Drug companies have been besieged by a rising tide of challenges to patents on brand-name drugs in recent years. Indeed, lawsuits challenging patents on branded drugs have risen from 81 in 2005 to more than 230 last year, according to Fortune, which cites The Paragraph Four Report.
Part of the rise in lawsuits is because generic drug makers have expanded their patent challenges--historically focused on blockbuster products--to treatments with relatively small market shares like Solvay Pharmaceuticals' hypertension pill Teveten. That drug brought Solvay just shy of $200 million in annual revenue, giving the company about 1 percent of the market.
Major drug companies like Merck ($MRK) and Pfizer ($PFE) are already challenged to bring enough new products to market to replace those drugs whose patents have expired. With the increase in challenges on patents that have not yet expired, Fortune's piece questions whether government regulators "increasingly fail to strike the right balance between fostering innovation and preserving competition in the pharmaceutical business."
Matthew Higgins, a professor at the Georgia Institute of Technology, tells the magazine that a drugmaker that spends $5 million on litigation to challenge a patent can gain $60 million in additional revenue during the first six months after its generic drug goes on the market if the lawsuit is successful. The story also notes generic firms are successful in about 70 percent of cases.
There are concerns that there are not enough legal protections for companies that focus investments on developing new drugs. "It's not like these companies are patent trolls," Yali Friedman, the founder of DrugPatentWatch.com, tells Fortune. "They are operating entities that spend hundreds of millions of dollars developing new drugs."
- check out the report from Fortune