Aggressive Tactics Proved Too Risky For These Generic Drugmakers

In 2010, a jury upheld the patent’s validity and decided Teva’s generic Protonix infringed that patent. To finally bring dispute to an end, the two generic-drug manufacturers agreed Wednesday to pay $2.15 billion in patent-infringement damages, ending the trial that began last week in federal court in New Jersey. Of the total amount, 64 percent of which will go to Pfizer, Teva will pay 1.6 billion and Sun will pay $550 million.

This settlement is one of the highest tabs for damages from a so-called “at-risk” launch of a generic drug. An at-risk launch refers to when a generic drug manufacturer that has been sued for patent infringement begins selling the generic product even before the patent litigation is resolved. The risk in such action is obvious; if the patent for the branded drug is upheld, the generic drug maker is liable for damages for lost profits by the branded drug’s manufacturer. In this case, the damages were huge, surpassing the $442 million Apotex paid Bristol-Myers Squibb (NYSE:BMY) and Sanofi (NYSE:SNY) last year for selling generic copies of anticlotting drug Plavix in 2006.

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The Protonix patent exclusivity expired in January 2011, and Pfizer’s Wyeth unit is still trying to recover lost profits. But Pfizer is happy with the outcome. “We are pleased with today’s settlement, which recognizes the validity and value of the innovation that led to Protonix,” Amy W. Schulman, Pfizer’s general counsel, said in a Wednesday press release.

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