The Plavix Case
A patent is essentially a limited monopoly whereby the patent holder is granted the exclusive right to make, use, and sell the patented innovation for a limited period of time. Granting exclusive rights to the inventor is intended to encourage the investment of time and resources into the development of new and useful discoveries. Baron noted that “Patents are the driving force in the pharmaceutical industry, providing strong incentives for research, development, and testing of new chemical entities.”
A patent on a new drug and approval for marketing by the Food and Drug Administration gives the innovating company a monopoly on the sale of the drug. A monopoly means that the company appropriates or increases its returns by charging a high price for the drug. At the expiration of a patent, generic versions of the once patented drug can be then marketed. This significantly drives the price down and increases the use of the drug.
In the United States, patent infringement litigation has undergone a substantial increase the last decade. In addition, it is not uncommon to see significant damages awarded to owners of patents for infringement by competitors. One case is that of the drug Plavix, with the patent holders Bristol-Myers Squibb and Sanofi-Aventis and competitor Apotex.
Bristol-Myers Squibb and Sanofi-Aventis seek a settlement rather than let the patent infringement case go to trial because Apotex had communicated that it expected imminently FDA approval. Bristol-Myers knew also that the FTC had expressed its opposition to agreements that restricted the introduction of generic drugs which could be anti-competitive. With this, Bristol-Myers hoped that it could pursue a settlement with Apotex subjected to FTC approval, delay the launch of Apotex generic drug until its patent expire, which would ensure a continued monopoly until expiration. It