FTC Sues Patent Owner In Pharmaceutical Industry For Misusing Government Processes To Thwart Competition

On March 7, 2003, the Federal Trade Commission sued drug maker Bristol-Myers Squibb ("BMS") for improperly asserting intellectual property rights and using tainted patents to subvert the Food & Drug Administration processes for approving generic drugs in order to maintain monopolies in three separate pharmaceutical markets. The FTC brought this action just a few days after bringing a suit against Unocal for engaging in a patent ambush to obtain monopoly power in the market for reformulated gasoline.1 Along with its complaint against BMS, the FTC issued for public comment a proposed consent order, to which the FTC and BMS have agreed in principle, to settle the action.

Challenged Conduct

The FTC charges that BMS took steps to prevent low-priced generic drugs from entering the market in competition with BMS's anti-anxiety drug BuSpar and cancer drugs Taxol and Platinol. According to the FTC, BMS gamed the FDA system for approving generic drugs by improperly listing various patents in the FDA publication commonly known as the "Orange Book" and bringing baseless lawsuits against generic drug manufacturers. These actions automatically precluded generic drugs from entering the market for 30 months, regardless of whether the patent suit had any merit (under applicable FDA laws). The FTC alleges that BMS went to great lengths to obtain what in reality were spurious patent rights late in the generic drug approval process, at times literally on the eve of a generic drug's entry into the market, to obtain additional periods of exclusivity under the FDA laws. The FTC's Complaint asserts that BMS's patents did not meet the statutory criteria for listing in the Orange Book and that the patents were either invalid or could not properly be asserted against generic versions of BMS's drugs. In addition, BMS allegedly made contradictory statements to the FDA during the approval process for BMS's drugs and to the PTO during patent prosecution. The FTC claims that BMS also engaged in other misconduct before the PTO in prosecuting its Taxol and Platinol patents.

In addition to the improper Orange Book listings and enforcement of tainted patents, the FTC also challenged a settlement agreement between BMS and a would-be generic competitor as an unlawful market allocation scheme. To settle BMS's patent suit against the generic competitor, BMS agreed to pay the generic company more than $70 million over a four year period in exchange for the generic company's...