A Court Case To Watch

With the best short form description yet of the negotiating magic that Apotex managed: Generic of Plavix Is Blocked

[T]he situation also seems to suggest that Bristol-Myers and Sanofi, a French company, should never have entered negotiations they began last year with Apotex, which created the opening that has allowed the generic maker to ship its product for more than three weeks.

The patent covering Plavix gives market exclusivity to Bristol-Myers and Sanofi until the end of 2011. Apotex began challenging that patent in 2002, arguing that it was not valid. The case has been pending in court ever since and originally was set to go to trial in June.

But the dynamic changed earlier this year, after the Food and Drug Administration approved Apotex’s version of the drug. Despite that approval, under federal law Apotex would have run the risk of paying financial damages amounting to three times the generic’s total sales, if it brought its product to market but then eventually lost the patent case.

Bristol-Myers and Sanofi began negotiations with Mr. Sherman to settle the dispute. Under an agreement reached in March, the companies granted Apotex exclusive generic rights for a six-month period that was to begin in September 2011.

That settlement deal was rejected by the Federal Trade Commission and state attorneys general who viewed it as restricting competition.

It was during efforts to renegotiate the deal that Bristol-Myers and Sanofi agreed to provisions that made it easier for Apotex to market its generic immediately if the revised agreement was also turned down. Those concessions included a waiver by the big companies of their rights to collect triple Apotex’s sales of the generic, as well as an agreement that they would not go to court to challenge distribution of the Apotex product until five days after it began shipment.

After the second agreement was also rejected, Mr. Sherman’s company began shipping its product to the United States on Aug. 8.

Under terms of the agreement Mr. Sherman negotiated, Apotex is liable to repay Bristol-Myers and Sanofi for only half of the generic drug’s sales should Apotex lose at the patent trial. The negotiations, and accusations by Mr. Sherman that the companies entered a secret side deal, are the subject of a Justice Department investigation.