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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Actavis Announces Daytrana® Patent Challenge Settlement

On March 19, 2014, Actavis plc (NYSE: ACT) announced that it entered into an agreement with Noven Pharmaceuticals, Inc. to settle all outstanding patent litigation related to Actavis’ generic version of Daytrana® (Methylphenidate Transdermal System).  Daytrana® is a CNS stimulant indicated for the treatment of Attention Deficit Hyperactivity Disorder. For the 12 months ending December 31, 2013, Daytrana® had total U.S. sales of approximately $98 million, according to IMS Health data.

The ultimate launch of Actavis’ product is, however, contingent upon Actavis receiving final approval from the U.S. Food and Drug Administration on its Abbreviated New Drug Application (ANDA) for generic Daytrana®.

This patent dispute in fact arose out of the filing of the ANDA by Actavis. An ANDA applicant must make one of four certifications regarding each patent that applies to the drug for which approval is being sought: (I) no such patent information has been submitted to the FDA; (II) the patent has expired; (III) the patent is set to expire on a certain date; or (IV) the patent is invalid or will not be infringed by the drug covered in the ANDA.

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Drugs: From Patent to Market is a Long Haul

Recently I was perusing press releases to see if I could find any interesting news items worth reporting. One particular press release did catch my eye. The title was AvidBiotics Granted U.S. Patent for Bactericidal Proteins that Selectively Kill C. Difficile. C. Difficile, or Clostridium difficile…more commonly called C. Diff. for short…. is a bacterium that can cause symptoms ranging from diarrhea to life-threatening inflammation of the colon. I have known people who have suffered with C. Diff., and it is no joking matter. So a treatment for C. Diff. is interesting enough, but an innovation that would kill only C. Diff., without harming other (good) bacteria, might be a real breakthrough. The problem with many antibacterial drugs is that they kill the good bacteria with the bad, or sometimes kill the good and not the bad, which can lead to a hose of digestive problems.

In any event, AvidBiotics Corp., which is a privately held biotechnology company, recently announced that it obtained US Patent No. 8,673,291, entitled “Diffocin and Methods of Use Thereof,” which claims modified R-type bacteriocins from C. difficile that specifically kill C. difficile bacteria. Also covered are methods of manufacturing such bactericidal proteins.

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