Pfizer Inc.’s deal with Ranbaxy Laboratories Ltd over Lipitor deserves scrutiny. The US pharma company inked an agreement that postpones generic competition to its $12 billion (Rs51,500 crore) cholesterol drug from the Indian firm. Ranbaxy won’t start selling cut-price versions of the drug until November 2011.
The apparent quid pro quo: Ranbaxy will get a licence to sell another of Pfizer’s patent-protected drugs starting at the same time. This may not be as obviously anti-competitive as a cash payment, but it’s close.
Whether regulators will declare this kosher remains to be seen. Agreements between generic and branded drug makers on patent challenges have been allowed in the past. After all, neither party knows how strong a patent is until a court rules. If the two sides agree to split the difference and introduce a generic drug a few years early, the consumer isn’t hurt on an average. What regulators do object to is any form of payment from a pharmaceutical company to a generic firm that forestalls competition.
Pfizer’s two patents for Lipitor expire in 2016 and 2017. So it can claim that consumers aren’t hurt by the agreement. But this argument is hollow. Pfizer’s patents cover how the drug is made, and such patents are notoriously weak. Challengers can find other ways to make the same drug, or knock the patent down in court. Moreover, the two firms also came to an understanding over Caduet. Ranbaxy can start selling a generic version of this cardiovascular drug at the same time it starts selling a Lipitor knock-off. Caduet’s patent expires several years later. Big drug companies normally don’t give up patents without a huge fight. Regulators should ask whether Pfizer ponied up Caduet to keep Ranbaxy from goring its Lipitor cash cow.