So -- this smells an awful lot like more pay to delay -- if this agreement survives FTC scrutiny, Merck's Temodar® will have effectively acheived nearly 31 years of patent monopoly power (17 is the statutory period). Of equal importance, though is the notion that, but for this deal, Teva could begin selling generic temozolomide today. United States drug consumers won't see lower prices until August 2013, if the FTC allows this deal to stand. What's fair about that? Here is a snippet -- of the Reuters reporting:
. . . .Teva Pharmaceutical Industries Ltd. said Wednesday it agreed to hold off on launching a generic version of Merck & Co.'s cancer drug Temodar (temozolomide) until a federal appeals court weighs in on the drug's patent.
Instead of launching its generic version of Temodar now, Teva said it will begin selling its drug only if the court agrees that a patent on the brain cancer drug is unenforceable. In return, Merck agreed to allow Teva to start selling its generic in August 2013. . . .
The basic patent on Temodar expires in February 2014 (more background, here). So, to satisfy the test of commercially reasonable equivalence, the payments under the deal, from Merck to Teva, ought to be at least equal to (a) the difference between Teva's profits on generic temozolomide from January 2010 through August 2013, (b) less only a probability discount, to factor in the possibility that Judge Robinson's ruling is overturned on appeal. Judge Robinson ruled the '291 patent unenforceable in part for "inequitable conduct". That's significant.
That sort of a ruling is an intensely-fact driven one. Such a ruling is pretty tough for the appeals panel to overrule, since the all live witnesses' relative levels of credibility were assessed exclusively in the trial court's proceeedings. All the appellate court will have is a cold paper transcript of the record at trial. So, in sum, I think it unlikely that Teva loses on appeal -- thus the discount for such an uncertainty should be less than 20 percent, in my opinion.
So -- is Teva getting around $500 million, here?
If it is not, then the deal should be suspect, from an FTC/DoJ perspective (again, in my opinion), thus: US sales of Temodar are about $380 million a year, times two and three-quarters years (January 2010, through end of August 2013) -- and let's conservatively guess that Teva's generic would only capture 60% of the market sales, in the US, 2010 to 2013. $380M x 2.75 years x 60% = $627 million.
Now let's generously discount that by 20%, for the chance that Teva loses the appeal:
That's still more than $500 million.
I suspect Teva has agreed to take far less than that amount.
Calling FTC/DoJ -- paging FTC/DoJ to a white paging telephone. . . .
[Recall also that last week, some wholesale drug company buyers sued Merck, seeking triple damages, and alleging violations of the Sherman Act, §§ 1 and 2 -- due to the fact that Merck did not have any enforceable patents on Temodar (as found by Judge Robinson in January 2010), and that Merck thus engaged in deception to preserve its monopoly, here -- since at least September of 2009. Ouch.]