The Hindu Business Line : The importance of being Lipitor

Intellectual property-related battles aside, the importance of a Lipitor is its relevance to patients. Generic copies of innovative drugs are more accessible to consumers as they are usually sold at a lower price. Pfizer’s settlement with Ranbaxy sits a little uncomfortably when seen in this context, says P. T. JYOTHI DATTA.

Consumers will be paying more for an innovative medicine, till the generic version comes into the market.

It was a high-profile litigation destined to go down to the wire, with Ranbaxy looking unwilling to pass up the opportunity of getting a slice of Pfizer’s estimated $13-billion cholesterol drug, Lipitor. And, true to Lipitor’s style, the out-of-court settlement on the blockbuster drug was scripted in no less dramatic a fashion, with Ranbaxy and Pfizer agreeing to a cease-fire on the multi-country legal battle that had spanned five years and run up huge legal bi lls.

But that has been the importance of Lipitor — it has always attracted hi-decibel corporate manoeuvres. Lipitor was a significant part of the reason why Pfizer acquired Warner Lambert several years ago.

And getting its hands on the blockbuster drug, a term the pharma world uses to describe any medicine that grosses sales of over $1 billion, made perfect business sense to Pfizer, as this would give it exclusive access to a drug that would go on to become the world’s best selling one.

Several years later, as the end was in sight on Lipitor’s exclusivity, the drug became the centre of fresh corporate speculation and, this time, regarding Pfizer’s designs on Ranbaxy, a generic maker of Lipitor.

With patents on Lipitor set to expire in another two years, the US drug-maker waged a protracted battle against companies making generic similars of Lipitor. Pfizer’s sales stand to be hurt if generic companies managed to use provisions in the US law to legally enter that market with generic Lipitor. The US market for Lipitor is estimated at $8 billion, and that explains Pfizer’s efforts to ward off any generic competition.

Against this backdrop, there was again a buzz in pharma circles that Pfizer’s attempts to hold on to Lipitor could drive it to do a Warner Lambert on Ranbaxy. But the lid seems to have been put on such speculation, as the two drug-makers arrived at a settlement.

Whose call

Who pulled the strings on settling the long drawn-out litigation on Lipitor, is a question that will occupy minds, especially since the deal comes close on the heels of Ranbaxy’s promoters selling their entire stake to Japanese drug-maker Daiichi Sankyo.

Was this a part of the Daiichi deal, that Ranbaxy settle litigation that burns a hole in its pocket? Ranbaxy had forked out about Rs 120 crore on patent-related litigation last year, including the Lipitor case.

Or, was Ranbaxy’s Chief Executive Officer and Managing Director, Mr Malvinder Singh, already on course to cleaning up litigation-related expenses, an observation borne out by the other settlements forged by the company, including that with Astra Zeneca on ulcer drug Nexium, the world’s second highest-selling medicine.

And though out-of-court settlements were increasingly becoming the norm in the global pharma world, Ranbaxy’s settlement with Pfizer on Lipitor is being lauded as one of the most comprehensive agreements the industry has seen.

In the past, Ranbaxy’s battle over two of Pfizer’s specific patents on Lipitor met with varying degrees of success for both companies in different markets, leading to a renewed round of appeals against the court’s decision by the aggrieved company — a seemingly never-ending cycle of litigation.

As part of the latest settlement, Pfizer and Ranbaxy have agreed to stop battling each other in different markets. Ranbaxy has agreed to delay its launch in the US till November, 2011, about 20 months later than its original launch date.

Given the opportunity of the US market for Lipitor, pharma analysts are still scratching their heads over why Ranbaxy agreed to such a deal.

But then, again, since Ranbaxy is first off the block in targeting Lipitor, as per the deal, it would now be legally allowed an exclusive period of 180 days when it can sell in the US, before other generics get into the fray on patent expiry.

Past experience in the US has shown that the price of a medicine has eroded over 90 per cent as several generic drug makers jump on to the bandwagon of a drug going off patent.

In this scenario of fierce generic competition, the settlement removes uncertainty and allows Ranbaxy to launch generic Lipitor in the US and other markets free of risk, both from the innovator and subsequent generic competition.

A risk-free launch, without having to fork out more for legal expenses, is a good bargain for Ranbaxy, as it also gets access to markets in Canada, the Netherlands, Germany, Belgium, Italy and Sweden.

In Australia, Ranbaxy will get to launch close to the patent expiry date. And Pfizer, on its part, would not look to block generic Lipitor sales in markets such as Peru, Vietnam etc. The Lipitor battle, though, continues in the markets of Denmark, Portugal, Spain, and Romania.

For Pfizer too, the deal helps it breathe easy, as it gets to hold on to Lipitor for more time, without fear of generic onslaught.

As the portfolio of new drugs from pharma majors shrinks, companies such as Pfizer will be relieved to settle legal suits out of court, as seen in the several cases where multinationals have settled with generic companies — GlaxoSmithKline’s settlement with Ranbaxy and Dr Reddy’s, among others, on migraine drug Imitrex, being just one example.

Other Indian drug companies such as Sun Pharma and Lupin too have been party to out-of-court settlements, a safe option as pressures increase on both the generic and innovative drug companies.

This is a turnaround, compared to strategies seen about five years ago, when companies such as Ranbaxy and DRL were at the forefront of waging patent-related battles on drugs whose patents were near expiry.

The carrot at the end of the stick was the windfall gain a generic drug company could get, if it managed to invalidate the innovator’s patent.

Consumer concern

Market exclusivity and intellectual property-related battles notwithstanding, the importance of medicines like Lipitor is their relevance to patients.

Generic copies of innovative drugs are usually sold at a lower price, as the copies involve less research and marketing-related expenses. And, as a result, the drug becomes more accessible to the consumer.

So, though Pfizer says its settlement with Ranbaxy is pro-consumer, the agreement sits a little uncomfortably when seen in the context of the signals it could be sending out for the future.

Heath-sector watchers had expressed concern when ownership of Ranbaxy, an aggressive generic company, passed into the hands of innovation-oriented Daiichi. The worry was that the generic orientation of Ranbaxy could be influenced by Daiichi’s intellectual-property-oriented outlook.

Their worst fears seem to be coming true with Ranbaxy’s settling on Lipitor with Pfizer, meaning that the launch of a less expensive version of Lipitor in some markets will get delayed.

This, in turn, means that consumers will be paying more for an innovative medicine, till the generic version comes into the market. And it is against such concerns that corporate moves around blockbusters like Lipitor will be assessed in future.