Patent Law Practice Center

Litigation is the Life of a Generic Drug Manufacturer

Generic drug companies are those that sell versions of a brand name drug that are similar enough so that they can rely on the research and trials of the brand name company. They either have to wait until the patent on the brand name drug expires, or they can proceed through a process at the FDA where they certify that the generic that they want to sell is either not infringing and/or the patent claims obtained by the brand name company are invalid. If they say that they are not infringing and/or that the patent claims are invalid, that allows the brand name drug company to immediately file a patent infringement action, as authorized by Hatch-Waxman.

The way generics make money and the marketplace can sometimes seem byzantine, but there is no doubt that generics can be quite profitable. For example, generic drug maker Actavis plc (NYSE: ACT) recently reported its financial information from the first quarter of 2014. In the announcement, Actavis stated that their net revenue increased 40% to $2.66 billion for the first quarter ended March 31, 2014, compared to $1.90 billion in the first quarter 2013. Cash flow from operations for the first quarter of 2014 was $440 million and cash and marketable securities were $340 million as of March 31, 2014.

But the announcement of exceptional Q1 financial data came at the end of a week that showed just how much of a roller coaster ride it can be for generic drug companies, and just how much of their business model is dominated by litigation, litigation and more litigation.

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