A small Ontario drug firm has been forced to shut down production and
lay off most of its staff after pharmaceutical giant Bristol-Myers
Squibb succeeded in a controversial court case that removed its rival's
ovarian and breast cancer drug from the market.
Biolyse Pharma's product, Paclitaxel, would have offered significant
competition to Bristol-Myers' lucrative anti-cancer drug, Taxol. Both
drugs have the same active ingredient, paclitaxel.
"We did our last production and now we're wondering whether we should
keep going," said Biolyse president Brigitte Kiecken. "We don't know
how
we're going to manage."
The story of what happened to Biolyse, of St. Catharines, Ont., is a
complex tale that provides insight into the high stakes and aggressively
litigious world of pharmaceutical manufacturing.
It also highlights an essential difference between the Canadian and
American approaches toward drug patents.
In the U.S., federal authorities have launched a campaign to prevent
pharmaceutical companies from illegally blocking the introduction of
competing generic drugs by securing new and frivolous patents on older
products, a tactic known as "evergreening."
In Canada, however, the government has largely left generic firms to
fight their own patent battles.
"The Americans have provided remedies to the situation, but the same
actions are being largely ignored in Canada," charged Liberal MP Dan
McTeague, vice-chair of the Commons industry committee that will begin
in June an examination of evergreening in Canada.
In the U.S., the Federal Trade Commission has pursued legal action
against a handful of drug companies. Bristol-Myers has been sanctioned
for attempting to obstruct the entry of low price generic alternatives
to three of its products, including Taxol.
As part of a settlement with the trade commission finalized last week,
Bristol agreed to stop trying to enforce most, if not all, of its
existing Taxol patents. The trade commission alleged that those patents
would "almost certainly be invalid" since most of the science behind
the
development of the drug was done by the National Cancer Institute, a
publicly funded agency.
In Canada, however, neither the federal Competition Bureau nor Health
Canada has challenged Bristol-Myers' Taxol patents.
Bristol-Myers continues to hold at least two valid Canadian patents on
Taxol -- patents that were used as the basis for the recent court action
that has Biolyse Pharma on the verge of collapse.
Biolyse had been given federal government approval to sell its
anti-cancer drug, Paclitaxel, in September, 2001.
Paclitaxel was an important entry onto the Canadian health care scene
because it offered a cheaper alternative to Bristol-Myers' anti-cancer
drug, Taxol, used to treat breast cancer, ovarian lung cancers and
AIDS-related Kaposi sarcoma.
The British Columbia Cancer Agency was quick to take advantage of the
introduction of Paclitaxel, signing a two-year $2.5-million contract
with Biolyse. The agency calculated that it would save more than $1.3
million annually by using Paclitaxel, which offered similar therapeutic
benefits for about one-third less than Taxol. (An individual's full
course of treatment with Taxol can cost more than $14,000.)
Biolyse appeared to be on the verge of a market breakthrough: it was in
the process of negotiating deals with other provinces and cancer
agencies eager to trim drug costs.
Then Bristol-Myers launched an unusual court action.
It asked the Federal Court of Canada in November 2002, to strike down
Health Minister Anne McLellan's decision to approve Paclitaxel for sale.
Lawyers for the pharmaceutical company argued that the minister failed
to comply with her government's own amended drug approval regulations.
The regulations were changed in 1999 in an attempt to bolster patent
protection for brand-name drug companies in Canada.
The amendments were intended to ensure that brand-name drug companies
were informed when a generic competitor was trying to enter the market
so that they could defend their patents in court. Its introduction
resulted from a case in which a generic company tried to evade such
notification by comparing its new drug to an existing generic product
rather than the brand-name one.
Lawyers for Bristol-Myers claimed that they should have been notified
that Paclitaxel was about to enter the market since Biolyse had made
reference to Taxol in its new drug submission.
Biolyse lawyers argued that the company had done nothing wrong since it
had strictly followed instructions from Health Canada.
The case had more than a decade of background.
Biolyse scientists discovered in the late 1980s that paclitaxel -- a
naturally occurring anti-cancer agent -- could be derived from the twigs
and needles of the yew bush. Until then, the Pacific yew tree had been
the only source of the material, which had first been discovered by the
taxpayer-funded U.S. cancer institute.
Biolyse focused its attention on developing a paclitaxel based
anti-cancer drug. The company twice asked Health Canada whether its
product would be considered an entirely new drug or a generic version of
the existing Taxol. (New drugs have to be put through lengthy and costly
clinical trials, while generic drugs often have to fight patent battles
in court against brand-name drug firms.)
Health Canada twice informed Biolyse that its product would be treated
as an entirely new drug since it was being produced from "a new
botanical source."
In Federal Court, Biolyse's lawyers argued that since Paclitaxel was
being treated as a new product, it did not have to inform Bristol of its
application for federal approval -- a provision normally applied only to
generic products.
Federal Court of Canada judges, however, disagreed.
In November, Mr. Justice Edmond Blanchard ruled that Health Canada erred
by granting Biolyse the right to sell its drug. He said Biolyse should
have notified Bristol-Myers since its drug contains the same active
ingredient, paclitaxel, as Taxol.
Whether the Taxol patents were valid was not a question argued in
Federal Court.
Biolyse, joined by Health Canada, appealed that decision, but lost in a
ruling issued earlier this month.
Biolyse has since been forced to shut down its production plant while it
seeks overseas markets to replace its lost Canadian sales. "It's putting
the 12 years of research we've put into this product into jeopardy,"
said Ms. Kiecken, who's considering an appeal to the Supreme Court of
Canada.
"We followed the rules and acquired our government approval; we were
selling our product on the Canadian market. Now we have a full operating
plant here that has no meaning."
What makes this case even more remarkable is that Bristol-Myers has so
far succeeded in defending its Taxol patent rights in Canada while at
the same time being sanctioned and fined for similar action in the U.S.
"What's ironic here is that when they did these types of activities in
the U.S., they were slapped down by the Federal Trade Commission," said
Jim Keon, president of the Canadian Generic Pharmaceutical Association.
"Yet the activity here so far has been entirely successful."
In the U.S., Bristol-Myers recently reached a settlement with the U.S.
Federal Trade Commission after it charged the drug manufacturer with "a
series of unlawful acts to delay competition from generic versions of
three of its major drug products." One of those products was Taxol.
According to the trade commission complaint filed in the case,
researchers at the National Cancer Institute discovered and developed
paclitaxel as an anti-cancer drug in the 1980s. The U.S. government
spent $32 million to design techniques to extract paclitaxel from yew
tree bark and to create a drug that could be used in clinical cancer
treatments.
In 1991, the cancer institute signed a deal with Bristol-Myers. The drug
company would have exclusive use of the institute's research in return
for developing a paclitaxel-based product for cancer treatment.
On July 29, 1991, a subcommittee of the U.S. House of Representatives
held a hearing to investigate the deal between Bristol and the cancer
institute. The committee expressed concern that the deal offered no
protection for cancer patients against future price gouging. In
response, a spokesman for Bristol-Myers said Taxol "has no patent
protection. Thus, the degree of market protection typically available to
new pharmaceutical products is lacking in this case."
Bristol-Myers subsequently sought and won federal approval to market
Taxol from the U.S. Food and Drug Administration in December, 1992.
Under U.S. law, that FDA approval gave Bristol-Myers the exclusive right
to market its paclitaxel-based product for five years.
Generic competitors were supposed to be able to enter the market when
that period expired in December, 1997.
In the interim, however, Bristol-Myers went to the U.S. Patent and
Trademark Office to secure patents on Taxol, which had become a highly
profitable drug for the company. (Sales would eventually reach $1
billion a year.)
The U.S. trade commission alleged Bristol-Myers made "false and
misleading material statements" to the patent office and failed to
disclose information about the cancer institute's role in the
development of paclitaxel and its method of delivery.
Those misrepresentations, the commission alleged, allowed Bristol-Myers
to secure two patents that covered the methods of administering Taxol.
Bristol-Myers, in turn, took those patents to the FDA for listing in its
Orange Book -- the annual compendium of approved drugs and
pharmaceuticals. The FDA does not assess the merits of the patents
listed in the Orange Book, which plays a critical role in the market
entry of generic products.
That Orange Book listing, the trade commission alleged, allowed
Bristol-Myers to repeatedly invoke an automatic 30-month legal stay
against generic drug manufacturers as they sought to introduce their own
paclitaxel products beginning in July, 1997.
That stay effectively frustrated generic competition until a patent
infringement case could be heard.
In March, 2000, U.S. District Court found that Bristol-Myers' two
patents were mostly invalid. Then, the trade commission alleged,
Bristol-Myers "improperly" listed a third patent in the Orange Book
in
an attempt to again trigger the 30-month stay provision offered by U.S.
law.
Generic manufacturers in the U.S. eventually overcame what the trade
commission called Bristol-Myers' "anti-competitive efforts" in October,
2000.
Within a year of generic paclitaxel coming onto the market, Taxol's U.S.
sales tumbled from $1.1 billion to $545 million.
Bristol-Myers has since reached a settlement with the U.S. trade
commission that bars the company from trying to enforce most, if not
all, of the existing U.S. patents it now holds on Taxol.
Based on the same set of facts, 50 states sued Bristol-Myers for damages
in a federal antitrust action. Although Bristol disputes the facts of
the Taxol case, it settled with the attorneys general and other
claimants this week for $135 million in damages.
The case made headlines in the U.S. since it represented a significant
victory for health care consumers, who overpaid millions of dollars for
Taxol in the late 1990s.
"The case shows we will hold drug companies accountable when they
attempt to unlawfully block generic competitors from the marketplace,"
New York Attorney General Eliot Spitzer declared Thursday in a release.
In Canada, however, Bristol-Myers still holds at least two patents on
Taxol -- patents that were used as the basis for its court action
against Biolyse.
One of those patents -- 2,086,874 -- is substantially the same as the
patent -- 5,641,803 -- that was deemed invalid in the U.S. The patent,
which covers methods for the administration of Taxol, does not expire in
Canada until 2013. Another Taxol patent, which covers the solvent that
prevents Taxol from degrading in storage, does not expire until 2014.
Industry Canada's Competition Bureau has for two years received
complaints from the Canadian Generic Pharmaceutical Association about
the repeated abuse of patents by brand-name companies to block generic
drugs and frustrate competition.
But a spokesman for the bureau said the investigation of such action
lies outside its mandate. Chris Busuttil said Health Minister Anne
McLellan has the power to police the patent list and prevent the
addition of superfluous or irrelevant patents.
A Health Canada official said the department can refuse to list patents
that relate to the manufacturing process of a drug. But Anne Bowes, a
manager in the Office of Patented Medicines and Liaison, conceded that
"it is really up to the generic company" to test the validity of a
listed patent in Canada.
The generic pharmaceutical association's Mr. Keon said the result of the
Canadian system has been that neither the competition bureau nor Health
Canada does anything to eliminate patent abuse.
"In the U.S., the Federal Trade Commission is very concerned about these
tactics," he said, "but in Canada, federal authorities don't want
to
look at it."
Indeed, Liberal MP Dan McTeague said the Biolyse case highlights his
government's refusal to confront the practice of patent abuse. "It's a
practice that is undermining our health care system," he said.
Mr. McTeague plans to raise the Biolyse case at this week's Liberal
caucus meeting and in June when the industry committee examines patent
abuse.
"You can't tell me that in the case of Paclitaxel, where a company has
found a different way of doing something and has followed in good faith
the dictates of Health Canada, that it should suddenly find itself
unable to provide people an affordable product.... You don't play games
with people who are sick."
A spokesman for Bristol-Myers said he could not discuss the specifics of
the company's legal case against Biolyse since it could go to an appeals
court.
Rob Hutchison, however, said Bristol-Myers has always acted within the
law. Bristol-Myers, he added, decided to pay a total of $670 million in
damages related to Taxol and the anti-anxiety drug, BuSpar, in order to
put the matter behind the company.
"Our actions in defending Taxol and BuSpar were proper and lawful,"
he
said. "The company agreed to accept these terms as part of a settlement
of litigation with many different parties."
The settlements, he said, will allow Bristol-Myers to continue to focus
on discovering and developing new medicines.
In St. Catharines, Biolyse Pharma laid off 14 chemists, office workers
and labourers this week and cancelled the contracts of more than 100
temporary workers who collect yew bush clippings. "We're a one product
company," said Ms. Kiecken, who called the conduct of Bristol in defence
of its patents "very aggressive."
"These patents are so questionable," she said. "I think they're
just
using the court system to keep us off the market."