If you’ve got a patent-protected drug that’s bringing in more than $1 billion a year in sales, you stand to lose a significant chunk of that revenue when the patent expires and lower-cost generic versions come on the market. A California prosecutor alleges that a number of drug companies illegally colluded in a nearly decade-long “pay-for-delay” deal intended to prevent the release of a cheaper competitor to a popular cholesterol drug.
Last week, Orange County (CA) District Attorney Tony Rackauckas filed a consumer protection lawsuit [PDF] against Teva Pharmaceuticals, Abbott Laboratories, AbbVie Inc., Barr Pharmaceuticals, and Duramed, claiming these companies all engaged in a scheme to keep an affordable version of cholesterol treatment Niaspan off the market.
Niaspan is a time-released form of niacin (aka vitamin B3) that can be used to treat patients with high levels of cholesterol. The FDA approved the drug in 1997, and it quickly became a big seller. Between 2001 and 2005, annual sales of Niaspan increased from $87 million to $475 million, accounting for more than half the revenue of its developer, Kos Life Sciences.
During this time, competing firm Barr Pharmaceuticals attempted to get FDA approval on a bio-equivalent generic version of the drug, which it claimed at the time would not infringe on the Niaspan patents. Nevertheless, Kos filed multiple patent infringement lawsuits against Barr.
In 2003, the FDA did grant Barr tentative approval to begin marketing its generic version of Niaspan, and it was expected that the company would bring this lower-cost option to pharmacies in 2005.
Being the first generic of this particular drug, Barr would have had a 6-month exclusivity on this market. However, Kos could release its own generic of Niaspan, thus spoiling Barr’s position as the only generic.
And so, according to the complaint, in 2005 Barr entered into a “reverse payment” agreement with Kos. Barr would wait eight years to release its generic. In exchange, Barr received licenses permitting it to eventually make generics of Niaspan and another cholesterol drug Advicor.
The lawsuit also alleges that Barr (through its Duramed subsidiary) agreed to promote Niaspan and Advicor to obstetricians, gynecologists and other doctors specializing in women’s health. For their efforts, these companies allegedly received a royalty on all of Kos’ sales of these two drugs. In just 2006 and 2007, according to the suit, Barr received $82 million in royalty payments.
The two companies entered into a manufacturing agreement in which Barr would serve as a back-up supplier to Kos for its own drugs. For this, contends the complaint, Barr received a non-refundable lump sum “stand-by” payment.
Even though the FDA gave final approval to Barr’s generic in April 2005, prosecutors say the company discarded its pre-launch inventory of the drug after reaching the reverse payment deal with Kos.
The complaint notes that at the time, both companies “repeatedly stated that the effect of the agreement was to bring a generic equivalent of Niaspan to the market in 2013, which they asserted was four years earlier than the expiration date of the last-expiring Kos Patent.”
However, contends the complaint, this simply wasn’t true, as Barr could have launched its generic in 2005. Granted, it would have been an “at-risk” release because of the pending patent lawsuits, but prosecutors say that the patent issue would have been resolved much earlier than 2013.
In 2006, Abbott began the process of acquiring Kos, primarily based on its lucrative Niaspan business. According to the complaint, Abbott continued to make the royalty payments to Barr.
“Upon the completion of the merger, Abbott joined the ongoing unlawful course of conduct — and joined the unlawful agreements, collusion and conspiracy — with respect to the suppression of generic competition for Niaspan,” states the complaint. “Abbott did not withdraw from that conspiracy. Instead, Abbott participated in it.”
In fact, after acquiring Kos Abbott filed around ten Niaspan-related patent lawsuits against companies trying to produce a generic version of the drug. The Orange County complaint alleges that these suits were brought to protect Teva’s 180-exclusive window for when it eventually launched the generic.
In 2008, Teva acquired Barr and its payments from Abbott. Meanwhile, sales of Niaspan continued to skyrocket, reaching more than $1.1 billion in 2011.
Then Abbott spun off Niaspan and other drugs into a new venture, AbbVie Inc. in 2013. “As Abbott’s successor, AbbVie stepped into the shoes of Abbott with respect to the ongoing unlawful agreement with Teva,” argues the complaint. “Teva continued to refrain from launching a generic equivalent of Niaspan, and AbbVie continued to make the agreed-upon payments to Teva.”
Teva’s Barr-developed generic didn’t hit the market until Sept. 2013, and because of its 180-day exclusive window as the first generic, no others were able to be released until March 2014 — nearly a decade after the alleged reverse payment deal was reached, and more than a decade after Barr first sought approval for the generic.
In all, say prosecutors, consumers and taxpayers (through Medicaid) paid significantly more for Niaspan because of the lack of a generic equivalent.
“Consumers have the right to have companies compete fairly so that they can obtain prescription drugs at a reasonable cost,” said Rackauckas in a statement. “Companies shouldn’t be allowed to keep their prices artificially high and not have competition by making back-door deals with their competitors. In a pay-for-delay game, consumers come out the losers.”
In a statement to the KPCC radio, a rep for Abbott would only say that the “commercial rights and associated responsibilities for Niaspan passed to AbbVie,” when that company was spun off three years ago.
by Chris Morran via Consumerist