Two firms’ spat shows flaws in drug reg­u­la­tion

Los Angeles Times - - BUSINESS - MICHAEL HILTZIK

Law­suits in the phar­ma­ceu­ti­cal in­dus­try are as com­mon as TV ads pro­mot­ing won­der drugs, never mind the hor­rific side ef­fects rel­e­gated to a breath­less, fasttalk­ing voice-over at the end.

Typ­i­cally, how­ever, the plain­tiffs in th­ese law­suits ac­cuse the de­fen­dants of patent in­fringe­ment. (The de­fen­dants typ­i­cally strike back by claim­ing the patents should never have been is­sued in the first place.)

So what to make of the law­suit filed last week by the big drug com­pany Al­ler­gan against the San Diego drug “com­pound­ing” com­pany Im­primis? Al­ler­gan doesn’t ac­cuse Im­primis of tread­ing on any of its patents. It ac­knowl­edges that, to the ex­tent Im­primis may be do­ing some­thing wrong, its ac­tions are gov­erned by the Food and Drug Ad­min­is­tra­tion — which al­ready has taken a hand­ful of reg­u­la­tory ini­tia­tives against the com­pany.

In­stead, Al­ler­gan is try­ing to close off a com­pet­i­tive strat­egy that could cost it cus­tomers and money over time. The com­pany doesn’t think the FDA is mov­ing fast enough, so it’s tak­ing mat­ters into its own hands. (Al­ler­gan filed a sec­ond, al­most iden­ti­cal law­suit against two re­lated Florida com­pa­nies it says is be­hav­ing just like Im­primis.)

“They view us as a se­ri­ous com­pet­i­tive threat,” Im­primis Chief Ex­ec­u­tive Mark L. Baum told me. “This law­suit ex­ists be­cause we’re hav­ing suc­cess.” Al­ler­gan de­clined to an­swer ques­tions about the case.

Baum may be right — ex­cept that there’s rea­son to ques­tion whether Im­primis it­self is en­tirely com­ply­ing with the law. Baum doesn’t deny that his com­pany is mar­ket­ing drugs with­out ob­tain­ing FDA ap­proval for them; he just says FDA ap­proval isn’t nec­es­sary for its for­mu­la­tions.

Not ev­ery­one agrees. “If we al­low com­pa­nies to do what they’re do­ing on a large scale,” says Michael Carome, di­rec­tor of the Health Re­search Group at the con­sumer or­ga­ni­za­tion Pub­lic Ci­ti­zen, “that could un­der­mine the mar­ket for FDA-ap­proved drugs. That would not be good pub­lic pol­icy.”

The case un­der­scores the ridicu­lous com­plex­ity of U.S. phar­ma­ceu­ti­cal reg­u­la­tions, which are full of loop­holes and worm­holes that can be rou­tinely ex­ploited by nim­ble drug com­pa­nies — gen­er­ally to the dis­ad­van­tage of Amer­i­can pa­tients. There’s lit­tle ques­tion that Im­primis is ex­ploit­ing one such reg­u­la­tory gap to build its busi­ness. But there’s

lit­tle ques­tion that Al­ler­gan has done so it­self. That’s not to men­tion its 2014 merger with Ac­tavis, which trans­formed Al­ler­gan from an Irvine drug com­pany into an Ir­ish cor­po­ra­tion in a taxsav­ing trans­ac­tion known as an in­ver­sion. Ac­tavis had been a New Jer­sey com­pany un­til un­der­tak­ing its own in­ver­sion by merg­ing with an Ir­ish firm in 2013.

Al­ler­gan’s law­suit in­volves an ex­emp­tion in drug reg­u­la­tions for com­pound­ing drug firms. Th­ese typ­i­cally are small dis­trib­u­tors and man­u­fac­tur­ers that are per­mit­ted to mar­ket drugs un­der two cir­cum­stances. One is when a for­mu­la­tion in­clud­ing a generic drug re­quires a mi­nor tweak to serve a tiny num­ber of pa­tients—those who can’t swal­low a pill but can take a liq­uid, for ex­am­ple, or those who are al­ler­gic to a cer­tain in­ac­tive in­gre­di­ent. In those cases, physi­cians have to write per­son­al­ized pre­scrip­tions for in­di­vid­ual pa­tients, cov­er­ing the change. Com­pound­ing firms are per­mit­ted to make and dis­trib­ute drugs in bulk, rather than in­di­vid­u­ally, only when they’re de­clared by the FDA to be in a short­age or serv­ing a par­tic­u­lar clin­i­cal need.

Al­ler­gan con­tends that Im­primis is squeez­ing th­ese ex­emp­tions un­til they burst at the seams. “Im­primis is sim­ply cre­at­ing, patent­ing, trade­mark­ing, mar­ket­ing and sell­ing stan­dard­ized, mass-man­u­fac­tured un­ap­proved new drugs,” Al­ler­gan charges, “un­der the false guise of ‘com­pound­ing.’ ”

Im­primis’ chief mar­ket is for oph­thalmic drugs to treat glau­coma and mac­u­lar de­gen­er­a­tion. Baum says it has boiled down the per­son­al­ized vari­a­tions of its drugs into three or four for­mu­las that can meet the cus­tom needs of mil­lions of pa­tients. For that, he says, “we don’t need to go through the FDA.”

Al­ler­gan says it’s merely look­ing out for physi­cians and pa­tients. Im­primis “puts pa­tients at risk by ex­pos­ing them to drugs and com­bi­na­tions of drugs that have not been shown to be safe or ef­fec­tive,” it says in its law­suit. But there’s a bit more to it than that. Im­primis is about to bring out a drug aimed at the mar­ket for dry-eye re­lief that could be a di­rect com­peti­tor of Al­ler­gan’s block­buster pre­scrip­tion eye-drop Res­ta­sis, which treats dry eyes. With $1.5 bil­lion in world­wide sales last year, Res­ta­sis is Al­ler­gan’s hottest prod­uct next to only Bo­tox, which brought in $2.8 bil­lion.

In­deed, the suit claims that Im­primis is com­pet­ing un­fairly with Al­ler­gan by cir­cum­vent­ing the FDA, and it seems ev­i­dent that its main con­cern is com­pe­ti­tion with Res­ta­sis.

Nor would this be the only move Al­ler­gan has made to pro­tect its Res­ta­sis fran­chise, which will run out in 2024 with its patent ex­pi­ra­tion. The day af­ter it filed the Im­primis law­suit, Al­ler­gan an­nounced that it had trans­ferred the Res­ta­sis patent to the tiny St. Regis Mo­hawk In­dian tribe of up­state New York, which promptly trans­ferred a li­cense for the drug back to Al­ler­gan.

Un­der the deal, the tribe will get as much as $15 mil­lion a year in roy­al­ties, while Al­ler­gan will re­tain the rest of that $1.5 bil­lion in in­come. More im­por­tant, as an en­tity with sov­er­eign im­mu­nity the tribe can move to quash chal­lenges to the Res­ta­sis patent filed by the drug com­pany My­lan and two other firms, though not a sep­a­rate chal­lenge filed by the U.S. patent of­fice. It’s the first such ma­neu­ver known in the phar­ma­ceu­ti­cal in­dus­try, ex­perts say, though it doesn’t ap­pear to be il­le­gal.

Im­primis hasn’t for­mally re­sponded to the Al­ler­gan law­suit, but the two com­pa­nies have been trad­ing slurs. Al­ler­gan in its law­suit lists a hand­ful of re­cent FDA ac­tions against Im­primis, in­clud­ing ci­ta­tions for un­san­i­tary con­di­tions at two of its man­u­fac­tur­ing fa­cil­i­ties. (Im­primis says it didn’t own one fa­cil­ity when the flaws were dis­cov­ered and that other de­fi­cien­cies have been re­solved to the FDA’s sat­is­fac­tion.) The FDA also in­ves­ti­gated two mishaps, in­clud­ing one lead­ing to a pa­tient’s death, in­volv­ing an Im­primis prod­uct; the com­pany says physi­cians wrongly ad­min­is­tered the prod­uct.

Im­primis, for its part, has dredged up, among other things, Al­ler­gan’s in­ver­sion tax ma­neu­vers; a Fed­eral Trade Com­mis­sion al­le­ga­tion against Al­ler­gan and a for­mer sub­sidiary that they en­tered a “pay-for-de­lay” scheme to stave off com­pe­ti­tion from a gener­ics man­u­fac­turer against a branded drug (the case is pend­ing); and the In­dian tribe stunt.

“Al­ler­gan’s il­le­gal, abu­sive, and an­ti­com­pet­i­tive ac­tions aimed at main­tain­ing its ob­scenely high drug prices,” Baum said in a news re­lease, “re­veal its true so­cially un­con­scious val­ues.”

Joel Mo­rillo Pas­sage Pro­duc­tions

IM­PRIMIS, above, a drug com­pound­ing com­pany in San Diego, is about to bring out a drug aimed at the mar­ket for dry-eye re­lief that could be a di­rect com­peti­tor of Irvine-based Al­ler­gan’s block­buster pre­scrip­tion eye­drop Res­ta­sis.

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