As we reported back in August, (Abbott and plaintiffs agree to proposed Norvir settlement), Abbott Laboratories (NYSE:ABT) and plaintiffs who brought a nationwide class action challenging Abbott’s 400% price increase on its HIV/AIDS drug Norvir agreed to a settlement of between $10 million and $27.5 million. Under the settlement, the amount that Abbott would have to pay would depend on whether the Ninth Circuit Court of Appeals accepts an appeal of certain key issues in the case, and how that Court ultimately rules on those questions. For a full description of the different scenarios, and amounts that Abbott would have to pay, see the earlier post here.

Yesterday, the Ninth Circuit Court of Appeals issued an order accepting the appeal. This allows the settlement process to move forward, although how much Abbott will have to pay will remain up in the air until the Ninth Circuit issues its actual decision on the appeal.

The order can be found here.

We’ve frequently reported here on the Prescription Access Litigation (PAL) blog about the class action lawsuit brought by PAL coalition member SEIU Health & Welfare Fund and others against Abbott Laboratories [NYSE:ABT], challenging Abbott’s December 2003 price increase of 400% on its HIV/AIDS drug, Norvir. That lawsuit alleged that Abbott’s price-hike was intended to increase the sales and market share of another Abbott HIV/AIDS drug, Kaletra.

We’re pleased to announce that SEIU Health & Welfare Fund, the two individual plaintiffs in the class action and Abbott agreed to a proposed settlement of the case on August 13, 2008. Abbott has agreed to pay between $10 Million and $27.5 Million, depending on court rulings to come, to settle the nationwide claims by consumers who were overcharged for the medicine.

There have been a number of important decisions by the Court to date that have set the stage for this settlement. On June 11, 2007, the Court certified the case as a nationwide class action. On May 16, 2008 the Court issued a ruling that was a partial victory for the plaintiffs and a partial victory for Abbott. The Court held that Abbott could not claim a patent that it holds on Norvir as a defense to the plaintiffs’ claims (the partial win for the plaintiffs). However, the Court also dismissed the plaintiffs’ claims for “unjust enrichment.” These claims alleged that Abbott was “unjustly enriched” by its allegedly illegal Norvir price hike.

What’s important about this dismissal is that these common law unjust enrichment claims were the only nationwide claims for monetary damages (as opposed to claims for “injunctive relief,” that is, for changes in company practices) in the case. When the Court dismissed these claims, the only claims for damages that remained in the case were under California state law. Thus, in a nutshell, after the Court’s May 16 order, the case for monetary damages was narrowed to cover just consumers and health plans in California.

Abbott had asked the Court to allow an “interlocutory appeal.” This means, basically, that Abbott asked the District Court to ask the 9th Circuit Court of Appeals to make a decision on a particular question of antitrust law that Abbott felt could determine the outcome of the case. The Court refused, since the trial was at that point only three months away.

The proposed settlement attempts to get the Court of Appeals to resolve this and several other legal issues, and to tie the amount of the settlement to the decisions of the Court of Appeals. Abbott and the plaintiffs will ask the court hearing the case (the federal District Court for the Northern District of California) to allow them to appeal three legal issues to the 9th Circuit immediately. These legal issues are ones that have been essential to the plaintiff’s success so far, and which Abbott would likely appeal if the plaintiffs were to win at trial.

There are several different forms the settlement could take, depending on how this appeal goes:

• If the District court ”certifies” all three questions up to the Ninth Circuit for appeal, and the Ninth Circuit accepts at least two of them, Abbott will pay a non-refundable $10 Million in to a settlement fund. That $10M (and possibly more – see below) would eventually be distributed to 13 different non-profit organizations that benefit people with HIV/AIDS. (See a list of those organizations here).
• How much Abbott would have to pay beyond the initial $10M depends on how the 9th Circuit rules on the appeals questions:
  • If Abbott wins the appeal of any of the three questions before the Ninth Circuit, then it doesn’t pay anything beyond the initial $10M.
  • If the plaintiffs win on all the questions before the 9th Circuit, then Abbott must contribute another $17.5 Million to the settlement fund.
  • If the 9th Circuit “remands” (sends back) the case to the District Court for any reason (such as asking the District Court to make findings of fact), then Abbott must contribute only $4.375 Million more to the settlement fund.

In a nutshell, Abbott will ultimately pay between $10M and $27.5M. After the attorneys’ fees and expenses are paid (approximately 1/3 of the total), here is how the rest of the settlement will be divided:

• If Abbott wins any one of the questions before the Ninth Circuit, then the $10M, reduced to $6-7 M after costs and attorneys’ fees, will be distributed equally to all the cy pres recipients on the list above.
• If, however, the court remands any question, or if the Plantiffs win all the questions, then the settlement amount ($14.3M or $27.5M respectively, before legal costs and fees, or between $9.6 and $18.4M after) will be divided, with
  • 70% of it (between $6.7M and $12.8M approximately) going to the 13 organizations described above, and
  • 30% (between $2.9M and $5.5M approximately) going to consumers and TPPs in California)

Confusing? Yes. But the settlement is a creative resolution of the lawsuit. It takes into account the different possible outcomes to a trial and inevitable appeal, and essentially adjusts the amount of the settlement accordingly.

The Court has scheduled a hearing for August 19 on whether to grant “preliminary approval” to the Settlement. If it does grant that approval, notice will be published to alert members of the class about the proposed settlement. Consumers and TPPs that paid for Norvir will have the option of opting out of the settlement (if they want to pursue their own individual lawsuits against Abbott), objecting to the terms of the settlement, and, if they are located in California, filing claims forms to receive a portion of the settlement proceeds. The Court will schedule a Final Approval hearing for several months from now. After that hearing, the Court will decide whether to grant Final Approval to the settlement. If it does grant that approval, and after any appeals, the money in the settlement will be distributed as described above.

To see a copy of the settlement, go here.

Other resources:

• A summary of the lawsuit challenging Abbott’s price hike of Norvir
• Earlier PAL blog entries on the plaintiff’s successful class certification, Abbott’s attempt to keep damaging documents from public view, or the plaintiff’s anti-trust claims.

We’ve written a lot on the past few months about the national class action lawsuit against Abbott Laboratories, targetting Abbott’s December 2003 400% price increase on its HIV/AIDS drug Norvir.

The case has survived Abbott’s numerous attempts to have it dismissed, and the Judge in the case recently forced Abbott to make public some embarrassing documents that Abbott wanted to keep hidden. (See What Abbott Laboratories was Trying to Hide – Court unseals Norvir documents).

A trial is scheduled to begin in the case in August. Given that very few pharmaceutical class actions actually go all the way to trial, this is noteworthy.

Two of the lawyers representing the plaintiffs in the case, including Prescription Access Litigation coalition member SEIU Health and Welfare Fund, recently wrote an analysis of the case in the Bureau of National Affairs publication, Pharmaceutical Law & Industry Report.

With BNA’s permission, we reprint this analysis here. It gives a good overview of the case, and of the Court’s recent rulings invalidating Abbott’s patent defenses. Bear in mind that it was written with a lawyer audience in mind… (A PDF version of this piece is available here)

In a May 16, 2008, ruling, Judge Claudia Wilken of the District Court for the Northern District of California effectively extinguished Abbott Laboratories’ hopes to avoid trial in a nationwide antitrust class action suit arising from its 400 percent price increase on Norvir, a drug that has revolutionized the treatment of HIV (6 PLIR 598, 5/23/08 a0b6n3r1r0 ).1 The Court’s ruling not only offers useful insight into the sometimes-murky issue of inherent anticipation, but also has far-reaching implications for pharmaceutical companies hoping to rely on patents to avoid allegations of anticompetitive conduct.

The Plaintiffs’ Sherman Act claims in In re Abbott Laboratories Antitrust Litigation are inextricably intertwined in the biology of the HIV virus itself. A longstanding challenge to scientists working to create effective treatments for HIV is the fact that the virus reproduces very rapidly, and mutates as it does so. These mutations permit the virus to rapidly gain resistance to new drugs as they are developed. Accordingly, innovation and competition in the marketplace for new HIV treatments is crucial: without it, patients will rapidly succumb to the disease as existing treatments fail.

Beginning in about the mid-1990s, researchers developed a promising new class of treatments for HIV disease called protease inhibitors (“PIs”). The advent of this powerful new class of drugs helped transform HIV disease from a death sentence into a chronic, manageable illness. Physicians used these PIs in combination with other HIV drugs to great effect, halting the disease in its tracks for many patients. However, as soon as PIs became available, the clock began running, as the virus rapidly acquired resistance to the new treatments.

In 1996 Abbott introduced a patented PI called Norvir, the brand name for ritonavir, to be used at a recommended daily dose of 1200 milligrams. Because of the drug’s debilitating side effects at this dose, it was rarely used. However, scientists and physicians soon noticed that Norvir had a striking effect on certain metabolic pathways in the liver, dramatically slowing the metabolism of many types of drugs, including PIs. When Norvir was taken with PIs, therapeutically effective blood levels of the PIs could be consistently maintained, and the PIs could be taken at smaller doses, sparing patients many of the severe side effects associated with the drugs. More importantly, Norvir’s “boosting” effect greatly impaired the virus’ ability to develop resistance to PIs. Norvir is the only commercially available drug known to have this effect.

Indeed, unless a patient takes Norvir together with a PI, the virus can rapidly develop resistance to the entire PI class. Accordingly, Norvir boosting has become part of the standard PI treatment. To enable patients to take these boosted PI regimens, Abbott sells Norvir pills to the public.

In 2000, Abbott capitalized on Norvir’s boosting properties by launching a pill called Kaletra, in which it combined a PI called lopinavir with a boosting dose of Norvir. Kaletra was the only single-pill treatment available that combined Norvir and a PI. While Kaletra was a very effective boosted PI treatment, it was associated with serious side effects, including hyperlipidemia, lipodystrophy, and gastric problems. Notwithstanding these problems, it quickly became the dominant boosted PI prescribed, and one of Abbott’s top primary-care products.

In 2003, however, Abbott’s lucrative Kaletra business was in peril. New PIs were about to be launched by Abbott rivals GlaxoSmithKline and Bristol Myers Squibb that, when boosted with Norvir, were just as effective as Kaletra, but better tolerated and more convenient.

What Abbott did next has become the subject of enormous controversy. In December of 2003, Abbott imposed a 400 percent price increase on the Norvir sold for use with rivals’ PIs, while leaving the price of Kaletra unchanged. Overnight, Kaletra became the cheapest boosted PI regimen on the market. According to Abbott’s rival, GlaxoSmithKline, this price hike has seriously affected sales of Glaxo’s effective new boosted PI, Lexiva.

In 2004, the plaintiffs in In re Abbott Labs Norvir Antitrust Litigation brought suit under Section 2 of the Sherman Act, arguing that Abbott used the Norvir price hike as a means to protect Kaletra from the competitive threat it faced from newer and safer drugs such as Lexiva. Abbott argued in its defense that it raised the price of Norvir in light of the increased clinical importance of the drug, and because it was being used in smaller doses as a booster than it was as a stand-alone PI.2

Abbott also mounted an affirmative defense of patent immunity premised on patents it claimed on the boosting method. In essence, Abbott argued that because it had patents on the method of using Norvir to boost PIs, it was entitled to exclude competitors from the market for Boosted PIs by any means it liked, including a Norvir price hike.

Indeed, Abbott’s boosting patents were a source of substantial revenue for the Company. As Abbott itself explained in documents filed with the Court, “[a]t considerable expense, Abbott’s four major competitors in the Boosted Market have taken a license to these patents for the express purpose of ‘promot[ing] and market[ing] certain of [their] products with Ritonavir for the purpose of co-prescription/co-administration.’”3

After bringing two unsuccessful motions for summary judgment in 2005 and 2006, Abbott filed a third motion in February of 2008, premised in part on its patent immunity defense. The benefits of this tactic seemed obvious. If the Company’s motion were successful, the pending case would be dismissed. If it lost, the complex patent arguments would still have to be resolved at trial, scheduled for Aug. 18.

That there was also substantial risk to Abbott’s strategy became apparent when, in response to the Company’s motion, Plaintiffs filed both an opposition to Abbott’s motion and a cross-motion of their own for partial summary judgment, attacking Abbott’s patents as invalid and asking that the Court bar the Company from asserting its patent immunity affirmative defense.

The validity arguments in Plaintiffs’ opposition and cross-motion turned in large part on the significance to be accorded language in the preambles to Abbott’s patents. Claim 9 of U.S. Patent No. 6,037,157 (the ’157 patent) states:

A method for increasing human blood levels of a drug which is metabolized by cytochrome P450 monooxygenase comprising administering to a human in need of such treatment a therapeutically effective amount of a combination of said drug or a pharmaceutically acceptable salt thereof and ritonavir or a pharmaceutically acceptable salt thereof.

Similarly, claim 21 of U.S. Patent No. 6,703,403 (the ’403 patent), which is dependent on claim 22 of the same patent. Claim 21 states:

A method for improving the pharmacokinetics of a drug which is metabolized by cytochrome P450 monooxygenase comprising administering to a human in need of such treatment an amount effective to inhibit cytochrome P450 monooxygenase of ritonavir or a pharmaceutically acceptable salt thereof.

Claim 22, in turn, states “the method of claim 21 wherein the drug which is metabolized by cytochrome P450 monooxygenase is an HIV protease inhibitor.”

In essence, both claims describe a method of using Norvir together with other drugs in order to benefit from its effects as a metabolic booster. The problem for Abbott, suggested the Plaintiffs, is that these patents were anticipated by U.S. Patent Number 5,674,882, which claims:

A method of inhibiting an HIV infection comprising administering to a human in need thereof a therapeutically effective amount of [Norvir] or a pharmaceutically acceptable salt thereof in combination with a therapeutically effective amount of another HIV protease inhibiting compound.

While all three patent claims describe a method of using Norvir in combination with other drugs, Abbott argued that the ’157 and ’403 patents differed from the earlier ’882 patent in that they claim the method of using Norvir with the intent to achieve a specific result–metabolic boosting.

In determining whether this statement of purpose supported precluded Plaintiffs’ anticipation arguments, the Court looked closely at the Federal Circuit’s 2003 decision in Jansen v. Rexall Sundown.4 In Jansen, the plaintiff sued a manufacturer of an over-the-counter vitamin supplement containing both folic acid and vitamin B12 for the contributory infringement of a patent which claims:

A method of treating or preventing macrocytic-megaloblastic anemia in humans which anemia is caused by either folic acid deficiency or by vitamin B12 deficiency which comprises administering a daily dosage of a vitamin preparation to a human in need thereof comprising at least about .5 mg of vitamin B12 and at least .5 mg of folic acid.

In determining that the claim was not infringed, the Jansen court held that “administering the claimed vitamins in the claimed doses for some purpose other than treating or preventing macrocytic-megaloblastic anemia is not practicing the claimed method, because Jansen limited his claims to treatment or prevention of that particular condition in those who need such treatment of prevention.”5 In this respect, the preamble of the patent claim, describing the purpose for administering the vitamins, “gave life and meaning” to the patent. Id.

The Court rejected Abbott’s argument that the preambles to the ’157 and ’403 patents similarly gave life and meaning to the ’157 and ’403 patents beyond what was described in the ’882 patent. The Court held that

In Jansen, the preamble language was construed as a limitation because it disclosed a specific theretofore unknown use for taking a combination of folic acid and vitamin B12–namely, the prevention and treatment of macrocytic-megaloblastic anemia. The preamble gave “life and meaning” to the claim because without it, the patent would simply recite a method that was already practiced. Here, the preamble does not disclose a new use for the prior art…. The preamble simply expresses one of the necessary results of practicing the existing method. Abbott cannot patent the practice of prior art by framing a necessary result of that practice as a claim-limiting purpose.

The Court’s ruling has dramatic consequences for the Company. Abbott now faces trial on Plaintiffs’ antitrust claims bereft of its principal defense. In light of the fact that Plaintiffs in the In re Abbott Laboratories Norvir Antitrust Case seek not only damages but nationwide injunctive relief, a loss at trial in August could have significant repercussions for the Company’s business. Moreover, a verdict against Abbott will also have preclusive effect with respect to many of the factual issues that will be tried in the cases brought by Glaxo and by the direct purchasers.

The Court’s patent ruling also has important strategic implications for industry observers. In attempting to dismiss Plaintiffs’ antitrust claims, the Company risked and lost valuable intellectual property–patents made more valuable by the fact that Norvir has shown promise as a metabolic booster to drugs used to treat other disease states as well, such as hepatitis. Even without the benefit of a victory at trial, Plaintiffs have significantly altered the playing field in the market for boosted PIs by undercutting Abbott’s claims on this crucial new technology. The Court’s decision thus stands as a caution for companies seeking to press intellectual property into service as a defense in antitrust cases.

Footnotes:
1 In re Abbott Labs Norvir Antitrust Litigation, 2008 WL 2095516 (N.D.Cal. May 16, 2008).

2 In 2007, direct purchasers of Norvir and Abbott’s rival GlaxoSmithKline together filed six more suits, making similar allegations.

3 Abbott Laboratories’ February 13, 2008 Motion for Summary Judgment, Docket No. 445.

4 342 F.3d 1329 (Fed. Cir. 2003).

5 Jansen, 342 F.3d at 1334, cited at page 15 of Judge Wilken’s opinion.

Hollis Salzman (hsalzman@labaton.com) is a partner at Labaton Sucharow LLP. Michael Stocker (mstocker@labaton.com) is an associate with the firm. Labaton Sucharow represents the Service Employees International Union Health and Welfare Fund in pending litigation against Abbott Laboratories. BNA welcomes other views on the litigation.

Reproduced with permission from Pharmaceutical Law & Industry Report, Vol. 6, No. 25 (June 20, 2008), p. 721. Copyright 2008 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Recently, we posted an entry here titled “What is Abbott trying to hide? Maker of Norvir asks Court to deny public the right to see documents.” We’re pleased to report that the Court denied Abbott’s motion to keep some documents under seal. We analyze these documents below.

In 2003, Abbott Laboratories (NYSE:ABT) raised the price of its HIV/AIDS drug Norvir (ritonavir) by 400% overnight. Norvir is used in combination with other “protease inhibitors,” (PIs) and it “boosts” the effectiveness of the PI it’s used with. Abbott also makes a combination pill called Kaletra that includes both Norvir and its own PI – when they raised the price of Norvir, they didn’t raise the price of Kaletra.

Prescription Access Litigation coalition member SEIU Health and Welfare Fund filed a national class action lawsuit against Abbott. The lawsuit claimed that Abbott violated federal anti-trust laws, alleging that Abbott raised Norvir’s price in order to boost sales of Kaletra, at the expense of competing PI drugs that require Norvir as a booster. In a nutshell, the lawsuit argued that Abbott tried to “leverage” its patent-protected monopoly over Norvir into a monopoly over the market for protease inhibitors.

As we’ve discussed before, Abbott has fought throughout the litigation to keep documents regarding the price increase of Norvir sealed. Abbott’s lawyers recently argued that a set of documents that they wanted shielded from public view contain “highly confidential information related to … how Abbott analyzes, views and makes strategic business decisions in the HIV pharmaceutical market.” [Order, p2.

But after a Judge recently ordered some of the documents unsealed (a copy of the Judge’s order is here) it became clear why Abbott wanted to keep what was in these documents hidden from public view.

First, these documents revealed Abbott’s disregard of how a price increase would affect HIV/AIDS patients. An email from Abbott executive Jesus Leal shows three strategies that Abbott considered to drive up sales of Kaletra, despite the potential interference with patients’ existing or future treatment regimens.

One strategy was to sell Norvir in three ways: as an ingredient in Kaletra, as a separate pill priced at five times its former price, or at the original price in a liquid form that Abbott executives admit tasted “like someone else’s vomit.” Given that many protease inhibitors have nausea as a possible side effect, even considering a strategy that would force the many HIV patients who could not afford a five-fold price increase resort to taking the foul-tasting liquid Norvir is reprehensible.

Another strategy considered was to stop selling Norvir altogether, and offer only Kaletra. But switching to Kaletra is not medically appropriate for many HIV/AIDS patients, because they eventually have to change to different PI drugs as the virus mutates and becomes resistant. A premature switch to Kaletra would deprive patients of a treatment option that they would otherwise have held in reserve until absolutely necessary.

Further, one side effect of Kaletra is hyperlipidemia (high cholesterol), which leads to higher risks of heart attack and stroke. Thus Kaletra may be less appropriate for some HIV patients than other treatments which combine Norvir(ritonavir) and other PI drugs as necessary.

Abbott considered – and eventually adopted -- a third strategy – continue selling Kaletra, but increase Norvir’s price to five times its former price. Since this time, Kaletra sales have grown significantly, from $400 million in 2003, to between $682 and $900 million in 2004, and $1.14 billion in 2006.

Exhibit 18 also reveals that Abbott planned to argue that their price increase was necessary because it was “no longer feasible for Abbott to provide a production line of Norvir capsules at the current price.” Abbott executives speculated that a price increase had a notable weakness - the company would face “exposure on price if forced to open books.” They were right. Their own released documents show that it was profit motivations and market factors, not ‘feasibility’ that caused Abbott’s unconscionable 400% price increase of the widely needed drug Norvir.

It is apparent from these documents that patient and consumer concerns were secondary to, if not absent from, Abbott’s financial considerations. One released document [Exhibit 39] has a chart summarizing a proposed slide presentation on the price increase. Not surprisingly, the one slide summary labeled “Public Relations and Activist Slide” has no summary at all, just a question mark “(?).” This shows that Abbott knew that it would be lambasted by activists for its unconscionable price increase, and that there was no good response to this criticism.

The only remorse or reservation shown in these documents was a comment by Abbott’s Vice President of Global Pharmaceutical Development, John M. Leonard, M.D. He responded to Abbott’s proposals to limit access to Norvir “I think we are on the right (but uncomfortable) track.” [Exhibit 28] ‘Uncomfortable’ is a gross understatement given that the price hike Abbott was proposing increased the annual cost of Norvir for an uninsured patient from $1,300 to $6,600 a year.

The true purpose of the price increase demonstrated: Boost Kaletra sales

The documents also showed that Abbott quintupled the price of Norvir in response to the declining market share of Kaletra relative to protease inhibitors made by competitors. Kaletra sold almost $400 million in 2003 but new PI drugs having fewer side-effects made by other drug companies threatened Kaletra’s future sales.

One slide summary in Exhibit 28 shows that Abbott knowingly increased Norvir’s price in order to push the cost of using a competing drug Reyataz to a “significantly higher price.” This, Abbott speculated, would create “formulary pressures” i.e. pressures on insurers to cover Kaletra instead of Reyataz, or to increase the co-payment that consumers would have to pay for Reyataz.

Another slide summary showed that Abbott saw the treatment improvements from Reyataz not as a boon to HIV/AIDS treatment and to patients, but as a form of unfair gain by their competitor Bristol-Meyers-Squibb (BMS) at the expense of Abbott. Ironically, Abbott didn’t consider raising its price by 400% to be unfair gain at the expense of HIV/AIDS patients.

These released documents don’t reveal much about Abbott’s price hike that wasn’t already known (see, for instance, an article that originally ran in the Wall Street Journal here) but they do reinforce how coldly calculating Abbott was in considering how best to put profits before HIV/AIDS patients.

Abbott recently submitted a Motion for Summary Judgment to the Court hearing the Norvir class action. If this motion is denied, a trial in the case is currently scheduled for August 2008.

Readers, what do you think of the released documents? Do they change your opinion of Abbott? Or just reinforce it? Please post your thoughts in the comments.

And by the way, here are links to all the documents the Court agreed to unseal:

• Exhibit 1 (Rebuttal Expert Report of Joel W. Hay, PHD.)
• Exhibit 4 (08-09-2004 Depisition of Abbott executive Jesus Leal)
• Exhibit 5 (08-11-2004 Deposition of John Leonard)
• Exhibit 8 (12-19-2005 Deposition of Jodi Devlin)
• Exhibit 14 (9-3-03 Strategic Plan)
• Exhibit 18 (09-12-2003 Email from Jesus Leal re three pricing options for norvir)
• Exhibit 20 (07-13-2003 Email from Michelle Jones re 07-13-2003 PR article regarding Reyataz efficacy with Norvir)
• Exhibit 27 (09-10-2004 Deposition of Abbott executive Heather Mason)
• Exhibit 28 (09-22-2003 Email from Dr. John Leonard re Kaletra’s decline and Norvir’s growth with introuction of competitor pi’s)
• Exhibit 29 (08-04-2003 Emails from William Dempsey and John Thomas)
• Exhibit 32 (09-10-2003 Email from Joseph Serio Jr re decline in Kaletra market share)
• Exhibit 38 (Notice of Rescheduled meeting dated 09-25-2003)
• Exhibit 39 (09-29-2003 Email from Jesus Leal re Slide list)
• Exhibit 45 (2006 Jan Monthly Market Research Report re HIV drugs)
• Exhibit 47 (03-24-2006 Declaration of Michael P. Hannan, Product Director, Protease Inhibitors, Glaxo-Smith-Kline)
• Exhibit 49 (12-14-2007 Deposition of Douglas F. Greer, PHD re Profitability of PI’s developed for use with Norvir)
• Exhibit 50 (08-08-2007 Deposition of Dale Kempf re Patent issues)
• Exhibit 51 (07-24-2007 Deposition of Dr. John M. Leonard, Abbott VP)

In December 2003, Abbott Laboratories (NYSE: ABT) decided to increase the price of its HIV/AIDS drug Norvir (ritonavir) by 400%. PAL member Service Employees International Union Health & Welfare Fund filed a class action lawsuit against Abbott in October 2004, alleging that the price increase violated the antitrust laws.

Norvir is a “protease inhibitor” (PI) that is commonly used as part of AIDS “drug cocktails” (combinations of prescription drugs working together). Norvir is very important because it “boosts” the effects of other PIs taken by HIV/AIDS patients. Abbott, by increasing the cost of Norvir by 400%, effectively forced HIV/AIDS patients to pay significantly more for their life-saving drug regimens. (The Wall Street Journal did an excellent story in Jan. 2007 laying out the history of the price increase, “Inside Abbott’s tactics to protect AIDS drug“)

Abbott faced a firestorm of criticism for this outrageous price increase — there were shareholder resolutions, protests at Abbott headquarters, a boycott by hundreds of physicians, Attorney General investigations, numerous newspaper editorials lambasting the move, etc. But Abbott refused to even consider reducing the price. The only significant challenge to Abbott’s conduct is the lawsuit brought by SEIU Health and Welfare Fund and two patients.

The lawsuit has overcome significant hurdles (the Court denied Abbott’s motion to dismiss and motion for Summary Judgment, and certified the case as a class action), and the trial is scheduled to begin this summer. Abbott has again filed a motion for Summary Judgment. Such motions are filed with the Court after the parties have completed discovery (exchange of documents, depositions of witnesses and experts) but before the trial. Abbott is essentially asking the Judge to rule in its favor, arguing that based on the evidence, there’s no way a reasonable jury could find in favor of the plaintiffs.

Both Abbott and the plaintiffs have filed numerous documents with their Summary Judgment motions, and now Abbott is asking the Court to “seal” many of those documents, i.e. make them not available to the public. The motions and papers concerning Abbott’s request are here, here and here.

Why does Abbott want to keep these documents a secret and out of public view?

One of Abbott’s lawyers submitted a declaration to the Court giving the reasons:

“5. It is my understanding that the portions that have been redacted reflect, in general, Abbott’s strategic thinking and views related to pricing, public relations, marketing, research and development, market positioning, promotional activities, market segmentation, strategic brainstorming, long-range planning, sales, and lifecycle management of its pharmaceutical products that are not shared with the public or widely disseminated even within Abbott. It is my understanding that this information is kept in the highest confidence even within Abbott and is not intended to be disseminated to the general public or Abbott’s competitors.”

It seems to me that “Abbott’s strategic thinking and views related to pricing, public relations, marketing, research and development, market positioning, promotional activities, market segmentation,” etc are all of great public interest, particularly given that they concern a drug that is essential to fighting the significant public health crisis that is HIV/AIDS.

The fact that such information “is not intended to be disseminated to the general public” of course doesn’t mean that it shouldn’t be. In fact, it may even be all the more reason it should be. In fact, the plaintiffs quoted a Court opinion from an unrelated case in their original filing on this issue:

“Indeed, common sense tells us that the greater the motivation a corporation has to shield its operations, the greater the public’s need to know.” [In re Lifescan, Inc. Consumer Litigation, No. C 98 20321 JF, 1999 U.S. Dist. LEXIS 9894, at ** 7-8 (N.D. Cal. June 23, 1999)]

But let’s read on…

“6. In addition, it is my understanding that many of the Exhibits, from which these redactions are made, contain information that could be confusing, misleading, or incomplete if taken out of context or without the proper background information. Therefore, some of the information redacted, in addition to being competitively sensitive, could be used to mislead the public and be perceived in a way that was never intended by the author or the deponent. Public dissemination of this information could substantially harm Abbott’s good will, standing, and relationships that it has created with the HIV/AIDS community.” [emphasis mine]

Of course, one has to ask, what good will, standing, and relationships with the HIV/AIDS community is Abbott talking about? Abbott managed to alienate virtually the entire HIV/AIDS community by raising Norvir’s price, and then further by threatening to withhold all new medicines from Thailand if Thailand’s government issued a compulsory license for the HIV/AIDS drug Kaletra (a pill that, incidentally contains Norvir, and which the Norvir price hike was intended to increase US sales of). [A compulsory license would have allowed Thailand to break the patent on Kaletra in Thailand and import a less costly generic version]

And how could Abbott think that trying to keep these documents from public view would improve its relationship with the HIV/AIDS community? It’s likely that many of the documents would just rehash what’s already publicly known about Abbott’s reprehensible price increase. Sometimes trying to keep documents secret does more harm to a company’s reputation than the documents themselves would have. Nothing arouses suspicion more than the question “What are they trying to hide?” So Abbott may have, as the expression goes, cut off its nose to spite its face with this move.

Abbott’s attorney then goes on to give “justifications” for why particular Exhibits should be sealed, all beginning with the phrase “It is my understanding that…”

The lawyers for SEIU and the class filed a response to Abbott’s attorneys arguments, which is here. They point out that:

• To have documents sealed, Abbott has to “overcome a strong presumption of access by showing that ‘compelling reasons supported by specific factual findings . . . outweigh the general history of access and the public policies favoring disclosure.’” Pintos v. Pac. Creditors Ass’n, 504 F.3d 792, 802 (9th Cir. 2007).
• “The declaration Abbott has filed in support of its sealing request… fails to satisfy Abbott’s burden…[T]he declaration is not based on the personal knowledge of Abbott’s counsel…For the most part, the declaration merely asserts [Abbott's counsel's] “understanding” of the general subject matter of the redacted portions of the documents Abbott proposes that the Court permanently seal, and presents no actual evidence.”
• The “Declaration offers little in the way of facts; rather, it is replete with unsubstantiated, conclusory statements and hypothetical assertions, as well as argument… Abbott has not even attempted to make the sort of particularized showing mandated by the applicable standards.
• And finally, “much of the information in the documents has already been made public, the documents are mostly four to six years old and therefore especially undeserving of being shielded and there is a particularly strong interest here in allowing public access to the materials at issue given that the subject matter of the litigation ‘involves matters of significant public concern.’”

So we ask you, dear readers, what do you think? Did Abbott do more harm than good in trying to seal these documents? Post your thoughts in the comments.

To receive udpates about the Norvir case, fill out the form located here.

For information about the Norvir case, including copies of court documents, go here.

Readers of this blog have previously read about a lawsuit brought by PAL member Service Employees International Union (SEIU) Health and Welfare Fund against Abbott Laboratories (NYSE:ABT), charging that Abbott’s unconscionable 400+% price increase of the vital anti-HIV/AIDS drug Norvir violated antitrust laws.

That lawsuit has withstood various attempts by Abbott to have it dismissed– defeating a motion to dismiss, defeating a motion for summary judgment, being certified as a national class action, and then surviving an Abbott challenge to that class action status. The trial is scheduled to begin next summer.

Now the chain supermarkets are joining in. The Wall Street Journal reported yesterday that Safeway Inc., Walgreen Co., Kroger Co., Supervalu Inc.’s New Albertson’s Inc. and American Sales Co. have filed a similar lawsuit. It’s not clear from the WSJ article what exactly the supermarkets are claiming, or how they allege they have been damaged. If a copy of the complaint comes our way, we’ll update this entry.

Abbott announced the price increase back in December 2003. What took these supermarkets so long? It’s almost 3 years later. The filing of the suit now may have been motivated by the fact that various states have 3 year statutes of limitations (the amount of time you can file a lawsuit after an alleged “wrong” has occurred) for various kinds of claims concerning alleged fraud. Three years would be up in this instance in about a month. These supermarkets may also have seen the progress of the SEIU suit and concluded that they have a viable case as well.

Merrill Goozner, of GoozNews, (and author of the $800 Million Pill, which contains a chronicling of the development of Norvir), dryly noted “If we had a government (and a Justice Department) that cared about consumer protection, it would join in these suits by invoking the government’s right to ensure that the drug is made available on reasonable terms.”

The last phrase in that quotation refers to the fact that Norvir was developed in part with public funds. Under the Bayh-Dole Act, inventions developed with government funds must be made available to the public on reasonable terms. In 2004, the consumer group Essential Inventions petitioned the FDA and NIH to force the licensing of a generic (a move provided for by the Bayh-Dole Act) because Abbott was not making Norvir available on reasonable terms. In a move notable for its lack of surprise, the FDA and NIH declined.

In June, we reported that the Judge hearing the class action lawsuit against Abbott Laboratories for its Norvir price hike had certified the case as a nationwide class action (“Judge certifies class action in Norvir case“). Back in October 2004, PAL member SEIU Health & Welfare Fund filed a class action lawsuit against Abbott Laboratories (NYSE:ABT), alleging that Abbott’s 400% price increase for its HIV/AIDS drug Norvir violated federal antitrust laws. (In re Abbott Laboratories Norvir Antitrust Litigation, Case 4:04-CV-01511)

Abbott Laboratories asked the 9th Circuit Court of Appeals for permission to appeal that decision to certify the class. As we explained back in June:

Class Certification is the stage at which the Judge determines whether or not the lawsuit can proceed as a class action or not. Given that any individual patient’s financial harm is comparatively small, class actions are almost always the only way in which illegal pharmaceutical industry behavior such as that alleged in this case can be challenged. The cost of bringing an individual lawsuit to challenge actions such as this would outweigh that individual financial harm by orders of magnitude. Class Actions allow for thousand or even millions of individuals to combine their claims into one lawsuit that challenges the actions that caused harm to all of them….

Class certification is a watershed moment for a class action. If Class certification is denied, that is often the end of the case, since most class actions cannot feasibly be pursued as individual lawsuits. The Judge’s granting of class certification is an important intermediate success in this case.

Last Thursday (9/13), the 9th Circuit Court of Appeals denied Abbott’s request for permission to file an appeal. Thus, the case against Abbott will proceed.

The 9th Circuit’s decision was just an entry on the Court’s docket. The Judge’s Order granting class certification can be found here.

Back in February, Prescription Access Litigation (PAL) and PAL member AFSCME District Council 37 Health and Security Plan (DC 37) announced that a settlement in a nationwide class-action lawsuit brought by DC 37 and others against EMD Serono, Inc. and Merck Serono International S.A. (jointly, Serono) (NYSE: SRA) had received preliminary approval by the U.S. District Court for the District of Massachusetts.

The $24-million settlement resolves claims that Serono wrongfully encouraged doctors to prescribe the AIDS wasting drug Serostim to patients for whom it was unnecessary. Serostim is a recombinant human growth hormone manufactured by Serono to treat AIDS wasting, a condition involving profound involuntary weight loss in AIDS patients.

On August 16, the Court extended the deadline for Consumers who paid all or part of the cost of Serostim prescriptions to submit claims for payment from this settlement. The deadline has been extended to September 27, 2007. Claim forms, instructions, and answers to Frequently Answered Questions can be found on the settlement website, serostimsettlement.com The deadline for Third Party Payors (insurers/health plans, union benefit funds and self-insured employers) was not extended, and has already passed.

The Court will hold its “Fairness Hearing” on October 9, 2007. At this hearing, the Court will hear testimony from the parties about why the settlement should be approved, and from any class members who have objected to the settlement on why it should not.

The Court’s August 16 order can be found here.

The Public Patent Foundation (“PubPat”) is a member of the PAL Coalition. PUBPAT is a not-for-profit legal services organization that represents the public’s interests against the harms caused by the patent system, particularly the harms caused by undeserved patents and unsound patent policy.

Below is a release they issued on Wednesday, reporting that the US Patent & Trademark Office has granted each of PUBPAT’s requests to review four key HIV/AIDS drug patents held by Gilead Sciences, Inc. PUBPAT alleges that there was “prior art” that the Patent Office did not review when considering the patent applications. Prior art “constitutes all information that has been made available to the public in any form before a given date that might be relevant to a patent’s claims of originality. If an invention has been described in prior art, a patent on that invention is not valid.” (Wikipedia entry on prior art)

KEY HIV/AIDS DRUG PATENTS TO BE REVIEWED BY U.S. PATENT OFFICE: Prior Art Submitted by PUBPAT Raises Substantial Doubt Regarding Validity of Gilead Sciences Claims

New York, NY — July 18, 2007 — The Public Patent Foundation (“PUBPAT”) announced today that the U.S. Patent & Trademark Office has granted each of PUBPAT’s requests to review four key HIV/AIDS drug patents held by Gilead Sciences, Inc. (NASDAQ: GILD). The patents relate to the drug known generically as tenofovir disoproxil fumarate (TDF), a key weapon in the battle against HIV/AIDS. Gilead markets TDF in the United States under the brand name VIREAD and as a part of its ATRIPLA combination product.

Roughly 40 million people worldwide are infected with HIV/AIDS, including more than 1.2 million Americans. The U.S. Food and Drug Administration will not allow anyone other than Gilead distribute TDF in the United States because Gilead claims the four challenged patents give them the exclusive right to do so.

“Every person suffering from HIV/AIDS has a right to get the best medical treatment science can offer, without any unjustified impediments placed in their way,” said Dan Ravicher, PUBPAT’s Executive Director. “This includes Americans infected with HIV/AIDS, who are entitled to the best pharmaceuticals possible without undeserved patents making them exorbitantly expensive.”

In its March filings challenging the patents, PUBPAT submitted prior art that the Patent Office did not review before granting the patents to the Foster City, California, biopharmaceutical giant. PUBPAT also described in detail how the prior art invalidates the patents. The Patent Office has now found that PUBPAT’s filings indeed raised “substantial questions” regarding the validity of each of the four Gilead Sciences patents. Having granted PUBPAT’s requests to review each of the patents, the Patent Office will now turn to deciding whether they deserve to exist or not.

“We are very pleased that the Patent Office has agreed with us that there are indeed significant questions about the validity of the Gilead patents on TDF,” said Ravicher. “This is a very strong first step towards ending the harm being caused to the public by Gilead’s use of those patents to prevent anyone else from offering TDF to HIV/AIDS patients in the United States.”

The Gilead Sciences TDF patents challenged by PUBPAT now being reviewed by the Patent Office are U.S. Patents No. 5,922,695, 5,935,946, 5,977,089 and 6,043,230. Gilead has applied for similar patents on TDF in other countries throughout the world, including India, where they have received fierce opposition by non-profit AIDS patient groups.

More information about the reexaminations of the four Gilead Sciences TDF patents challenged by PUBPAT, including copies of the official Office Actions issued by the Patent Office granting PUBPAT’s four requests for reexamination, can be found at http://www.pubpat.org/gileadhivaidsdrug.htm