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Business News/ Companies / AstraZeneca fights billions in possible damages in Nexium trial
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AstraZeneca fights billions in possible damages in Nexium trial

The case challenges a 2008 settlement of a patent lawsuit that stalled sales of Nexium's generic in the US until AstraZeneca's patents expired last May

The agreement at the center of the case ended Ranbaxy’s legal challenge to the strength of London-based AstraZeneca’s Nexium patents, a development that caused stock in both companies to jump at the time. Photo: AFPPremium
The agreement at the center of the case ended Ranbaxy’s legal challenge to the strength of London-based AstraZeneca’s Nexium patents, a development that caused stock in both companies to jump at the time. Photo: AFP

New York: AstraZeneca Plc, in a first trial since the US Supreme Court ruled drugmakers can be sued over so-called pay-to-delay deals, is fighting to avoid what might be billions of dollars in damages over claims it illegally paid to block generic versions of the heartburn tablet Nexium.

The case against AstraZeneca and Indian generic-drug maker Ranbaxy Laboratories Ltd. challenges a 2008 settlement of a patent lawsuit that stalled sales of a cheaper version of top- selling Nexium in the US until AstraZeneca’s patents expired last May.

Dozens of wholesalers, pharmacy companies and hundreds of thousands of possible individual consumers were overcharged billions of dollars for years as a result of the deal, according to the complaint. While the terms of the accord are private, plaintiffs argue Ranbaxy got more than $1 billion, a payment they claim violated antitrust law and is too high for a patent dispute.

AstraZeneca and Ranbaxy started a six-week jury trial on 20 October in Boston, setting up the first test of what limits may be placed on pay-for-delay deals deployed by drugmakers to protect steady streams of revenue on popular drugs. US District Judge William Young scheduled closing arguments for today.

The verdict will give “greater clarity" in determining “what is lawful and unlawful" in arranging such deals, said Richard Steuer, an antitrust lawyer with Mayer Brown LLP in New York who isn’t involved in the case. “It’ll get very close attention from everyone in the health care community."

Ranbaxy’s compromise

The agreement at the center of the case ended Ranbaxy’s legal challenge to the strength of London-based AstraZeneca’s Nexium patents, a development that caused stock in both companies to jump at the time. In dropping out of the case, Ranbaxy, based in Gurgaon, India, gave up the chance of entering the market before the patents expired in exchange for a 180-day monopoly on selling the generic version.

The trial follows the Supreme Court’s June 2013 decision that opened up the deals to greater scrutiny by finding the payments can’t be “large and unjustified." The ruling was largely a victory for the Federal Trade Commission and the Obama administration, reversing a lower-court decision that had effectively insulated pharmaceutical companies from liability.

“The Supreme Court opened the door to cases like this," said Daniel Lev, an intellectual property lawyer at Pierce Atwood LLP in Boston who isn’t working on the case. “Now it’s up to courts like the district court here in Massachusetts" to “add some flesh to that framework, and to try to determine what exactly is a large and unjustified payment."

Supreme court

The FTC, which filed the landmark case that reached the Supreme Court, has said the disputed accords, also known as reverse payments, cost drug buyers as much as $3.5 billion a year, a figure the drug industry contests. Forty such agreements were reached in fiscal 2012 alone, according to the agency.

Teva Pharmaceuticals Industries Ltd., another would-be maker of generic Nexium that was sued alongside Ranbaxy and AstraZeneca, reached a settlement with the plaintiffs groups after four weeks of trial testimony. Jurors weren’t given details of that deal and Teva is no longer a defendant in the case.

The plaintiffs in Boston claim generic Nexium could have been on the market as long as six years ago, citing the viability of Ranbaxy’s challenge to AstraZeneca’s patents.

‘At risk’

The plaintiffs also argued Ranbaxy could have begun selling a generic version “at risk," before winning the patent case, resulting in a cheaper version being available earlier. Both defendants said that was unlikely.

“I agree with defense there is no sufficient evidence they would have launched at risk," Young said on Tuesday.

Both companies argue their agreement was a legal, prudent business decision, while AstraZeneca contends it wouldn’t have agreed to a settlement in 2008 if it involved generics entering the market before May 2014.

In an early victory for the companies, Young dismissed the case in a preliminary ruling in February, only to reverse course in June after new evidence emerged.

Two weeks into the trial, AstraZeneca filed a motion to throw out the claims, arguing the plaintiffs experts failed to offer evidence of what they say are “proper" royalty rates for drugs, “despite the court’s warnings that their case could not proceed without one," according to a court filing.

‘Grave doubts’

Young denied the request on 20 November, without elaborating. Yesterday, the judge again expressed doubts about the theories behind the plaintiffs’ case.

“I have grave doubts of sending this to the jury, but I’m going to," Young said.

The buyers failed to show they were actually harmed by the deal between the companies, relying instead upon “strained opinions of experts who each proffer a version of what could have or would have happened in a hypothetical world that has no connection to the evidence," Ranbaxy said in a court filing.

Teva’s accord emerged after the defendants won a mid-trial ruling that the plaintiffs failed to prove the existence of an “over-arching conspiracy" among the three companies, and that AstraZeneca’s deals with the two generics companies had to be considered in isolation.

Possible damages

If the plaintiffs group wins the trial, another trial will be required to determine the amount of damages. Lawyers for both sides declined reporters’ requests during the trial to specify the amount of damages being sought. Papers filed in the case referred to billions of dollars in possible damages.

AstraZeneca, which rejected a $117 billion bid from Pfizer Inc. in May, is relying on revenue from Nexium and another best- seller, Crestor, as it waits for new blockbuster drugs to emerge from its pipeline. The company assumed Nexium would have competition from a generic version in the US on 1 October, though Ranbaxy, which has the exclusive right to sell a copy for six months, hasn’t won final regulatory approval to do so.

Ranbaxy’s agreement to delay its generic Nexium until AstraZeneca’s patent expired also delayed entry of generic versions by other companies, including Teva, because Ranbaxy had a 180-day exclusive period to sell under US laws, according to court records. Ranbaxy won the brief monopoly because it was the first to file an FDA application.

Plaintiffs called the situation a “bottleneck" in court documents.

Meanwhile, a dispute between Ranbaxy and the FDA has prevented the Indian drugmaker from selling generic Nexium in the US as planned. The company sued the agency on 14 November in federal court in Washington after the FDA revoked Ranbaxy’s tentative approval to make the drug, citing deficiencies at its manufacturing facilities in India.

AstraZeneca, which had Nexium sales of $3.9 billion last year, had been bracing for competition that hasn’t materialized and on 6 November boosted its financial forecasts as a result. Bloomberg

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Published: 03 Dec 2014, 06:33 PM IST
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