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Pharmaceutical
Company to Pay Settlement of $670Million
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Bristol-Myers Squibb to Pay $670 Million
to Settle Lawsuits
By MELODY PETERSEN
Bristol-Myers Squibb said yesterday that it had agreed
to pay $670 million to settle numerous lawsuits by
states, consumers and competitors charging it with
using illegal tactics to keep lower-priced versions
of its medicines Taxol and BuSpar out of the market.
The drug company said final details of the settlement
were still being negotiated with the state attorneys
general and other parties who filed suit. The terms
are subject to approval by the courts where the lawsuits
were filed.
The announcement, however, is an important step toward
resolving the many lawsuits filed against Bristol
after it tried to stop companies from selling lower-priced
generic versions of BuSpar, an antianxiety medicine,
and Taxol, a cancer drug. Both drugs are now available
as generic medicines, but the lawsuits claim that
patients were deprived of the lower-priced medicines
for many months because of Bristol's actions.
The New York attorney general, Eliot Spitzer, said
that the high cost of the settlement should send a
message to the entire pharmaceutical industry that
actions like Bristol's would not be tolerated. New
York was part of a coalition of states whose attorneys
general filed the lawsuits on behalf of consumers
and state Medicaid programs.
"We're going to continue to be very aggressive,"
Mr. Spitzer said.
Under the agreement, Bristol said it planned to pay
$535 million to resolve the BuSpar litigation and
another $135 million to settle claims relating to
Taxol.
In a statement, Bristol said that it believed that
the actions it had taken to protect its rights to
the two drugs were "entirely lawful." The
company said it agreed to settle to put the uncertainty
and risk of litigation behind it.
The settlement does not end investigations by the
Federal Trade Commission into whether Bristol took
illegal steps to try to keep generic versions of BuSpar
and Taxol off the market. "We're continuing to
have discussions with the F.T.C.," said Robert
F. Laverty, a spokesman for Bristol.
Mr. Spitzer said Bristol and the plaintiffs in the
suits were negotiating terms aimed at preventing Bristol
from taking similar actions to delay generic competitors
in the future.
The lawsuits involving BuSpar and Taxol revolved
around secondary patents that Bristol filed with the
Food and Drug Administration that worked to delay
the sale of the generics.
Just 12 hours before the patent on BuSpar was to
expire in November 2000, and as Mylan Laboratories
was loading trucks with its generic version of the
drug, the United States Patent Office issued a new
patent to Bristol, which it immediately filed with
the F.D.A. to stop the shipments.
The states and other parties argued that the second
BuSpar patent, which covered a chemical substance
made in the body after a patient swallows the drug,
was not valid and that Bristol had used fraud to get
the F.D.A. to accept it.
Neither Mylan Laboratories nor another generic manufacturer
was able to sell buspirone, the generic name for BuSpar,
until four months later. In that time, Bristol earned
tens of millions of dollars from the drug's sales.
In the case of Taxol, the lawsuits contend that Bristol's
illegal actions denied patients and state governments
access to a lower-priced version of the cancer medicine
from December 1997 to April 2001.
The lawsuits claim in part that Bristol illegally
colluded with a smaller drug company, American BioScience,
to get another patent on the drug filed at the F.D.A.,
which stalled the sale of the generic medicine.
Taxol was discovered by the taxpayer-financed National
Cancer Institute. The government gave Bristol the
rights to continue with development and to sell the
drug.
Other drug companies have also filed for secondary
patents on products and tried to use loopholes in
federal law to extend the time they have to sell a
product exclusively.
For example, in the late 1990's, Warner-Lambert filed
additional patents covering Neurontin, an epilepsy
drug, which have succeeded in keeping generic makers
from selling the medicine even though its primary
patent expired in 2000. Pfizer, which now owns Warner-Lambert,
says the patents are valid.
The amount of money involved in such cases is often
substantial.
Before generic companies began selling Taxol, Bristol
was earning roughly $3 million a day from the medicine.
Prices for the first generic drug on the market are
often 30 percent below the price of the brand-name
drug. Prices fall even more as other manufacturers
begin selling the generic.
Yesterday, Senators Charles E. Schumer, Democrat
of New York, and John McCain, Republican of Arizona,
reintroduced legislation aimed at closing loopholes
in the law that the drug companies have used to keep
lower-price medicines off shelves. That legislation
overwhelmingly passed the Senate last year, but Republican
leaders in the House of Representatives refused to
bring it up for a vote.
1/8/03
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Bristol-Meyers Agrees
to Generics Pact
By Gardiner Harris
Bristol-Meyers
Squibb Co. said it agreed to pay $670 million
to settle much of the litigation surrounding its efforts
to block generic competition for two of its big medicines,
cancer drug Taxol and anxiety drug BuSpar.
The announcement isn't
the end of the legal difficulties for the New York
pharmaceutical company. Not all plaintiffs are settling,
and even among those involved in settlement negotiations,
not all of the issues have been resolved. The parties
are still negotiating over what promises Bristol-Meyers
will make about its future conduct.
"This settlement
won't happen unless there is absolutely full and fair
injunctive relief to stop the illegal misconduct of
inflating drug prices and blocking life-saving medicines
from getting to people who need them," said Connecticut
Attorney General Richard Blumenthal, one of the dozens
of state attorneys general who had sued Bristol-Meyers.
Several generic-drug makers, numerous chain drugstores
and a consortium of consumer groups also joined the
suits, alleging that Bristol-Meyers illegally blocked
cheap generic drugs, costing consumers millions of
dollars.
'Entirely Lawful'
In a written statement,
Bristol-Meyers said it "stood behind its actions
and believes they were entirely lawful."
In a time of skyrocketing medical costs, the availability
of cheaper generic equivalents for important medicines
is crucial for health-plan administrators. Employers,
state Medicaid operations and health plans are increasingly
adept at switching patients to generics within days
of the cheaper drugs' release. When scheduled patent
expirations are stymied by drug makers' last-minute
legal tactics-as Bristol-Meyers did with BuSpar-there
are immediate howls of protest and, increasingly,
strategies to fight back.
"This litigation is part of a major initiative
in our office focusing on pharmaceutical pricing,"
said Ohio Attorney General Betty D. Montgomery.
Some Reservations
Not all of the groups suing Bristol-Meyers may sign
off on the current agreement. Ahaviah Glaser, director
of the Prescription Access Litigation Project, said
she hasn't seen the settlement offer.
"The numbers look like they could be inadequate,"
said Ms. Glaser, whose consumer group is a BuSpar
plaintiff.
Bristol-Meyers said it entered into the settlement
talks "to put the uncertainty and risk of this
litigation behind the company."
Currently, Bristol-Meyers is swimming in uncertainty.
The company has said that it will issue next month
a restatement of the past three years of sales and
earnings as a result of an admitted tendancy to sell
wholesalers more drugs than needed to meet patient
demand. A page-one article in The Wall Street Journal
last month revealed that the company had for years
used aggressive accounting to pump up its operating
profit. Recently, sales and profit have plunged sharply,
and the company also was forced to write off more
than $1 billion from its investment in ImClone
Systems Inc.
Bristol-Meyers already put aside in the first quarter
of last year a $125 million litigation reserve, which
will be used in its entirety. The company will subtract
another $545 million from its profit last year to
pay the balance of the settlement. The BuSpar cases
cost $535 million; the Taxol cases cost $135 million.
BuSpar had $700 million in sales in 2000 while Taxol
had $1.6 billion in sales.
Concerted Attack
The BuSpar and Taxol cases arose from a concerted
attack on the branded-drug industry's longtime practice
of using legal tactics to fight off generic competition.
A coalition of consumer and generic groups lobbied
Congress last year for legislative changes to ban
precisely the sort of tactics that Bristol-Meyers
used to protect BuSpar and Taxol.
The Senate passed a bill to do just that, but it
languished in the House of Representatives. Lobbyists
for other drug makers complained that Bristol-Meyers's
aggressive tactics would cost them all dearly. Weeks
before November's election, President Bush promised
to make the changes through federal regulations, but
those regulations may take years to be implemented.
Yesterday, Sen. Charles Schumer (D., N.Y.) said he,
Sen. John McCain (R., Ariz.), and 17 others were reintroducing
the generics legislation.
At 4 p.m. in New York Stock Exchange composite trading,
Bristol-Meyers shares were off 17 cents at $25.1 apiece.
1/8/03
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