using the IPR process to challenge weak pharmaceutical patents and then short the stock of the company that owns the patent. The pharmaceutical industry, which relies heavily on patent rights, is far from pleased. And despite the fact that the IPR process contains significant protections for patent holders and the fact that Mr. Bass? actions can already be addressed by the SEC, the pharmaceutical industry has been able to shoehorn its issue into the larger reform efforts.

Let’s unpack that a little. The “IPR” process stands for “inter partes review” and it’s a process by which anyone can try to challenge a bad patent, by presenting specific evidence that it shouldn’t have been granted because of prior art. This process is somewhat useful in helping to get the Patent Office to toss out some bad patent claims that it never should have approved in the first place. It’s a fairly limited process too. You can file for an IPR, but the Patent Trial and Appeal Board (PTAB) will only take up the effort if it decides “there is a reasonable likelihood” that it will invalidate the claims based on the submitted material. In other words, it’s a pretty high bar to cross, and anyone filing frivolous IPR claims won’t get very far at all.

Now, back to Kyle Bass. He’s been making news in the last few months by filing for an IPR against pharma patents, while simultaneously shorting the stock of the pharmaceutical firms that hold the patents. He’s set up an entire organization to do this, called the Coalition for Affordable Drugs.

Kyle Bass, head of Hayman Capital Management LP?which made a fortune wagering on the housing bust?is targeting patents that he says have little value other than to drive up prescription drug prices. His new fund bets against companies whose patents it believes are spurious, and invests in those that would profit if the patents are invalidated, said people familiar with the matter.

His latest challenge seeks to employ a relatively new and inexpensive petition process to invalidate a Jazz Pharmaceuticals PLC patent for Xyrem, a narcolepsy drug with sales of $779 million last year, two-thirds of Jazz?s 2014 revenues.

Mr. Bass created the Coalition for Affordable Drugs, an organization that is the lead petitioner in several patent challenges filed with the U.S. Patent and Trademark Office. He says he plans to pursue the cases regardless of share price moves. ?We will not settle,? he said in an interview.

The Coalition has been busy of late, filing a whole bunch of IPR petitions against a whole bunch of phamaceutical firms. And, boy, are those pharma firms pissed off. Celgene, for one, has talked about seeking sanctions against Bass, claiming that Bass is using the process as a form of extortion:

Celgene attorneys made this point in a June 3 email to the patent office. But there was more. They also alleged that his coalition threatened to challenge Celgene patents ?unless Celgene met their demands.? Those demands weren?t specified, but the email states that ?when Celgene did not pay,? the patent challenges were filed, according to the patent office order, which cited the email.

And, using this whole story, to argue that the whole IPR process is a disaster, the pharmaceutical industry is trying to revamp and effectively destroy the entire (important and useful) IPR process.

And while it seems likely that Bass’s efforts are much more about enriching himself via the stock shorting than actually making drugs more affordable, arguing that his efforts somehow undermine the entire IPR process is a stretch. Indeed, as noted earlier, there are built-in protections that make it rather inefficient for anyone to really abuse the process the way pharma companies are portraying. Again, the special board in the Patent Office, the PTAB, has the ability to just outright reject any IPR petition it doesn’t think has a chance of surviving. And, in fact, a recent report by the Patent Office shows that (1) less than half of all IPR requests result in actual challenges and (2) even then, the vast majority of claims being challenged are actually allowed to stand. As of the end of June of this year, you can see that the PTAB rejects most petitions, many more are “terminated,” and of those that go to a full trial, many retain patentable claims that were challenged:

Even more to the point, if you look at the total number of claims actually challenged, against those that end up being found unpatentable, it’s a fairly tiny number: only 4,225 claims out of were challenged. That’s less than 12%. Hell, even if you look at just those claims that the PTAB initiates proceedings on, less than 25% of them are invalidated.

In short, the idea that the IPR process is making it easy to simply kill off good patents is not even remotely supportable. Instead, it appears to be doing what it’s intended to do: make it more reasonable to help people kill off bad patent claims. If pharma firms are worried about what Bass is doing, it should only be if the patents they have are questionable in the first place. If they’re legit, they won’t pass the laugh test, and the whole process won’t get anywhere.

And yet… because the pharma industry just doesn’t like having to deal with Bass at all, it’s trying to destroy the whole IPR process, saying that’s the only way that it will support the other aspects of patent reform. But undermining IPR would do serious damage to patent reform as a whole, and take away a key tool that actually does work in more quickly invalidating crappy patents. Whether or not you approve of the way in which Bass is doing what he’s doing, the process isn’t really open to abuse in a manner that should raise any real concern. And, for everyone else, the IPR process remains an important element in stopping abusive patents.

Filed Under: inter partes review, ipr, kyle bass, patent reform, patents, pharma, pharmaceutical industry, ptab, short selling, uspto
Companies: coalition for affordable drugs, hayman capital management

Bosses Of Big Pharma Companies Unable To Deny Australia Being Ripped Off On Drug Costs

from the and-that's-even-before-TPP-is-in-place dept

Here on Techdirt, we often write about the bad behavior of Big Pharma, particularly in terms of how it is one of the main driving forces behind far-reaching international agreements like TPP. As a recent leak underlines, drug manufacturers hope to use TPP to extend the monopolies that allow them to charge high prices for their products. Confirmation that drug pricing has little to do with actual costs in at least one part of the world comes from a surprising source — the heads of Big Pharma companies, as this report in the Canberra Times reveals:

> Multinational pharmaceutical companies are unable to assure Australians they are not being “ripped off” on the price of medicines as a result of their complex global supply chains. > > The Australian heads of nine of the biggest global drug suppliers were forced into the embarrassing admission on Tuesday after backing themselves into a corner by insisting they have no idea what their own sister companies in other countries pay to import the same medicines.

This interesting confession was made during an Australian Senate inquiry into corporate tax avoidance. Apparently, Pfizer paid just AU$21 million (about US$16 million) in company tax in 2014, even though its Australian sales were AU$1.4 billion (about US$1 billion). The company claimed that was because its “cost of sales” in Australia were more than three-and-a-half times higher than those in the US. However, when pressed on those figures:

> Pfizer managing director David Gallagher said he didn’t know what any other Pfizer subsidiary paid for drugs manufactured by the company in Ireland and declined repeated requests to explain the “arm’s length” process that determined intra-company transactions, known as “transfer pricing”.

Understandably surprised by this, the Senate Committee chairman asked the heads of Pfizer, AstraZeneca and GlaxoSmithKline to confirm what they seemed to be saying:

> “As the CEOs of three of Australia’s biggest pharmaceutical companies, you have no idea what drugs cost in other jurisdictions? You can’t tell us whether we’re getting ripped off?”

As the Canberra Times reported:

> All three agreed they could not.

It seems unlikely that TPP will do much to improve the situation.

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Filed Under: australia, big pharma, drug costs, pharma

Leaked TPP Chapter Shows How It's A Massive Gift To Big Pharma And Against Public Health

from the but,-fast-track's-in-place,-so-too-bad,-suckers dept

Over the last few years, we’ve seen leaks here and there of the various chapters of the TPP agreement, but generally ones that are quite out of date. The latest public leak of the “intellectual property” chapter that I’m aware of was done last October by Wikileaks and was the version from the previous May (2014). Now, Politico claims that someone has leaked the May 2015 version, though Politico has not published the document (which, frankly, is pretty lame for a journalism property). But, based on Politico’s report, the agreement still looks to be what everyone’s been saying it would be: a huge gift to giant corporate special interests, such as Big Pharma:

The draft text includes provisions that could make it extremely tough for generics to challenge brand-name pharmaceuticals abroad. Those provisions could also help block copycats from selling cheaper versions of the expensive cutting-edge drugs known as ?biologics? inside the U.S., restricting treatment for American patients while jacking up Medicare and Medicaid costs for American taxpayers. ?There?s very little distance between what Pharma wants and what the U.S. is demanding,? said Rohat Malpini, director of policy for Doctors Without Borders.

In response, the USTR falls back on its standard lame reply, about how draft texts are not “final.” But this is why it’s actually important to post these draft texts publicly, because what the draft Politico saw appears to show is that, whether or not it gets it, the USTR is fighting for policies that would harm poor, sick people, and massively benefit giant pharmaceutical conglomerates.

The highly technical 90-page document, cluttered with objections from other TPP nations, shows that U.S. negotiators have fought aggressively and, at least until Guam, successfully on behalf of Big Pharma.

That bit of information seems rather important in determining whose interests the USTR is truly representing in these negotiations. Remember, that while the final agreement will be posted publicly, the negotiating texts (which show what each side argued for) are being kept secret for four years after ratification — by which point the staff at the USTR will likely have turned over greatly, and whoever is there now can pretend they had nothing to do with the negotiating positions that the US is now locked into.

And, of course, now that fast track is the law, Congress can’t even step in to fix it. They’ll only be allowed an up/down vote on the entire agreement — with tremendous pressure on them to approve the whole thing, even if there are dangerous provisions mixed in the overall agreement.

Of course, we all know that this is why the agreement is secret. It’s not politically feasible for the US government to publicly show that it’s fighting against the health interests of the public and in favor of pharma profits. But it appears that’s exactly what’s happening behind closed doors. And that seems… wrong.

Filed Under: big pharma, biosimilar, competition, drugs, generics, ip, patents, pharma, pharmaceuticals, tpp