Lipitor Deal, Put-Option Gifts, Mirae Asset in India: Timshel

[Metropolitanjury]

Consumers in the U.S. drug market need to become experts in probability theory to know whether their interests are protected.
A case in point is last week's Lipitor settlement between Pfizer Inc. and India's Ranbaxy Laboratories Ltd.

Pfizer's key U.S. patent on atorvastatin, the active ingredient of its cholesterol pill Lipitor, the world's top- selling drug, expires in March 2010.
Indian generic-drug maker Ranbaxy, which wanted to sell a copy in the U.S. market immediately after the patent expired, has now agreed to wait an additional 20 months.

In exchange for the opportunity forgone by Ranbaxy, Pfizer will reward it by withdrawing lawsuits that it has brought on since 2003 to block the generic threat to its patent.

Not just that. As the first generic challenger, Ranbaxy will enjoy a six-month period, starting in November 2011, in which the Indian company's version of Lipitor -- and of its sister drug, Caduet -- will be the only ones in the market.
In the past, brand-name pharmaceutical companies have paid generic-drug producers to prevent them from entering the market even as the latter agreed to retain their 180-day exclusivity -- so no one else could enter, either.

Back in 2000, the U.S. Federal Trade Commission found the practice anti-competitive and put the drug industry ``on notice.''
Game of Chance

The Lipitor accord is different. For one, Pfizer isn't paying Ranbaxy to sit out.
Besides, Pfizer protects Lipitor, which had worldwide sales of $12.7 billion last year, with a formidable amount of intellectual property, including a patent on the process of making atorvastatin that expires only in 2016.
Pfizer sued Ranbaxy in March this year to prevent what it sees as infringement of its process knowledge.

Whether patients will be better or worse off under the settlement depends on the probability one assigns to different legal outcomes.

The typical 30 percent to 40 percent price erosion that occurs in the first 180 days will now take place 20 months later than consumers anticipate in their best-case scenario, but five years earlier than in their worst-case one.
Naturally, both Ranbaxy and Pfizer are saying that their handshake is in consumers' interests.

By Ms.Bobby Aanand, Metropolitan Jury.