Generic Drug Fight Gains Potency as Patents Expire

By MARC BALLON

June 10, 2001 12 AM PT

TIMES STAFF WRITER

As he leafed through a medical journal, Thomas Speace’s eyes widened when he came across an article about the drug Diprivan. Unlike other anesthetics, it didn’t leave mostpatients feeling groggy or sick after surgery--a real breakthrough, he thought.

But his interest wasn’t just a scientist’s idle curiosity. As head of business development at Sicor Inc., Speace was on the lookout for drugs going off patent, especially blockbusters that his Irvine company could copy. And in Diprivan, Speace saw a potential gold mine.

What he didn’t anticipate was how far Diprivan’s maker, AstraZeneca, would go to thwart Sicor from grabbing a share of the $650-million market. As Sicor drew closer to selling its lower-cost generic, the British pharmaceutical giant launched a major offensive.

AstraZeneca’s scientists first reformulated Diprivan to extend its patent. The company then filed a barrage of lawsuits. When that failed and Sicor began delivering its generic drug in early 1999, AstraZeneca waged an aggressive publicity campaign to discredit Sicor’s newly approved product, according to government regulators.

“They pulled out all the stops,” said Armand LeBlanc, Sicor’s senior vice president of scientific affairs.

AstraZeneca denies charges it played dirty.

The company now is battling other generic makers over its multibillion-dollar ulcer product, Prilosec.

AstraZeneca is not the only pharmaceutical giant at war these days. As numerous top-selling drugs lose or near the end of their patent exclusivity, the fight between brand-name drug makers and generics is heating up.

In recent months, federal and state courts have been bombarded with suits accusing drug companies of engaging in a host of unfair tactics to keep generic medications off the market. Federal regulators have opened investigations into Bristol-Myers Squibb Co. and Schering-Plough Inc., among others. Last month, California joined 14 other states in suing Aventis and Andrx Corp. for conspiring to delay the launch of cheaper knockoffs of Cardizem CD, a widely used blood pressure drug. The companies have denied the allegations.

The stakes are huge. Over the next five years, drugs with a current market value of $37 billion are expected to lose their patent exclusivity. They include such top sellers as Schering-Plough’s allergy medicine Claritin and TAP Pharmaceutical Products Inc.’s anti-ulcer drug Prevacid.

“If you have a $1-billion drug, you’re going to do everything in your power to protect it,” said Steven Findlay, director of research at the National Institute for Health Care Management. “That’s the name of the game.”

And it figures to be a downright slugfest, if Sicor’s encounter with AstraZeneca is any indication.

Like most of the nation’s estimated 150 generic drug makers, Sicor is relatively small. Its total revenue last year was almost $294 million, compared with worldwide sales of about $16 billion for AstraZeneca.

But the generic drug companies have one thing going for them: They’re proposing to make comparable products that sell for as much as 70% less than their brand-name counterparts--a cost advantage that comes largely from not having to repeat the expensive and lengthy clinical trials by the drug’s originators.

With HMOs, hospitals, doctors and consumers clamoring for relief from skyrocketing health-care costs, the prospect of such savings has widespread appeal. Prescription drug costs last year rose by nearly 19% to $132 billion.

Legislative Backing for Generic Firms

Pressure from Washington is increasing. Sens. John McCain (R-Ariz.) and Sen. Charles Schumer (D-N.Y.) recently introduced legislation aimed at preventing brand-name drug companies from delaying the entry of generic versions.

“Because the stakes are so high, we’ve seen a broad-based abuse of the patent system,” said George Barrett, chief executive of the U.S. subsidiary of Teva Pharmaceutical Industries of Israel, which with sales of $1.7 billion is the world’s largest generic drug company.

Companies such as AstraZeneca insist that’s not so. “I think any research-based pharmaceutical company is going to fight to protect its patent rights and intellectual property,” AstraZeneca spokesman Steve Lampert said.

Sicor knew how hard it was to come up with a blockbuster; it had spent nearly a decade and $200 million vainly trying to develop a cardiovascular drug. When Sicor turned its focus on Diprivan in 1994, the company figured to benefit from its long experience with injectable drugs. And it thought the timing was just right.

Diprivan had been in the marketplace since 1989, but AstraZeneca’s patent on the intravenously administered drug was to expire in 1996. It had become one of the best-selling general anesthetics in the world, generating about $650 million in sales in 1998.

Diprivan’s special properties were in the way it was absorbed and released in the body, which resulted in generally more rapid and alert awakening from surgery, with a lower incidence of nausea and vomiting. Its use in intensive-care units and for outpatient surgery was booming.

After poring over seven pages listing Diprivan’s ingredients, obtained from the patent office, Sicor shelled out $15 million to overhaul its Irvine plant, installing a stainless-steel production line for the generic drug, named propofol. For months, Sicor’s team of 15 scientists and researchers worked round-the-clock to get the product ready, and in mid-1996 Sicor filed for approval from the Food and Drug Administration.

But while Sicor was developing its generic, AstraZeneca’s scientists also were hard at work, modifying Diprivan in a bid to extend its patent. And in late 1996, AstraZeneca beat Sicor to the punch as the FDA granted an additional three years of exclusivity rights for Diprivan based on a preservative.

AstraZeneca executives said the patent extension was merited because some patients had become ill from mishandled Diprivan.

But in general, big drug makers have come under criticism for seeking extensions by reformulating or tweaking original products. In many cases, they haven’t succeeded in getting extensions, but critics say this strategy, along with filing lawsuits, can effectively prolong their monopolies as regulators examine their applications and cases move through the legal system.

“Pharmaceutical companies shouldn’t be evading patent laws to try to get extensions,” said Betsy Imholz of the advocacy group Consumers Union. “What they’re doing drives up prices and keeps them high.”

In Sicor’s case, the FDA’s ruling landed like a sucker punch. When word got back to Sicor, dejected executives gathered for an emergency strategy session. “It looked like they were at a wake,” recalled LeBlanc, Sicor’s senior vice president.

With hopes fading, Sicor decided to take one more stab at getting its copycat on the shelves by finding another preservative. Two dozen scientists, working for nearly a year, came up with an alternative formulation to skirt the updated Diprivan patent.

Critical financing came from Carlo Salvi, a 64-year-old Italian businessman who gained control of Sicor, helped raise $30 million and now is its chief executive.

Sicor’s effort worked, winning a nod from the FDA early in 1999 and surviving AstraZeneca’s flurry of legal challenges.

On an April morning that year, Sicor employees gathered outside the Irvine plant as trucks prepared to deliver the first vials of propofol to various hospitals. To celebrate, they smashed a bottle of champagne on the first truck to roll out.

Relentless Defense by AstraZeneca

But AstraZeneca didn’t let up. At medical conferences, doctors’ offices and hospitals, reps for AstraZeneca repeatedly made distorted claims about the Sicor product, according to the FDA. The agency said AstraZeneca asserted that Sicor’s propofol product was “unstable and of poor integrity,” more likely to “crack” and was not cost effective.

In June 1999, AstraZeneca sent a letter warning Chicago’s largest private hospital, Rush-Presbyterian-St. Luke’s Medical Center, that it was illegal to use Sicor’s substitute for Diprivan.

The FDA gave Sicor’s propofol an “A” rating--meaning that the agency deemed it to be as safe and effective as Diprivan. Last fall, the FDA sent a stern warning letter to AstraZeneca, demanding that the company immediately cease spreading false statements about propofol and that it write a “Dear Health-Care Provider” letter of correction to those who had received false information.

AstraZeneca said it has worked closely with the FDA to correct the problems. But the company generally defended its aggressive strategy. (Regulators also are investigating whether AstraZeneca has been illegally blocking generic competition for Prilosec.)

By all indications, AstraZeneca has backed away some from fighting Sicor’s propofol. But in the marketplace, AstraZeneca cut Diprivan’s price, narrowing the initial 30% gap between Diprivan and Sicor’s generic to 10% to 15%, said Robert Uhl, an analyst with the brokerage firm Leerink Swann.

Sicor could have further cut the price on its drug, but the company said such a strategy might be self-defeating, particularly because no other generic rival has entered the fray in this market.

“We’d rather keep prices high and margins high than shoot ourselves in the foot and trigger a price war,” said Laurie Little, Sicor’s associate director of investor relations.

Sicor’s propofol, marketed and distributed through Baxter International, has cut into nearly 50% of Diprivan’s U.S. market share. Thanks to propofol, Sicor recorded its first profitable year in 1999 and earnings tripled last year, to nearly $36 million.

Sicor’s stock, which had languished for a long time, has been climbing all year. Friday, it hit $19.21 a share on Nasdaq, more than double the price a year ago.

With 1,500 employees and growing, Sicor is moving aggressively to introduce a variety of cancer and other anesthetic drugs going off patent. It is building a plant in Mexico and has $78 million in cash on hand.

Sicor says it wants to steer clear of copying drugs that will be costly to fight, such as Diprivan, which ate up more than $1 million in legal expenses alone. But the company also said it’s prepared to challenge patents in selective cases.

“The payback for being successful in a brutal, hard-hitting battle like the one we had with AstraZeneca is huge for both us and for consumers,” said John W. Sayward, Sicor’s chief financial officer. “We would absolutely do it again.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Expiration Date

Here are the United States’ five biggest-selling name-brand prescription drugs and the dates their patent exclusivity expires:

Drug*: Prilosec

Maker: AstraZeneca

Exclusivity Expires: October 2001

2000 U.S. Sales: $4.2 billion

Drug*: Prevacid

Maker: TAP Pharmaceutical Products

Exclusivity Expires: July 2005

2000 U.S. Sales: $3.1 billion

Drug*: Prozac