Big Pharma and the Trolls

A battle dividing the nation’s corporate elite landed in the Supreme Court this week in two important cases, LabCorp. V. Metabolite Laboratories and eBay v. MercExchange LLC. I’ll write more on these cases later. But it’s worth noting today how disappointing the commentary has been from the mainstream media. Both today’s New York Times’ editorial and Alan Murray’s Wall Street Journal column (subscriptions required for both) ignored the impact the court’s decisions will have on pharmaceutical pricing. It’s another case of myopia by journalists with Blackberries.

To get a sense of what’s really at stake, you had to read the back pages of today’s business sections in both papers. Sanofi-Aventis and Bristol-Myers Squibb, two of the biggest drug companies in the world, paid an “undisclosed amount” of money to Apotex, a Canadian generic manufacturer, to keep their exclusive rights to Plavix, a blood thinner, until 2011. Apotex was preparing to sell a generic version of the drug.

The stocks of both big companies leaped ahead after the announcement, which wasn’t surprising since Plavix generated over $6 billion in sales last year. What was the basis of the Sanofi-BMS suit against Apotex that led to the settlement? A patent. Not the original patent on the drug, which ran out in 2003. But a patent that runs out in 2011. This secondary patent covered the process for extruding the active half of the drug from the originally patented mixture (for those of you who understand organic chemistry, it’s the process of getting the active enantiomer out of Plavix’ racemate version). This is the same process that allowed other drug companies to substitute Clarinex for Claritin and Nexium for Prilosec, and allowed them to continue marketing these high price prescriptions to gullible doctors and unwitting patients who otherwise might have used generic versions.

Will the court’s decisions get in the way of this specious patenting? Clearly, Big Pharma is worried, or it wouldn’t have weighed in against companies like eBay that want to get around people who sit on patents in hopes of collecting fees from eventual users (the so-called “patent trolls,” of which Research in Motion, the company that sued the Blackberry maker and won a $612 million settlement, is only the best known).

But Big Pharma isn’t really worried about trolls. They’re the trolls. They want to maintain their right to run to court to get injunctions whenever generic firms try to get around secondary patents, no matter how specious.

These are complicated cases. If we had a Federal Trade Commission or Justice Department antitrust division that did their jobs, we wouldn't have to worry about how big companies game the patent system to rip off consumers. Now it's up to the Supreme Court. Given the recent pro-business appointments, it's hard to imagine anything far-reaching coming out of these decisions.