Patent Baristas

After being bombarded with 20 amicus briefs, the U.S. Supreme Court has opted out of ruling on the LabCorp v. Metabolite Laboratories case (U.S., No. 04-607) saying that it had “improvidently” agreed to hear the case in the first place and it dismissed the appeal. Basically, thousands of patents on medical tests and genes dodged a serious bullet since the Court could have deemed such tests “natural phenomena.”

Review was granted only with respect to whether a method patent setting forth an indefinite, undescribed, and non-enabling step directing a party simply to “correlat[e]” results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.

A District Court trial jury found that LabCorp indirectly infringed Metabolite’s U.S. Patent No. 4,940,658. The ’658 patent claims methods for detecting cobalamin or folate deficiency. Cobalamin and folate are both B vitamins, commonly known as B12 and folic acid, respectively. A deficiency in these vitamins can cause serious illnesses in humans, including vascular disease, cognitive dysfunction, birth defects and cancer. Claim 13 claims a method for detecting a deficiency of cobalamin or folate in warmblooded animals comprising the steps of: assaying a body fluid for an elevated level of total homocysteine; and correlating an elevated level of total homocysteine in said body fluid with a deficiency of cobalamin or folate.

On appeal to the CAFC, LabCorp argued that claim 13 is invalid on grounds of indefiniteness, lack of written description and enablement, anticipation, and obviousness. Likewise, LabCorp contends that claim 18, directed to the panel test, is also invalid on grounds of indefiniteness, and lack of written description and enablement. The CAFC upheld the district court’s decision.

Three justices dissented, saying the court should have decided the case after expressing concerns that patents in areas like biotechnology and financial services were being granted too liberally and over concerns that physicians could become unwitting patent infringers if they make the same test conclusion linking the presence of cobalamin or folate in a patient’s blood and vitamin B deficiency.

The dissent stated that:

Claim 13’s process instructs the user to (1) obtain test results and (2) think about them. Why should it matter if the test results themselves were obtained through an unpatented procedure that involved the transformation of blood? Claim 13 is indifferent to that fact, for it tells the user to use any test at all. Indeed, to use virtually any natural phenomenon for virtually any useful purpose could well involve the use of empirical information obtained through an unpatented means that might have involved transforming matter.

At most, respondents have simply described the natural law at issue in the abstract patent language of a “process.” But they cannot avoid the fact that the process is no more than an instruction to read some numbers in light of medical knowledge. … In my view, that correlation is an unpatentable “natural phenomenon,” and I can find nothing in claim 13 that adds anything more of significance.

Further consideration on natural phenomena will have to wait for another day.

See the dissent here. See also Patently-O, Phosita, and the WSJ Blog.

Pfizer announced today that the United Kingdom’s Court of Appeal has upheld the exclusivity of the main patent covering atorvastatin, the active ingredient in the company’s cholesterol lowering drug Lipitor. The appellate court ruling affirms a lower court decision in October 2005 which found that a proposed generic from Ranbaxy Laboratories Ltd., an India-based pharmaceutical company, would infringe the basic patent of Pfizer’s Lipitor. (see an earlier Barista post by Stephen and associated links). Ranbaxy had wanted to release a generic version of the drug in Britain. The patent covers atorvastatin, the active ingredient in Lipitor.

The appeals court backed the lower court by ruling invalid a second Pfizer patent covering the calcium salt of atorvastatin, which expires in July 2010.

The UK appellate court ruling affirms an October high court decision that found the basic patent on Lipitor, expiring in November 2011, was valid, but a more specific patent, running out in July 2010, was not. The ruling prohibits Ranbaxy from introducing a generic version of Lipitor in the United Kingdom before the expiration of the basic patent in November 2011, subject to a possible further appeal. Lipitor is known by the chemical name atorvastatin with annual sales of $12 billion.

In December, a U.S. federal court judge upheld the validity of two of Pfizer’s patents, dealing another setback to Ranbaxy, which had hoped introduce a cheaper copy as soon as 2008.

But let’s keep our eye on the ball – when looking at the patent landscape of the statins, this may have been only a small a victory for Pfizer that will play well in the press and for stockholders ever so briefly. Now that Zocor is off-patent in the US (which is also the major market), generic Zocor (which was approved by the FDA last Friday for Teva Pharmaceuticals) may actually represent a much bigger threat to the Lipitor market share and profitability in the US and worldwide.

In Abbott Labs. v. Andrx Pharm., Inc., No. 05-1433, the U.S. Court of Appeals for the Federal Circuit held that a preliminary injunction granted pursuant to plaintiff’s claims alleging infringement of its patents relating to extended release formulations of a broad spectrum antibiotic should be vacated where (a) the plaintiff failed to establish a likelihood of success on the merits; (b) the plaintiff failed to establish that irreparable harm supported the grant of the injunction; and (c) the public interest benefited from a denial of the injunction.

Earlier, Abbott Laboratories brought suit against Teva Pharmaceuticals, Inc. alleging infringement of its patents relating to extended release formulations of clarithromycin. Clarithromycin is a broad spectrum antibiotic from the macrolide family of antibiotics, all of which are derived from erythromycin A.

Abbott asked for a preliminary injunction against Teva on the grounds that Teva was infringing claims 2, 4, and 6 of U.S. Patent No. 6,010,718 (’718 patent) and claim 2 of U.S. Patent No. 6,551,616 (’616 patent). Teva argued that substantial questions existed as to the validity of Abbott’s asserted claims under 35 U.S.C. § 103. The district court granted a preliminary injunction after agreeing that Teva had raised a substantial question as to the validity of claim 2 of the ’616 patent but it rejected Teva’s invalidity arguments as to the asserted claims of the ’718 patent.

In 1997, Abbott filed for a patent claiming an extended release formulation of clarithromycin. The patent describes and claims extended release formulations comprising erythromycin derivatives combined with a pharmaceutically acceptable polymer. The resulting drug-polymer matrix leads to the extended release properties of the formulation. The ER formulation enabled patients to take one pill per day rather than twice, as had been required with the immediate release formulation. That patent issued on January 4, 2000 as the ’718 patent. Further, based on the ’718 patent application, Abbott filed a continuation-in-part application that claims a method of reducing adverse gastrointestinal side effects of erythromycin-derived drug formulations by using extended release formulations. This continuation-in-part issued as the ’616 patent. In 2000, Abbott introduced its ER clarithromycin formulation, Biaxin XL.

A plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief: (1) the movant has some likelihood of success on the merits of the underlying litigation; (2) immediate irreparable harm will result if the relief is not granted; (3) the balance of hardships to the parties weighs in the movant’s favor; and (4) the public interest is best served by granting the injunctive relief. These principles apply with equal force to disputes arising under the Patent Act.

In looking at the standard for a preliminary injunction, the court stated that when moving for the extraordinary relief of a preliminary injunction, a patentee need not establish the validity of a patent beyond question. The patentee must, however, present a clear case supporting the validity of the patent in suit.

As to the public interest factor, the court stated that:

Although the public interest inquiry is not necessarily or always bound to the likelihood of success of the merits, in this case absent any other relevant concerns, we agree with the district court that the public is best served by enforcing patents that are likely valid and infringed. As Abbott did not establish a likelihood of success on the merits, we conclude that the public interest is best served by denying the preliminary injunction.

In a split decision, the court said Teva had raised sufficient questions about the validity of Abbott’s patents to make it unfair for a court to keep Teva out of the marketplace for generic versions of Biaxin XL until after a full trial. The court felt that if Abbott ultimately proves its patents for extended release Biaxin are valid, money damages shall be sufficient.

U.S. Circuit Judge Pauline Newman dissented stating that:

Reversal of a preliminary injunction that preserves the status quo requires a clear showing that the district court exceeded its discretionary authority. See We Care, Inc. v. Ultra-Mark Int’l Corp., 930 F.2d 1567, 1570 (Fed. Cir. 1991) (“The court’s determination can be overturned only on a showing that it abused its discretion, committed an error of law, or seriously misjudged the evidence.”) My colleagues do not discuss the trial judge’s careful explanations, but, upon finding that Teva has raised a “substantial question” about patent validity, they hold that Teva should be permitted to practice the Abbott invention before patent validity is decided. With all respect to my colleagues’ concerns, they misapply not only the criteria of the preliminary injunction but also the standard of appellate review.

Merck is on the verge of losing patent protection for its multi-million dollar drug compound Simvastatin, paving the way for euphoric generic players to enter the U.S. Simvastatin market, which was worth around U.S. $4.4 Billion worldwide in 2005. Even though there is no current Para IV litigation for the Simvastatin tablet, the story so far is quite interesting, and central for the future of the U.S. generic industry, and more particularly for the First Para IV filer and subsequent Para IV filers. On June 23, 2006, generic players will start commercializing their generic versions of Simvastatin tablets, but the debate surrounding the generic launch and entry still continues to prevail. That is, if all generic players get the FDA final nod to market their generic versions, or if only Teva and Ranbaxy would reap the benefit of 180-day exclusivity for their generic Simvastatin tablets.

The Food and Drug Administration (the “FDA”), which earlier denied Ranbaxy and Ivax’s citizen petitions for not approving subsequently-filed ANDAs (before expiry of their 180-day exclusivity for respective strengths, and for reinstating the delisted patents to the Orange Book) has already made an appeal with the U.S. Court of Appeals against the decision of the U.S. District Court, which remanded and sent the case back to the FDA for a decision. Now interestingly, rather than being a conventional generic tussle between Innovator and Generics, this case is turning out to be decisive regulatory tussle between the FDA and the First Para IV filers, concerning a 180-day exclusivity issue.

Let us go back and revisit this unusual case history from its inception, to figure out the issues involved, and their impact on future generic industry, particularly when the Authorized Generics are turning out to be next big hurdle for the 180-day exclusivity holder.

Merck’s Goldmine

Merck hit a gold mine when the Merck scientists synthetically derived Simvastatin from a fermentation product of Aspergillus Terreus, while developing and researching lovastatin. In 1980, Hoffmann et al. filed a U.S. patent application for Simvastatin (its pharmaceutical composition and use thereof to treat hypercholesterolemia, against which U.S. Patent No. 4,444,784 was issued on April 24, 1984). Merck filed the new drug application (the “NDA”) for simvastatin and for anti- hypercholesterolemia indication, being approved by the FDA on December 23, 1991, in 5 mg, 10 mg, 20 mg, and 40 mg strengths. Subsequently, the FDA listed the Simvastatin tablet along with the ‘784 Patent, with the Approved Drug Products, and with the Therapeutic Equivalence (Orange Book) under 21 U.S.C. § 355 (b) (1).

Listing Additional Patents & PTE

On May 20, 1993 the USPTO, under 35 USC § 156, extended the term of the ‘784 Patent for a period of 1,704 days, adjusting the patent expiry of the ‘784 Patent from April 24, 2001 to December 23, 2005. The FDA later approved the 80 mg strength of the Simvastatin tablet in 1998. In 2000, Merck further listed two additional patents, stating them to be metabolites of Simvastatin, namely:

1. U.S. reissued Patent No. RE36,481 (the ‘481 Patent)
2. U.S. reissued Patent No. RE36,520 (the ‘520 Patent)

Later, Merck also obtained Pediatric Exclusivity from Simvastatin tablets, extending the patent terms of the ‘784, ‘481, and ‘520 patents with additional 6 months.

Ivax Para IV Attack

Like other blockbuster drugs, Simvastatin also became a Para IV target in the same year when Merck listed additional patents for Simvastatin tablets. On December 14, 2000 Ivax submitted ANDA, with the FDA seeking marketing approval for its generic version of the Simvastatin tablet, in 5 mg, 10 mg, 20 mg, and 40 mg strengths. Ivax filed a Para III certification, with respect to the ‘784 Patent, but filed a Para IV certification with respect to additional patents, contending that the ‘481 and ‘520 patents were invalid or unenforceable, or that their drugs would not infringe the patents. Ivax notified Merck of the Para IV certification, detailing the factual and legal basis for its belief, and that its generic drug would not infringe the patents, or that the patents are invalid or unenforceable.

Ranbaxy Joins the Para IV Race

In November 2001, Ranbaxy became the second generic player to file Para IV certification with the FDA, seeking marketing approval for its generic version of the Simvastatin tablet in 5 mg, 10 mg, 20 mg, 40 mg, and 80 mg strengths. Ranbaxy was, however, first to file Para IV certification in the case of the 80 mg strength, as Ivax’s Para IV certification was intended for 5 mg, 10 mg, 20 mg, and 40 mg strengths. Like Ivax, Ranbaxy also filed a Para III certification with respect to the ‘784 Patent, and a Para IV certification with respect to additional patents, contending that the ‘481 and ‘520 Patents were invalid, unenforceable, or that their drugs would not infringe the patents. Ranbaxy also notified Merck of the Para IV certification, detailing the factual and legal basis for its belief that its generic drug would not infringe the patents, or that the patents are invalid or unenforceable.

Conquering 45 day Barrier

Merck did not sue Ivax and Ranbaxy within 45 days as required under 21 U.S.C. 355 (j) (5) (B) (iii), to trigger an automatic 30-month stay of the FDA approval of the ANDAs. As a result of this, both Ivax and Ranbaxy were entitled to a 180-day exclusivity for their respective strengths, and expected to launch their generic Simvastatin tablet after expiry of the ‘784 Patent. Until this, everything seems to be clear and evident that, with the expiry of the ‘784 Patent, Ivax and Ranbaxy would enjoy a 180-day marketing exclusivity and would be the sole generic players in U.S. Simvastatin market.

Big celebrations for Big Generic Predators!

FDA 2003 Rulemaking

On June 18, 2003, the FDA published its Revised Rules, clarifying the types of patents that must and must not be submitted to FDA for listing in the Orange Book, effective as of August 18, 2003. Under the Revised Rules, NDA holders are not allowed to submit patent information for listing in the Orange Book for: drug packaging, drug metabolites, and intermediates of a drug. In addition to this, the Revised Rules also added requirements for submission of: (1) polymorph patents (only if the NDA holder must have the test data, demonstrating that a drug product containing the polymorph will perform the same as the drug product described in the NDA) and (2) a product-by-process (only if the product is novel).

However, these developments had no role to play in the Ranbaxy and Ivax’s 180-day party.

Merck Unexpected Maneuver

Following the FDA revision, on October 10, 2003, Merck submitted a letter to the FDA requesting that the ‘481 and ‘520 Patents be delisted from Orange Book. The following month, the FDA received a letter from Kenyon & Kenyon (an intellectual property law firm) challenging the listing of additional patents under revised an FDA regulation published on June 18, 2003. The FDA forwarded this letter to Merck, which renewed its request that the patents be withdrawn. In June 2004, Merck sent a third request to the FDA to delist the patents. In September 2004, Ivax and Ranbaxy learned that the FDA had delisted the ‘481 and ‘520 Patents from the Orange Book.

FDA Nullify 180-day Exclusivity

Discovering that the FDA had delisted the ‘481 and ‘520 Patents, both Ivax (on January 05, 2005) and Ranbaxy (on February 1, 2005) submitted citizens’ petitions with the FDA, requesting that the FDA confirm it would not approve subsequent ANDAs, until after the 180-day period, and the FDA relist the patents in the Orange Book. On October 24, 2005, the FDA denied both petitions, deciding that it would not relist the disputed patents, that no applicant would be eligible for a 180-day exclusivity for delisted patents, and that it would approve all subsequent ANDAs for simvastatin tablets. Following the FDA denial, Ivax and Ranbaxy separately sued the FDA, challenging the FDA’s refusal to relist the ‘481 and ‘520 Patents, and their refusal to grant any ANDA Applicant eligibility for the 180-day exclusivity for generic Simvastatin tablets. All three parties moved for summary judgment. Ranbaxy and Ivax moved for summary judgment, seeking to vacate the FDA decision. The FDA filed a cross-for-summary judgment seeking to maintain its decision.

Thumbs Up for Ranbaxy & Ivax!

On April 30, 2006 Judge Richard W. Roberts of U.S. District Court for the District of Columbia, in his memorandum opinion, ruled in the favor of Ranbaxy & Ivax by granting them summary judgment and contending that the FDA has acted contrary to the clear intent of Congress in its decision to deny Ranbaxy and Ivax’s citizen petitions. The issue was sent back to the FDA by the District Court for a decision giving Ranbaxy and Ivax much expected relief.

FDA Not Ready to Give Up

On May 24, 2006, the FDA appealed against the decision of District Court and filed a Motion with U.S. Court of Appeals, seeking expedited review concerning Ivax and Ranbaxy’s 180-day exclusivity issue, and also proposed a schedule whereby the appeal will be fully briefed over the summer, with arguments to be heard at the Court’s earliest convenience thereafter. Teva (which earlier acquired Ivax) has agreed to an expedited schedule as proposed by FDA.

The Generic 23/6: The Day Belongs To?

As of now, FDA has already relisted both the delisted patents to the Orange Book, which implies that Teva and Ranbaxy will receive the final marketing approval for their generic Simvastatin tablets on June 23, 2006, and will market their respective strengths with 180-day exclusivity period. Considering that appeal will be briefed over the summer, and Teva and Ranbaxy will commence their marketing in June 2006, there can be either of two situations:

1. If the U.S. Court of Appeals rules in favor of Generics, then Teva and Ranbaxy will enjoy marketing exclusivity, until the end of December; or

2. If U.S. Court of Appeals rules against Generics, then the FDA will grant their final marketing approvals to the rest of generic players, and end Teva and Ranbaxy’s marketing exclusivity before the 180 days.

Whatever the outcome of the appeal would be, four things are very much evident on June 23, 2006:

1. Simvastatin will lose its patent protection;
2. Generics would enter the U.S. Simvastatin market;
3. Dr. Reddy’s Laboratories will be there as Authorized Generics; or
4. Merck will continue to market its branded Zocor.

But what remains critical is, should the U.S. Court of Appeals rule in the favor of the FDA, delisting may become one more viable strategy for innovators to negate the 180-day exclusivity. However, if the U.S. Court of Appeals rules in favor of Generics … Well!!! That will keep their hope intact with this High Risk, High Returns strategy.

Today’s post comes from Varun Chhonkar, Senior Officer – Patents with J.B. Chemicals & Pharmaceuticals Ltd., Mumbai, India (varun.chhonkar[at]jbcpl.com). © Varun Chhonkar.

Today, the US Supreme Court refused to become involved in a closely watched case that tested the legality of multimillion-dollar settlements between big pharma drug companies and their generic rivals. The issue in that case was whether these big drug companies – such as Schering-Plough, the company involved in the case – should be allowed to pay generic rivals to stay out of the market in order to settle patent challenges. Schering-Plough has repeatedly maintained that these types of patent settlements are legal.

This case provoked a very open and public disagreement between the top two federal anti-trust regulators over whether such settlements should be allowed. In declining to hear the case, the Supreme Court sided with the Justice Department, and rejected the views of the Federal Trade Commission, the antitrust regulator that has criticized such settlements. The FTC maintains that such deals are anti-competitive and hurt consumers by keeping drug prices high. The US solicitor-general, writing for the Justice Department, sent a petition to the court in May saying that the Schering case was not a “good vehicle” to test the underlying legal question over the validity of the deals. (Why not?)

Earlier, the FTC had appealed a deal between Schering-Plough and Upsher-Smith Laboratories Inc. of Minneapolis for a generic alternative of the high blood pressure potassium supplement K-Dur 20. Under federal law, drugmakers are allowed to seek U.S. Food and Drug Administration approval for generic versions of brand-name drugs such as K-Dur before a drug’s patent expires. They must certify that the patent is invalid or will not be infringed by the new generic version. But the high court’s rejection of the appeal came after the FTC and the U.S. Solicitor General’s office, which brings federal government cases to the Supreme Court, openly argued over whether the justices should take this particular case.

U.S. Solicitor General Paul Clement, in a brief requested by the Supreme Court, said the FTC’s appeal “does not present an appropriate opportunity for this court to determine the proper standards for distinguishing legitimate patent settlements.” I still have not quite figured out what he really means.

In a brief filed June 12, the FTC general counsel William Blumenthal said the Solicitor General’s office was wrong to tell the justices to pass over this case. “The U.S. fails to appreciate the extent to which this ruling will place pharmaceutical patent settlements beyond antitrust scrutiny,” Blumenthal said. “The U.S. does not address the urgent practical reasons why immediate review is needed.”

In making its case for a hearing, the FTC alleged that the $60 million agreement, which among other things delayed marketing the generic alternative, violates federal antitrust laws. The FTC filed an administrative complaint in 2001 to stop the deal. An administrative law judge dismissed the matter in 2002, but the FTC overruled the judge in 2003. On appeal, the 11th U.S. Circuit Court of Appeals sided with Schering-Plough and Upsher-Smith, rejecting the FTC’s complaint.

Today, the Supreme Court rejected the FTC’s appeal despite the fact another similar case could be appealed to the Supreme Court regarding an agreement to delay introduction of a generic alternative to Tamoxifen, a breast cancer drug sold by AstraZeneca PLC.

After all the explanations by the Justice Department, why does this still seem like a “pay-off” to me and a dodge by the Court?

Timir Chheda has prepared a clickable list comparing the Model Rules with the PTO Code, which you can find here: http://www.jmls.edu/ripl/vol5/issue3/chheda2.pdf

It’s often important to look at both sets of rules during prosecution.

I have written extensively about the ethical issues that can arise during patent prosecution and litigation. This summer, I’m tackling two topics which, stated simply, are: what patent agents can and can’t do, and subject matter conflicts during patent prosecution. This post relates to one issue concerning the former.

First, some definitions: nonlawyers are people who are neither patent agents, patent lawyers, or lawyers; lawyers are people who are licensed by a state, but not registered with the PTO; patent agents are not lawyers, but are registered with the PTO; and patent lawyers are both licensed with a state and registered with the PTO.

It is clear that a nonlawyer cannot provide, say, an opinion as to whether a party is likely to infringe an issued patent. At the outset, that’s clearly the practice of law, and so you’d have an unauthorized practice issue. In addition, the cases suggest that only attorneys can provide such opinions in a way that reasonable reliance can take place. So, forget about nonlawyers.

Can patent agents provide opinions of counsel? It’s an interesting question. The cases I’ve seen suggest not: that it must be from a lawyer, and best if from a patent lawyer. I find this quite interesting, though, as from a functional perspective it doesn’t make a lot of sense. Here’s why.

It is appropriate for a patent agent to advise a client as to whether proposed claims are patentable. That’s what registration authorizes them to do, and obviously they must do this in order to competently prosecute applications.

In making a patentability determination, the patent agent obviously must rely on patent law principles concerning anticipation and nonobviousness. Anticipation, of course, is the mirror image of infringement. “That which infringes if later anticipates if earlier” is close to some quote I’ve read too many times. So, the patent agent is deemed qualified to advise clients on whether proposed claims are patentable.

Yet, he can’t advise a client as to whether a proposed product infringes a patent, or whether an issued patent is invalid. The law seems settled, in part because the PTO only has authority to authorize patent agents to conduct activities that are reasonably related to prosecution: advising clients whether their products infringe valid patents certainly isn’t necessary for prosecution, at least in the abstract.

But from a functional standpoint, this dichotomy doesn’t make a whole lot of sense. Why shouldn’t a client be allowed to receive and rely upon an opinion of invalidity due to nonobviousness, say, from a highly experienced patent agent? The patent agent is required, for example, to know the law of obviousness and to be able to make judgments on behalf of clients in that regard during prosecution. From the perspective of protection of clients, it doesn’t make a whole lot of sense to deny them this choice.

From a legal perspective, again, though, it does, though. The short answer is that it’s the unauthorized practice of law, and allowing this to happen would encourage UPL. (Indeed, if a lawyer was involved, you could have the lawyer get hit for assisting with UPL; however, obviously, UPL would not be a problem if the patent agent was assisting the lawyer to write an opinion.)

So, where we end up is this interesting odd thing: the purpose for which the advice (obvious, or not, for example) is going to be used determines whether it’s appropriate to have a patent agent do it. If the purpose is patentability, it’s fine; if it’s invalidity, it’s not.

I would love your thoughts and comments. hricik_d@mercer.edu

David Hricik
Mercer Law School

The Law of Karma states that “for every event that occurs, there will follow another event whose existence was caused by the first, and this second event will be pleasant or unpleasant according as its cause was skillful or unskillful.’ Apparently Merck has decided to create some karma of its own, deciding that it has had just about enough from generic manufacturers that want to make generic versions of its branded drugs. In a move that has already shaken up some folks, Merck has aggressively targeted leading generic company Teva Pharmaceuticals by pricing its brand-name cholesterol drug, Zocor, below the generic price for some customers, just prior to it going off-patent, which is Friday, June 23.

What’s at stake is Teva’s profits from its 180-day exclusivity period (gained by being the first to challenge the validity of Merck’s patents) and perhaps industry-wide profits in the future. For a generic, this 180-day window is critical and possibly pivotal in filing strategies since this 180-day window affects the profitability of the generic company to not only develop a drug but to risk the litigation to overturn the patent in question.

What Merck has done is negotiate separate deals with health insurance companies like United Health and Well Point under which patients will be able to get Zocor at a lower cost than the generic version. Although the total number of people involved at present looks to be a fairly modest minority of the total population, the threat in such a move sets a fairly clear precedent.

Under the deal, members of United Health Group Inc. will pay around $10 for a month’s supply of brand name Zocor and $40 for a generic after the drug loses patent protection on Friday. Both Merck and United Health say the arrangement demonstrates how market competition drives down costs, and that’s good for patients.

Of course, that’s not the way you’re going to hear it from Merck. From Merck’s point of view, this is just the competitive market working itself out and that this great for consumers since they will benefit from lower-cost drugs.

Teva Pharmaceuticals said that the United Health Group-Merck contract will not significantly affect the company’s sales since the specific United Health program covers less than 5% of the insured US citizens. The company’s generic Zocor is expected to receive the final approval from the FDA after the expiration of the branded version later this week.

However, George Barrett, CEO and president of Teva North America, said other health plans had spurned Merck’s offer of low-cost Zocor and that his company is considering legal action over the issue. Still, he expressed optimism about the prospects of Teva’s version of Zocor. Litigation is still pending about whether Teva is entitled to the six months of exclusivity and Barrett declined to say whether it would launch its product on Friday.

What will be interesting to watch is whether other large pharmaceutical companies like Pfizer, GlaxoSmithKline, and Novartis follow suit and what the government decides to do about this and when something will be done about it (recall 2006 is an election year).

Consumer advocates typically cheer lower prices but in this instance they worry that a short term benefit for patients will ultimately result in long term problems. They say moves such as Merck’s undermine generic companies’ chances to generate the profits that fuel their ability to conduct research and challenge drug company patents — eventually resulting in fewer cheap medicines.

Generic companies make most of their profits when awarded six months of market exclusivity because a lack of competition means they don’t have to sell their product at an enormous discount to the brand. If the brand chops its price, the generic may be forced to follow suit.

‘Sen. Charles Schumer, D.-N.Y., accused Merck of engaging in predatory pricing and called its actions ”a legal bribe.” He has asked the Federal Trade Commission to investigate the deal between Merck and United Health. ”Merck is taking an end run around the generic drugs laws to make sure there are no generic drugs,” Schumer said.

When the dust settles, it is unlikely that Congress will let the branded pharmaceutical industry choke off the generics through authorized deals and predatory pricing. However, since a solution to this will not happen overnight, what we will likely see is a period of uncertainty and legal wrangling as people debate and lobby for their respective needs and interests and reap the results of the karma they have created.