There are more generic manufacturers than ever, especially from emerging markets, says Andrew Shaughnessy in Lexpert

March 01, 2008

High demand, high stakes, high fees, high volume and minimal incentive to settle are some of the reasons that generic drug litigation has gained steam in recent years. But a bump in the tracks may threaten to throw the whole train off course.

Generic drug litigation constitutes at least 60% of all patent cases and consumes at least 75% of the legal fees attributed to them.

Not so long ago, 17 of the 20 motions on the Federal Court List in Toronto were pharmaceutical cases.

“There are more generic manufacturers than ever, especially from emerging markets,” says Andrew Shaughnessy. “And the nine little sections that make up the Patent Medicines (Notice of Compliance) Regulations (also known as PMNOC, which govern generic drug litigation in Canada) invite an intense focus because they are the gatekeepers protecting markets worth hundreds of millions of dollars.”

With costs of $100 million to $1 billion to bring a drug to market, brand name drug makers (innovators) have a huge investment to recoup. But generic companies do not have to make that investment. They can piggy-back on the innovators’ successful drugs and obtain regulatory approval for the safety and efficacy of their own versions, while the innovators’ patents are still extant. They can then either wait for the patent to expire and market their own drug immediately, or use the PMNOC procedure in an attempt to get to market before the innovator’s patents expire.

Also driving the litigation train is the fact that PMNOC, the generic drug opposition procedure formulated in 1993, offers little incentive to settle. Because the system creates a stay on the introduction of the generic drug during the two years it allows a case to get to trial, it is almost always in the interest of the brands to maintain the monopoly during the entire period.

“Of the 90 or so cases filed annually in recent years, just 15 or 20 settle,” Andrew says.

What generic drug litigation offers, then, is high demand, high stakes, high fees, leveraged billing, deep pocketed clients, high volume, minimal incentive to settle and a regulatory framework mandating that cases turn over within two years.

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