Glaxo-Apotex ruling could impact future patent cases

Executives at pharmaceutical giant GlaxoSmithKline have reason to be glum. The company's stock took a hit in March when the company lost a patent case for its antidepressant Paxil in the U.S. District Court in Chicago. Paxil is Glaxo's market leader, with $2.2 billion U.S. sales and a total of $3.25 billion worldwide sales last year, representing about one-tenth of the company's total sales.

If the Chicago ruling is upheld—a big if, according to some analysts—it could cost the already beleaguered company millions and perhaps have an effect on other patent cases. Glaxo could get a market boost later this year, however, from a recent approval to sell an anti-impotence drug in Europe.

For now, at least, the company has hit some rough patches. Judge Richard Posner ruled that "the [Paxil] patent, although valid, is not infringed, and further, even if it is valid and infringed, [Glaxo] is entitled to no relief."

Within 24 hours of the March 3 ruling, the defendant, Canadian generic manufacturer Apotex Corp., announced that it would begin marketing its generic paroxetine hydrochloride as early as next year. Almost immediately, Glaxo's stock fell more than a dollar. Some market analysts, including S. G. Cowen in London, believe that if Paxil faces competition from generics next year, the company's 2004 earnings could fall 3%.

That could continue a three-year decline in stock values that was precipitated, according to market analysts, by the fact that several of Glaxo's blockbuster drugs are off or about to go off patent.

The London-based company's U.S. stock lost more than 37% of its value in the past year alone, down to $31.35 on March 10 from a high of $49.98 in April 2002. Glaxo's antibiotic Augmentin ($1.06 billion in U.S. sales in 2002) already faces generic competition. And in the next five years, five of its other major drugs face either patent expiration or potential competition from generic makers.

Industry analysts contend that it's too early to tell what the Chicago case means to the generic industry overall. "Generic companies will continue to monitor this case, as they do all patent cases," said Christine Simmon, VP of policy and public affairs for the Generic Pharmaceutical Association in Washington, D.C. "An FTC report in 2002 said that generic manufacturers prevail in 73% of generic patent cases. That's because manufacturers bring thoughtful determination to litigation. This case is no exception," Simmon noted.

The Chicago case, if upheld, could signal a toughening legal environment for brand-name products. The reason is that the case addresses two contentious issues: how much of a patented substance must a generic compound contain to constitute an infringement; and, even if an infringement occurs, what relief should be granted if a court determines that no harm has occurred to the patent holder.

On both issues, Judge Posner's ruling favors generic manufacturers.

The fact that Apotex's product is bioequivalent to Paxil, as required by the Food & Drug Administration, was not disputed. However, Paxil is produced by Glaxo in hemihydrate form. That means each molecule of Paxil is one part water for every two parts of its active ingredient, paroxetine hydrochloride. Apotex's generic paroxetine hydrochloride is an anhydrate; that is, it contains no water. But in producing the generic anhydrate, some of the hemihydrate form is also produced by Apotex, and that was the basis for Glaxo's claim of infringement before Posner.

Glaxo claimed, in essence, that the patent for the hemihydrate form is extant, so by containing even a trace amount of hemihydrate paroxetine crystals, Apotex's patent is an infringement, and the FDA's tentative approval in May 2001 of Apotex's ANDA for paroxetine hydrochloride should therefore be stayed. (The Federal Trade Commission, which has been moving in the direction of supporting generic drug marketing in the past few years, filed a brief before Posner in support of Apotex.)

In his 67-page ruling, Judge Posner came to two conclusions. First, the production of hemihydrate paroxetine hydrochloride by Apotex in creating its generic bioequivalent of Paxil was unintentional and, in all probability, unavoidable. In any case, it is only a trace amount, so no harm was done to Glaxo. Second—and most important, according to some analysts—even if a patent infringement did occur by the creation of the hemihyrdate form, no remedy or relief should be granted, because no harm was done to Glaxo.

The judge described the hemihydrate amounts as "merely an impurity" that provide Apotex with no economic advantage. He said that the "grant of an injunction in the circumstances disclosed by the evidence in this case would be a travesty of equity."

In his decision, Judge Posner said that "the efficacy of Apotex's generic competition with Paxil will gain nothing from the fact that Apotex cannot eliminate minuscule quantities of the hemihydrate from its anhydrate product. The infiltration of Apotex's production process by hemihydrate is merely a pretext for an infringement suit designed to prevent competition from a product that is in the public domain."

"Those were strong words," said Brian Coggio, a patent lawyer with Orrick Herrington & Sutcliffe in New York. The conventional wisdom in law, Coggio went on to note, is that defendants cannot claim innocence simply because no harm was done. The concept of de minimis non curat lex—"the law is not concerned with trifles"—is not viewed by courts as a valid defense for patent infringement or other civil action, he said.

"Case law implies that you can't use de minimis non curat lex as a defense, that there is no de minimis defense, but in this case the judge ruled 'no harm, no foul,'" says Coggio. "That is very interesting. It will be interesting to see whether this ruling is upheld."

One generic industry official, who spoke to Drug Topics on condition of anonymity, thinks the ruling may not have a significant effect. "The question for this court was whether not allowing the generic drug to go forward is a proper response, even if there was a patent infringement. The court decided to allow the generic to go forward," the official said. "That could be problematic for other courts."

In its appeals of the ruling, Glaxo plans to argue that the Apotex version of Paxil contains enough of the hemihydrate form to infringe on the company's patent. "We think it's important that the judge found the patent valid," said Mary Anne Rhyne, spokeswoman for Glaxo. "We plan to appeal the case on the ground that the presence of hemihydrate paroxetine is sufficient for infringement."

Another Glaxo claim in the Chicago action was that Apotex was moving too fast in coming to market. Judge Posner agreed with Glaxo's statements that the company spends a lot of money in developing branded drugs and has a vested interest in battling ANDA approvals. But the judge dismissed the company's claim that Apotex is being too quick to come to market: "[Glaxo] deplores Apotex's eagerness to be first, but of course that eagerness is the mirror of [Glaxo's] zeal to obtain the much more extensive protection conferred by a patent that excludes the competition of a bioequivalent drug as infringing," he wrote.

Glaxo is currently involved in European litigation to keep generic Paxil from the market overseas, and another Paxil patent case is pending in Philadelphia between Glaxo and Apotex. The drug is patented until 2006 in major European markets. The company claims that its U.S. patent runs until 2006, but several generic manufacturers are challenging that.

In any case, Glaxo is entitled to exclusive Paxil sales in the United States until September 2003 under provisions of the Waxman-Hatch Act. The company also may be shielded from the impact of a generic Paxil by patients switching to a newer, controlled-release version of the drug called Paxil CR. According to analysts at ING Financial Markets, about half of Paxil's U.S. consumers may have switched by the end of the year to Paxil CR, which already has about a one-third share of new Paxil prescriptions.

A trial date is yet to be set for the second case against Apotex, in the U.S. District Court for the Eastern District of Pennsylvania. The case involves other generic companies and contests several Paxil patents, including a direct challenge to Apotex's anhydrate form of paroxetine hydrochloride. Also pending is a decision from the U.S. Court of Appeals for the Federal Circuit relating to the legality of Glaxo's late-listing activities in seeking patent extensions from the FDA and blocking Apotex's various paroxetine-related ANDAs.

"Glaxo is the poster child for what the FDA and the FTC consider uncompetitive behavior," said Bob Billings, Apotex manager for public affairs. "The Chicago case clears another hurdle for bringing an affordable form of Paxil to market. It may not end up being a landmark case, but we expect it will be referenced by other courts as patent cases present themselves."

Martin Sipkoff

The author is a Gettysburg, Pa.-based healthcare writer.

 

Martin Sipkoff. Glaxo-Apotex ruling could impact future patent cases. Drug Topics Generic Supplement;147:10S.