For people with high cholesterol, the wait for a cheaper version of Lipitor has gotten longer. Pfizer Inc. announced an agreement yesterday to head off generic competition for its flagship drug until November 2011.
The drugmaker said it settled patent litigation with Ranbaxy Laboratories, an Indian generic drugmaker that had threatened to market its own version of Lipitor, the world's best-selling medicine.
The agreement delays Ranbaxy's generic version of Lipitor and is estimated to be worth billions of dollars in additional sales for Pfizer, which could have faced generic competition from Ranbaxy as early as March 2010.
Whenever it comes, a cheaper generic version of Lipitor would sharply cut Pfizer's sales of the drug, which were $12.7 billion last year.
Lipitor is currently priced at up to $3 a day, while a generic version might eventually sell for well below $1.
Pfizer did not disclose the terms of the agreement. But the company said it contained no provisions that would run afoul of the Federal Trade Commission, which has frowned on arrangements in which makers of name-brand drugs pay off generic manufacturers to keep them from entering the market.
The FTC has argued that such arrangements harm the public by inflating drug prices and has challenged them in court, with mixed results.
"We don't have any of the items that the FTC has identified as being of concern such as reverse payments," said David Reid, Pfizer's acting general counsel.
In a conference call with investors and analysts, Reid called the agreement "pro-patient, pro-competition and pro-intellectual property."
But Ronny Gal, a generic pharmaceutical analyst for the investment company Sanford C. Bernstein, said the agreement clearly was not envisioned by the Hatch-Waxman Act, the 1984 law that meant to encourage generic drug competition.
"This is clearly a miscarriage of the law," Gal said, noting that the agreement will mean that consumers continue to pay branded pharmaceutical prices for Lipitor longer than necessary. Yet, Gal said, the agreement is probably fashioned in such a way that it will avoid FTC opposition.
Under terms of the deal, Pfizer also granted Ranbaxy the right to generic versions of Lipitor in seven countries, beginning at various times. Those countries are Canada, Belgium, the Netherlands, Germany, Sweden, Italy and Australia.
Reid said the company's agreements involved no payments to Ranbaxy. But the deal also included another incentive for the generic manufacturer. Pfizer dropped its challenge to Ranbaxy's current sales of generic Lipitor in four other countries - Brunei, Malaysia, Peru and Vietnam - allowing those sales to continue.
While potentially bad news for consumers in the United States, the deal was good news for Pfizer, whose shares rose 5 centsyesterday to close at $17.77. It has the effect of extending Lipitor's market exclusivity by up to 20 months. The exact extension is unclear because the date of Lipitor's patent expiration has been a matter of dispute, with one patent expiring in March 2010 and another in June 2011.
The company had argued that Lipitor might be covered by patents extending into 2016, but analysts have said those are minor patents not likely to be upheld.
Either way, Gal said, the extension would be worth billions of dollars to Pfizer, which has traded near decade lows this year.
The company has mounted an aggressive marketing campaign to defend its Lipitor brand against recent competition from simvastatin, a generic version of Zocor, a similar anti-cholesterol drug that lost patent protection in 2006.
Studies have shown that for many patients hoping to control cholesterol levels, simvastatin is a viable substitute for Lipitor, known generically as atorvastatin. A big difference between the two is that Lipitor costs $2.50 to $3 a day, while simvastatin can retail for 75 cents to $1 a day, or as low as 10 cents a day at some discount pharmacies.
As the first company to file with federal regulators to market a generic version of Lipitor, Ranbaxy has rights under the Hatch-Waxman Act to 180 days of generic market exclusivity. During that six-month period, the maker can price generic drugs fairly close to the brand-name version. Prices generally decline sharply when other generic competitors can enter the market.
The settlement agreement does not prevent other generic companies from challenging the Lipitor patent, but Ranbaxy's "first filer" rights in the United States eliminates much of the incentive to do so.