Good News for Mylan after Hellish Week: Another Win in Patent War Over MS Drug; Lawyers on Both Sides Rejoice.

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Teva Pharmaceutical Industries Ltd. (Petach Tikva ISR) had a third patent on its top-selling multiple sclerosis drug, Copaxone, invalidated last Thursday by a U.S. agency, a further blow to its bid to block generic versions of a drug that accounts for 20% of its revenue.

The Patent Trial and Appeal Board (PTAB) sided with Mylan NV (Amsterdam) and Amneal Pharmaceuticals LLC (Patterson NJ) in ruling that the patent covering the drug’s thrice-weekly dosage never should have been issued, according to Bloomberg News. Teva’s next step is to ask the board to reconsider that decision, and to petition an appeals court that specializes in patent law.

Teva had a third patent on its top-selling drug, #Copaxone, invalidated by a U.S. agency Click To Tweet

The ruling is a further strike against Teva–the PTAB previously said two other patents regarding the dosage were also invalid. It could make it harder for the company to fend off generic-drug challengers to a medicine that generated $4 billion in 2015 sales, with $3.3 billion of it in the U.S.

Teva has a total of five patents expiring in 2030 that cover ways to administer the drug in a 40-milligram dosage three times a week. The original version of Copaxone, consisting of 20 milligrams taken every day, began facing generic competition last year.

Mylan, under an avalanche of criticism now for huge price increases on its EpiPen anaphylaxis treatment, challenged the Teva patents through the Patent and Trademark Office’s (PTO’s) new inter partes review (IPR) process, and the PTAB handed down the decision late Thursday.

That lifts Mylan to three-for-three in targeting Teva’s protections on Copaxone 40mg, a new formulation of the multiple sclerosis drug that’s intended to fill the gap as the blockbuster original product yields to generic competition.

But Teva’s branded drug isn’t out of the exclusivity race yet. The Israeli drugmaker still has a chance to defend itself in a court fight scheduled to begin Sept. 26, according to FiercePharma.com. Novartis AG (Basel CHE) and Momenta Pharmaceuticals Inc. (Cambridge MA) will be trying to upturn a fourth patent covering the drug.

A decision in that case will likely come in the first quarter of 2017, RBC Capital Markets analyst Randall Stanicky figures. And now that the IPR process has dusted off three patents, analysts aren’t optimistic that the decision will go Teva’s way. “Teva is more likely to lose than win the court case,” Credit Suisse analyst Vamil Divan said in an investor note.

Meanwhile, Mylan is expected to target that fourth patent separately, via the same IPR process; the company has promised to pursue “all avenues” to bring that patent down, and analysts believe that includes IPR. They also expect yet another patent to be challenged the same way.

A fourth patent was unsuccessfully challenged by Mylan, though a petition filed by Amneal is pending. The fifth patent was issued Aug. 2. All five are similar in scope, but Teva is hoping there are enough differences that the failure of the first three before the agency doesn’t presage what happens to the others.

Teva only needs one of the patents to survive a challenge to block competition from generic-drug makers, said Aude Gerspacher, an analyst with Bloomberg Intelligence. The U.S. Food and Drug Administration can’t approve any generics until early 2017, so settlements are unlikely before then, she said.

Teva’s “most prudent course of action” would be to settle with Novartis and Momenta, Jason Gerberry, an analyst with Leerink Partners, said in a note to clients. Novartis and Momenta already jointly sell a cheaper version of the daily shot. Even with the generic-drug competition, Teva has been able to maintain sales by switching about 80% of patients to the 40-mg injection.

Mylan has said it believes it’s one of the first companies to apply to sell a generic version of Copaxone, which would give it 180 days of marketing exclusivity.

“Through significant investment in research and development, and by challenging these invalid patents, we are working to bring a more affordable generic alternative of Copaxone to market,” Mylan Chief Executive Officer Heather Bresch said in a statement.

She said the company is “pursuing all avenues” to challenge the fourth patent on the drug.

Steve’s Take: Confused a bit? That’s the idea, as the lawyers in this case laugh all the way back to their weekend retreats in eastern Long Island’s South Fork. Via helicopter, of course.

You see, it’s a core principle of capitalism that as competition erodes profits on established products, enterprises will invest in innovation to earn higher profits from new products.

U.S. law–which I term the Full Employment for Lawyers Act–governing prescription pharmaceutical markets abandons that principle and gives every new drug a long-term monopoly that prohibits competition. (See Health Affairs for an excellent discussion on this, much of which I’ve borrowed.)

Steve's Take: U.S. law abandons drug competition in favor of inefficient monopolies Click To Tweet

It also discourages competition between medicines based on comparative price or effectiveness. High prices and slow innovation cycles are the inevitable result and will remain so unless Congress makes fundamental changes in existing law.

According to the Pharmaceutical Manufacturers Association, it takes at least 10 years to develop a new drug. It is no surprise that the typical monopoly period on an existing drug is also 10-12 years. Why rush to bring a new product to market when a monopoly makes it possible to raise the price of the old one with impunity?

In contrast to products other than drugs, Federal law prohibits the FDA from approving a copy of a new drug for a period of seven to 12 years even if there are no patents. The FDA is also prohibited from approving a generic drug anytime a claim of patent infringement is alleged–a policy that has encouraged many frivolous patent claims just to delay competition.

Drug patents also get extensions of up to five years and then an additional six-month extension for conducting studies of the new drug’s suitability for use in children. Collectively, all of these special monopolies prevent competition and keep prices high.

In the case of Teva’s Copaxone, I stopped counting–at ten–the past, present and likely future lawsuits and Patent Office litigation. So you want be a pharma patent lawyer and sue someone? Or you have a client that’s facing a patent lawsuit? They better have a big, fat checkbook, because this isn’t going to be inexpensive.

A survey conducted last year by the American Intellectual Property Law Association (AIPLA) to find median litigation costs for patent infringement suits produced mind boggling numbers.

According to Cnet, the AIPLA survey found that for a claim that could be worth less than a $1 million, median legal costs are still $650,000. When $1 million to $25 million is considered “at risk,” total litigation costs can hit $2.5 million. For a claim over $25 million, median legal costs are $5 million. That’s the cost of fighting a patent infringement suit if you’re a plaintiff or a defendant. It doesn’t include how much you’ll have to pay if you’re the defendant who loses the suit.

“These litigation costs are definitely expensive,” said James Crowne, director of legal affairs at AIPLA. Yes they are. “But then so is the cost of getting a patent in the first place.”

Oh, I forgot about the legal fees for that!

My point is that just in the Copaxone patent fracas alone, analysts have said generic competition to the 40-mg version could wipe out as much as $3.2 billion in sales by 2019. That’s what’s at stake in all the claims and cross-claims; $3.3 billion.

If we apply the formula resulting from the AIPLA survey for determining approximate total legal fees (20%) associated with Copaxone—such fees amount to the jaw-dropping number of approximately $640 million. Most, if not all, or which will be passed on to us consumers one way or the other in the drug’s pricing.

I’m here in San Diego, but swear I can hear the sound of corks popping, all the way from those yachts in the Hamptons. And I don’t mean because someone’s just celebrating Labor Day.