Bristol-Myers Sued Over Taxol Generic

Adding to a growing legal assault on drug industry marketing practices, California and 28 other states Tuesday charged Bristol-Myers Squibb Co. with illegal efforts to block cheaper generic rivals to its top-selling breast cancer drug Taxol.

The states accuse the company, in part, of manipulating the U.S. Patent and Trademark Office process with fraudulent patents, a tactic designed to prevent competitors from entering the market until 2000. The drug industry giant had fought competitors for years to preserve its exclusive right to manufacture and sell Taxol, which had brought in $1.6 billion in annual sales until a generic version slashed that figure by 45% in 2001.

The lawsuit seeks unspecified civil penalties and a court order that would prohibit Bristol-Myers Squibb from engaging in such tactics in the future. California Atty. Gen. Bill Lockyer added that the states are seeking the return of $200 million to $250 million in estimated overcharges on Taxol.

“This particular action is in response to one of the more egregious cases of antitrust violations. We strongly believe that BMS violated these laws,” Lockyer said, adding that settlement negotiations were not successful.

In a brief statement, Bristol-Myers Squibb essentially accused the states of piggybacking on an old case. “The only news in this lawsuit is that the states have chosen to enter late in the litigation. The actual events at issue are several years old and have been the subject of litigation for some time,” said the company statement. “We will continue to deal with the issues raised by this new suit as we have been doing with other litigation related to these matters.”

Analyst Steven Gerber, with CIBC World Markets, said, “This is going to be a difficult case for the states to fight because existing law has allowed the pharmaceutical companies to engage in such practices, and the law needs to be changed.” He added that pending legislation in the Senate, sponsored by John McCain (R-Ariz.) and Charles E. Schumer (D-N.Y.), would tighten loopholes and “make it more difficult for companies to engage in delay tactics that ultimately hurt consumers.”

More than half of the states, as well as consumer groups and health plans, have filed lawsuits against large and small pharmaceutical companies in the last year, claiming antitrust violations and illegal manipulations of prescription drug prices. Some generic drug manufacturers have even been named in some of the lawsuits for allegedly colluding with brand name companies to stall the manufacture of a cheaper drug.

Lockyer and Jeff Boyd, the Texas deputy attorney general for litigation, added that other shoes would drop in the coming months.

Texas has already charged three drug makers--Dey Inc., Roxane Laboratories Inc., a unit of Germany’s Boehringer Ingelheim , and Warrick Pharmaceutical Corp., a unit of Schering-Plough Corp.--with inflating their average wholesale prices, which states use to determine what they will have to pay for medications.

Through that inflation, Boyd said, doctors received higher payments than warranted for the drugs, leading them to prescribe more of those drugs, helping the companies gain market share.

Boyd said that Texas Atty. Gen. John Cornyn is pursuing 17 similar cases against other drug companies. In California, Lockyer said that the state has issued administrative subpoenas and is investigating “dozens” of drug manufacturers for price manipulation.

Several other multi-state lawsuits were filed in 2001 and this year, including one in January by Nevada against 12 major drug companies for “employing a pricing scheme which we think robs states and consumers of a great deal of money,” said Nevada Atty. Gen. Frankie Sue Del Papa, adding that the state spent $60 million on prescription drugs in 2001, up from $40 million in 1999. “We are trying to protect the taxpayers’ health and their pocketbooks.”

The Federal Trade Commission also has entered the fray, with Commissioner Timothy Muris telling Congress that his agency can crack down on drug patent disputes that delay generic competition. Muris cited Biovail Corp., which agreed to settle FTC claims this year that it improperly listed a patent with the Food and Drug Administration to prevent generic competition.

Bristol-Myers Squibb also is the subject of a lawsuit filed in December by 29 states and Puerto Rico that alleges the company conspired to keep generic versions of its Bu- Spar anti-anxiety drug off the market.

Shares of New York-based Bristol-Myers Squibb closed at $28.65, down $1.18 on the New York Stock Exchange.