Last night, in a nearly unprecedented move, a federal judge ordered a cholesterol medicine that is on the market and used by patients to be withdrawn because it infringes on the patents of a competitor. Some patent attorneys reacted with shock. (Read the ruling.)
“It’s very strange for a judge to take one product off the market when there are patients on the medicine already,” says Rachel Sachs, an associate professor of law at Washington University in St. Louis. In an extended thread on Twitter about the decision, New York Law School Associate Professor Jacob Sherkow wrote: “I am shocked.”
Regeneron and Sanofi, the biotech-Big Pharma pair-up that lost the decision, will appeal the decision, which could result in years more of legal wrangling. Despite this, Amgen, in a press release, is already saying that it can make enough of its drug, Repatha, to serve all the patients who get Regeneron’s Praluent. A 6% fall in Regeneron’s stock this morning has cost its founder, chairman and CEO, Leonard Schleifer, about $70 million of his fortune, now estimated at $1.3 billion.
But the stakes go far beyond these two companies and their investors. Drug firms frequently battle it out over drug patents. Yet it’s remained an article of faith among many executives and investors that medicines that could actually help patients are rarely actually blocked from being sold. This is why multiple teams of investors have backed different companies that seek to use the gene-editing technology CRISPR to create new therapeutics even though intellectual property around CRISPR is caught up in a high-profile patent battle between the University of California and the Broad Institute in Cambridge.
Sachs points out that in a recent case that Merck won against Gilead Sciences over hepatitis C drugs, Merck got a record $2.5 billion award. But the company didn’t even ask that Gilead’s Sovaldi be removed from the market, as is being suggested in this case. In fact, one needs to reach back a decade to find a precedent. In 2007, Tercica, a Genentech spinout, managed to get a competitor’s treatment for short stature removed from the market. Two years before that Amgen managed to block Roche’s competitor to its anemia drug Epogen from entering the U.S. market.
Just got done reading the $AMGN $SNY $REGN injunction. I am shocked. 1/15 #patents #biotech h/t @megtirrell
— Jacob S. Sherkow (@jsherkow) January 6, 2017
New drugs would not be invented and developed without strong patents. The process always costs hundreds of millions of dollars, and more than $1 billion when the industry’s failure rate is averaged in. But the patent system does not need to be so strong that it prevents any similar drug from reaching the market. In fact, usually the opposite is true. That’s why there are many similar drugs for conditions like high cholesterol, hypertension, and pain. Patients benefit because often the drugs are different from one another in important ways. Society also benefits because competition between similar medicines is one of the only things that can drive down price. Pharmacy benefit managers have been able to play these two cholesterol medicines off each other to get better bargains, which will all go out the window if this injunction holds.
In his Twitter commentary, Sherkow, the New York Law School professor, points to several weaknesses in the ruling that could result in it being overturned. The judge’s decision hinges on the idea that Amgen had suffered irreparable harm, that one can’t come up with an estimate of that harm so Sanofi-Regeneron could just pay, and that this outweighed the damage to the public interest. (Because Sanofi-Regeneron’s Praluent is available at a much lower dose than Amgen’s Repatha, it’s a different product even if the drugs turn out to be otherwise alike.) Amgen argued that because competition was lowering the prices of both drugs, the harm to it was immeasurable, but another court could disagree. It’s also possible that, rather than go through the appeal, the two companies will go back to the negotiating table to settle.
That could be what happens in the end. Sanofi-Regeneron certainly has a chance on appeal. But, as this ruling shows, you can never know for sure what a court will do. Analysts on Wall Street differ in their predictions. John Evanson at Cannacord sees a settlement being reached in which Sanofi-Regeneron pay a 6% to 9% royalty. Brian Skorney at Baird assumes a 20% royalty. But Phil Nadeau at Cowen & Co. says for Regeneron to win a stay of the injunction and the later case will be "an uphill battle" and that Amgen seems unwilling to settle.
In response to a strongly worded request for comment, Amgen pointed to a statement from its press release by Chief Executive Robert Bradway: “Protecting intellectual property is essential to our industry as it reinforces the incentives for the large and risky investments we make in innovation to bring forward new medicines to treat serious diseases.” But that doesn’t require blocking every competitor from even begin marketed–even with infringement, a royalty would serve the same purpose, without depriving patients of choice.
One thing that the judge considered was potential damage to Amgen's reputation. As Sherkow points out, Amgen's reputation was not damaged by the existence of Praluent. But it may be damaged by winning. The joke about Amgen in biotech circles is that it is a law firm with a biotech company attached. That perception is only likely to get stronger now.
Then again: Never bet against a law firm with a biotech company attached.
