Prescription for a ‘recession-proof’ practice

By Maria Kantzavelos

Attorney K. Shannon Mrksich likes to say she is well versed in a form of iambic pentameter, but she’s not talking about the style, structure and rhythm of a William Shakespeare sonnet, or of English Romantic poet John Keats’ ”Ode on a Grecian Urn.”

As a patent lawyer armed with a doctorate in chemistry, Mrksich is referring to the tongue-twisting language of chemical structures — the scientific nomenclature for the molecules in pharmaceuticals.

Take, for instance, the anti-cholesterol drug marketed by Pfizer under the trade name Lipitor, which reportedly generated $12.7 billion in global sales last year, making it the world’s best-selling drug.

With a cadence all its own, Mrksich’s recitation of the lengthy, official chemical name for atorvastatin — the active pharmaceutical ingredient in the blockbuster drug — flows as if she were reading it from a stanza that might look something like this:

Two four fluoro phenyl
beta delta dihydroxy
five one methyl ethyl three phenyl
four phenyl amino carbonyl
pyrrole heptanoic acid.

”Any chemical structure can be reduced to a real long name like that. There are these crazy words that, to a normal non-chemist, you have no clue how to pronounce them,” Mrksich said. ”To deal with experts, to deal with inventors, I don’t think you have credibility unless you speak in, what I call, chemical iambic pentameter.”

Well beyond her grasp of ”chemicalese” — as others might call it — Mrksich acknowledged that she could easily visualize the molecular structure at hand.

”Given five minutes, I could draw it out for you,” she said. ”But more than that, I’m going to know the class of compounds it is, and what are the challenges with making molecules like that.”

Mrksich, a partner in Brinks Hofer Gilson & Lione, is among the Chicago lawyers whose backgrounds in organic chemistry, medicinal chemistry, and related sciences are at play in a law practice that focuses largely on finding ways to challenge the validity of patents covering brand name, chemically derived drugs, a niche that has undergone significant growth in recent years.

As a graying Baby Boomer generation adds more people to the mix of Americans living with chronic diseases, heightening the demand for low-priced prescription drugs, the prognosis is looking good for lawyers whose practices focus on the intellectual property matters associated with a growing number of quests to bring generic drug products to the U.S. market.

‘An exponential trend’

Robert F. Green, a member of the Chicago office of IP boutique Leydig, Voit & Mayer, said he has witnessed an explosion in the generic pharmaceutical IP practice area since 1986, when he handled his first such case.

It was a lawsuit brought by pharmaceutical giant Eli Lilly & Company against his client, a generic drug company accused of infringing on a patent directed to the injectable form of its chemotherapeutic drug Oncovin. Within a year, Green said, Eli Lilly dropped the lawsuit, and the first generic version of the drug used in cancer chemotherapy — referred to by its chemical name as vincristine sulfate — entered the market.

”At that time, there were very few challenges that were then pending — less than half a dozen,” Green recalled. ”The trend has been exponential since then. Every week, on average, there are five or six new cases filed where generic drug companies are attempting to market a generic version of a brand pharmaceutical, resulting in litigation by pharmaceutical companies against the generics.”

Mrksich turned to law 15 years ago, starting out as a patent agent for a Washington, D.C. firm by day and attending law school by night.

She joined the Chicago office of Brinks in 1997 and, up until two years ago, all of her pharmaceutical clients were brand name manufacturers.

As drug giants like Eli Lilly and Pfizer began to grow their in-house IP groups and turned more to East Coast firms for litigation services, she said, law firms like Brinks began to reevaluate their positions on the pharmaceutical IP battlefield.

”We sat down and said, ‘Where can we get a good client base from?’ And generic pharmaceuticals is what we decided we wanted,” Mrksich said. ”Our firm made a concerted effort to develop generic work, which is much more litigation, where you’re trying to knock out the patent portfolios that, previously, we had been writing. I literally switched sides. Before, I used to try to get patents. Now, I spend my time trying to destroy patents.”

The switch has been keeping Mrksich, and other lawyers like her, busier than ever, as brand-name drug makers battle fierce competition from a growing generics industry — with players also emerging from countries such as India, China, and Canada.

”There’s a lot of money to be had in this,” Mrksich said. ”A lot of these generic companies are seeing massive growth. This isn’t a stagnant industry. The amount of competition has really shot up. ”Before, you had [generic drug companies such as] Teva, Sandoz, Mylan, Dr. Reddy, Ranbaxy, Barr. By all means, that’s not the entire playing field. Additional companies have sprung up all over the place,” Mrksich said. ”In the last few years, you just see an increasing number of generic players in the market, and many more fights over drugs.”

Attorney Robert M. Gould, a former research scientist in immunology with a doctorate in biochemistry, said he saw an opportunity when he decided to make the move from Bell, Boyd & Lloyd to the Chicago office of Duane Morris in February, joining other partners in developing a law practice focused primarily on patent opinion work and litigation on behalf of generic drug companies.

He said the newly created sub-group within the IP department of Duane Morris’ Chicago office took off fast.

”The industry is just really looking for people to get work done. We’ve just been jammed,” Gould said. ”We’ve got everyone in our practice group working on opinions, and we just can’t crank them out fast enough.”

Attorney Paul Molino, a former pharmacist, is one of three former partners in the law firm previously known as Lord, Bissell & Brook who founded Chicago-based Rakoczy Molino Mazzochi Siwik, a spin-off firm that opened in 2004.

Molino said the boutique has grown to more than 25 attorneys who focus almost exclusively on the representation of generic drug companies in patent infringement litigation, patent counseling, and regulatory work.

”A lot of the products we work on, the single products themselves, have hundreds and hundreds of millions of dollars in sales annually,” Molino said. ”It’s big business. The innovator companies are very aggressive in trying to protect their intellectual property rights. And the generic companies, on the same hand, are very aggressive in trying to design around these patents in order to get their products on the market sooner rather than later.”

For lawyers like Molino, the goal is to assist companies in the process of getting a generic drug approved by the U.S. Food and Drug Administration — which requires that generics be ”bioequivalent” to the brand products, but their makers don’t have to perform large, expensive clinical trials — and taking the product to market prior to the expiration of certain patents on the brand pharmaceutical.

Litigation between generic companies and brand pharmaceutical manufacturers, Molino said, has been rising steadily for years.

”Let’s face it — when you’re an innovator company and you’ve got a product making $750 million a year, you’re going to do anything to protect that product,” Molino said.

”What I’m noticing is a lot of firms realizing how big, busy and lucrative this practice is, and they’re attempting to break into it,” Molino said. ”There are a lot of large, general practice firms that would love to get this type of business. But the area is so highly specialized, it’s not something that’s easily adapted to.”

A generic route to market

Along with an understanding of complex chemistry and pharmaceutical processes, the specialization Molino is referring to deals with the 1984 amendments to the Federal Food, Drug and Cosmetic Act — commonly referred to as the Hatch-Waxman amendments — which provided a regulatory pathway for expedited approval of generic drug products.

The statute established the so-called abbreviated new drug application approval process, opening the door for generic drug competition.

Generally, under the Hatch-Waxman law, the first applicant to successfully certify that an existing patent covering the would-be rival brand name drug is invalid or will not be infringed by the manufacture, use or sale of the generic version of the drug is eligible for 180 days of marketing exclusivity.

”That exclusivity is amazing,” Mrksich said. ”It’s the same thing as selling coffee. The first Starbucks in town is the one everybody goes to. A new coffee shop may open, but you’ve got these companies already. Why switch to another generic provider when you already have one?”

That period of protection from competition from subsequent generic versions of the same drug product serves as an enticement that was written into the statute to encourage generic drug companies to bear the risk of a lawsuit, Duane Morris’ Gould pointed out.

”That helps the generic company, who’s borne all the costs of the suit. That gives them an opportunity to recoup some of the costs,” Gould said. ”By launching first, they retain a bigger market share of the drug down the road.”

Many lawyers involved in the pharmaceutical IP niche, sometimes referred to as ”Hatch-Waxman practitioners,” point to that 1984 statute as the starting point of the boom in the generic drug industry and the rise in low-priced generic versions of brand-name pharmaceuticals, which account for 65 percent of all prescriptions dispensed in the U.S., according to the Generic Pharmaceutical Association.

”That is the number-one reason the generic industry has grown to the proportion it has grown to,” said James F. Hurst, a partner in Winston & Strawn whose litigation practice includes pharmaceutical patent cases. ”Before the Hatch-Waxman amendments, a generic company could not even begin the process of getting a drug on the market until the patents expired. Hatch-Waxman essentially creates a pot of gold for generics. It just creates massive incentive to launch more and more generics, which tends to be good for consumers.”

When a company seeks to market a generic drug before the expiration of a patent covering the would-be brand-name rival, it is required to file with the FDA what is called a ”paragraph iv” certification claiming the patent is invalid or that it would not be infringed by the generic drug. The generic drug maker also must notify the brand-name drug maker, which then has 45 days to file an infringement lawsuit against the generic applicant.

Behind that process are the lawyers with technical backgrounds in related sciences, such as chemistry and pharmacology, figuring out a strategy.

‘Like playing Risk’

”There’s always the Ph.D. chemist lurking somewhere in the background,” Mrksich said. ”Before you can ever get to litigation somebody has to figure out the case. These blockbuster drugs come on the market and it’s not like you can just sue. You have to say, ‘it’s invalid because — blank.”’

”It takes a lot of digging and research for somebody to find a position that can hold up,” Mrksich said. ”Without a chemistry degree, I don’t think that’s so easy.”

It is ”the hunt,” Mrksich said, that makes her job interesting.

”There are all kinds of strategies that come into play,” Mrksich said. ”It’s mind challenging. It’s fun, because there’s this big puzzle. It’s like playing Risk.”

Lawyers pointed out that efforts to extend the monopoly on a popular brand-name drug are common in the pharmaceutical industry. Often, they said, the issues involve numerous patents on different aspects of the same drug, such as different uses of the drug, extended dosages, different methods for making the drug, or alternative formulations of the drug — like caplets versus tablets.

Generally, under U.S. patent law, to receive a patent on a pharmaceutical — which can give a company the right to be the sole seller of a given drug for 20 years from the date the patent application is filed — the chemical invention must be new over everything else that’s been done. And, it can’t be an ”obvious” offshoot of an existing product.

Lawyers said recent decisions from the U.S. Court of Appeals for the Federal Circuit, which resolves solely patent-law cases, and the 2007 U.S. Supreme Court decision in KSR International Co. v. Teleflex Inc., which relaxed the evidentiary standard for ”obviousness,” have given generic drug companies more arsenal in patent fights.

”Some changes in the law, over the last year or two, have made it easier to challenge the validity of patents,” Gould said. ”Typically, these days, a lot of people are trying to prove them invalid as obvious variations of drugs, or formulations that were already known.”

Here’s how he summarized one approach to helping generic drug companies in that process.

”Typically, the patent may cover the drug molecule itself. We’ll look for a publication — a journal article — that came before that patent that discloses the molecule, or that discloses the molecule that’s very similar to that molecule, that could easily be modified into that molecule,” Gould said. ”If we find an identical molecule somewhere, the patent’s invalid because it’s not new.

”Alternatively, you might find a molecule that’s very close to what’s patented. Then it’s still new, but it still would be invalid because it’s just an obvious difference between what was known,” Gould said. ”That area, the obviousness part, is really where the law has changed in the last year or two.”

Also under Hatch-Waxman, lawyers pointed out, if the patent holder or innovator drug maker files an infringement lawsuit against the generic applicant, FDA approval to market the generic version could be automatically postponed for up to 30 months.

”It’s equivalent to an automatic, 30-month injunction preventing generic companies from going to market,” Leydig, Voit & Mayer’s Green said. ”That incentivizes the brand companies to file lawsuits even when they’re not strong.”If you have a drug product that’s selling $2 billion a year, the cost to the pharmaceutical company in keeping the litigation pending is drastically lower than the profit they get on a weekly basis for any of these drugs,” Green said. ”If the drug sells $2 billion a year at a gross profit margin of 90 percent, you can pay for a lot of lawyers.”

In recent years, races to market generic versions of brand drugs have been starting earlier.

”It used to be, the brand drug was on the market and made money for a couple of years before the generics even tried to enter the market,” Mrksich said. ”Now, the generics are trying to enter the market as soon as the FDA will allow them. It’s vicious, which is why you’re seeing this increasing practice.”

The bigger the drug, in terms of its success in the marketplace, the greater the interest in launching its generic version, Gould said.

”They [generic drug companies] know all the drugs, they do marketing studies. They evaluate what the revenues and profits for the drugs are, how much they can manufacture it for,” Gould said.

”The bigger the profit they see, the more they want to target that drug.”

Many lawyers point to the 2000 federal appeals court ruling in a patent dispute that cleared the way for Barr Laboratories to sell the first generic version of Prozac — then the world’s top-selling antidepressant — as a major case that drew attention to the opportunities available to generic drug companies, and the lawyers who represent or oppose them.

Winston & Strawn’s Hurst, who represents both generic companies and brand-name pharmaceutical manufacturers in patent disputes, recalled his work in representing the generic drug maker in the Prozac case.

”We ended up coming up with a novel theory that was logically correct and the Federal Circuit agreed with us — that Eli Lilly essentially had two patents on the same invention. They were just using synonyms, and you can’t do that. You can only have one patent per invention,” Hurst said. ”It’s significant because if you have two patents and they expire at different times you’re getting an artificially extended monopoly. That’s what we argued, that Eli Lilly got two patents instead of one and extended its patent monopoly by three years, which translates to $6 billion in sales.”

He recounted how the news of the ruling played out on Wall Street.

”The trading on both Barr stock and Eli Lilly stock was halted for about three hours until a half-hour before the close of the trading day,” he said. ”In the half-hour at the end of the trading day, trading was reopened. In that half hour, Barr Laboratories’ stock nearly doubled and Eli Lilly lost $35 billion. Barr doubled its market capitalization in one day.”

On the horizon

Traditionally, Brinks’ Mrksich said, Hatch-Waxman practitioners have generally been compelled to identify themselves with a side — generics, or branded pharmaceutical companies.

”Branded Pharma has heart failure when you tell them you represent a generic,” Mrksich said.

Gould agreed.

”It used to be very polarized,” he said. ”If a firm represented generics, Big Pharma just would not use that firm. That has kind of defined how firms market themselves.”

But the lawyers said it remains to be seen whether that attitude continues, in light of a trend that is seeing more branded pharmaceutical companies buying generic companies, or starting their own generic subsidiaries.

”This line is getting blurred between who’s the innovator and who’s the copier,” Mrksich said.

And in the midst of more competition among major generic companies, Green pointed out, the industry is also seeing an increase in consolidations.

Lawyers in the pharmaceutical IP niche also have their eyes on a movement in Congress for regulations that would open the door to competition from generic versions of medicines derived from biotechnology.

As opposed to chemically derived drugs, such as Paxil, Prilosec, and the many other pills that fill the medicine cabinets of American consumers, there is no regulatory pathway within the FDA to bring cheaper, generic versions of biotech drugs — known as biogenerics or biosimilars — to the U.S. market.

Biotech drugs — which are largely derived from living cells — are not covered under the landmark Hatch-Waxman law.

A statutory framework for the approval of generic versions of biotech drugs — such as Herceptin, which is used to treat breast cancer, or Humira, a medicine used in the treatment of rheumatoid arthritis — would likely spawn a new flood of litigation, lawyers said.

”That’s the next huge thing,” Hurst said. ”When that happens, there will be an explosion in pharmaceutical litigation related to biologicals.”

Lawyers also anticipate more antitrust litigation in the pharmaceutical arena, which is seeing a rise in lawsuits accusing brand companies of trying to extend the life of patented drugs via improperly obtained patents.

Meanwhile, the workflow continues for lawyers like Mrksich, who sees herself as a chemist who practices patent law.

”Healthcare issues aren’t going away; the patent issues in healthcare aren’t going away,” Mrksich said. ”It’s recession-proof. People always need doctors; people always need drugs. People are always going to need attorneys in this area.”