Under the deal, Ranbaxy will drop all legal challenge to Pfizer's patent on Lipitor in these markets, which expire between 2011 and 2018. In return, India's largest pharmaceutical company will get 180-day exclusive rights to sell a generic version of Lipitor in the US sometime in 2011.
Unlike most other out-of-court settlements, Ranbaxy, the patent challenger, will not get any compensation in cash. Still, it could make serious money from the exclusive selling rights.
In the past, low-priced generic versions have captured 50 per cent of the market once a drug goes off patent, though prices crash over 90 per cent. As Lipitor sales totalled over $8 billion in the US in 2007, Ranbaxy could make up to $200 million in the 180-day period.
Ranbaxy had burst on the global pharmaceutical market five years ago when it had challenged some of the Lipitor patents held by Pfizer, the world's largest drug maker, on grounds that these were not substantial improvements over the original patent, which expired in 2011. These patents, it had argued, were obtained just to keep cheaper generic versions of the drug out of the market.
The law suits were seen as a daring onslaught by an Indian generic company on Big Pharma, the collective name given to large trans-national drug makers. Since then, some courts have given a favourable decision to Ranbaxy, while a few have ruled in favour of Pfizer.
This is the fourth out-of-court settlement of a patent dispute by Ranbaxy in the last one year. It had earlier struck similar deals with AstraZeneca (over Nexium), Astellas Boehringer (Flomax) and GlaxoSmithKline (Valtrex).
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Lipitor was the only significant patent challenge the company was fighting in the courts. "The company is now risk-free," Ranbaxy CEO Malvinder Mohan Singh said (see interview).
Such challenges involve huge fees to patent attorneys and the outcome is unpredictable. Industry experts said these settlements are attempts by the current management to de-risk the business before the company is taken over by Daiichi-Sankyo of Japan, though said the buyout had nothing to do with it.
"This was expected since Daiichi-Sankyo is an innovator company and respects intellectual property. It will not like to continue litigation with another innovator company," said Sujay Shetty, associate director, PricewaterhouseCoopers.
According to the agreement, Ranbaxy will be free to sell generic Lipitor (atorvastatin) in Canada, Belgium, The Netherlands, Germany, Sweden, Italy and Australia, apart from the US. Similar disputes in Malaysia, Brunei, Peru and Vietnam have also been settled. The company is expected to start off with Canada later this year.
The settlement also resolves additional patent litigation between the companies involving Accupril (a hypertension drug) in the US and Viagra in Ecuador.
The two companies will, however, continue litigation over Lipitor in five countries