NYC Alleges Pharmaceutical Companies Manipulated the System

The City of New York filed three lawsuits in May against drug manufacturers it claims overcharged it for pharmaceuticals. The suits, brought in three district courts, claim that GlaxoSmithKline (GSK) and Purdue Pharma L.P. kept prices artificially high on pain reliever OxyContin', antidepressant Paxil', and antibiotic Augmentin' by using false and misleading methods to extend their drugs' patents.

The Purdue Case

The suits follow in the wake of successful actions brought by generic manufacturers against the two brand-name drug producers. In the case of pain reliever OxyContin, for example, the U.S. District Court for the Southern District of New York found on Jan. 5 that several patents related to Oxycontin were infringed by generic drug manufacturer Endo Pharmaceuticals Inc. but that the patents on the brand-name drug were invalid due to Purdue's inequitable conduct before the patent examiners. Purdue Pharma L.P. v. Endo Pharmaceuticals Inc., 00 Civ. 8029 (SHS), 01 Civ. 2109 (SHS), 01 Civ. 8177 (SHS), 2004 U.S. Dist. LEXIS 10 (S.D.N.Y. 1/5/04). The inequitable conduct complained of was this: Although Purdue repeatedly informed PTO examiners that it had discovered an oxycodone formulation that did not simply control pain over a reduced dosage range, but controlled pain over a “four-fold” range of doses for “approximately 90% of patients,” and that this “result” was of “extreme clinical importance,” the company never informed the patent examiners that it had no actual scientific proof that OxyContin's formulation relieved pain in most users over a four-fold dosage range. This claim was based only on one of Purdue's researchers' “insights,” which in turn was based on his observation of test data combined with his knowledge of the properties of oxycodone. The Purdue case is awaiting appeal.

Two Other Cases

The other two cases — one decided in the Eastern District of Pennsylvania and the other in the Eastern District of Virginia — have already been appealed to the U.S. Court of Appeals for the Federal Circuit, which affirmed the district courts' findings of patent invalidity. New York City's suits were filed in the respective districts in which the patents were declared invalid or unenforceable.

One basis for the city's lawsuit against GSK is an allegation that the company used the Hatch-Waxman Act to extend patents on Paxil, filing claims against nine different potential generic equivalent manufacturers. Each of these suits had the effect of extending GSK's monopoly for up to 30 months, due to the act's statutory stay provisions. In one of its cases against Purdue, the city claims that the original patent on Paxil should have expired in 1992, but that the company later filed dozens of additional patents on the product that would have extended its exclusivity rights until 2019.

At stake are as-yet uncalculated damages reflecting the difference between the prices of the name-brand drugs the city purchased and the prices the city's Medicaid program would have paid for generic equivalents, had they been available on the market. In addition, because the city claims the drug companies violated federal anti-trust laws, it's seeking treble damages. In 2002, New York City Medicaid patients used more than $14 million worth of Augmentin, over $23 million worth of Paxil and approximately $5.5 million worth of OxyContin. New York City picks up the tab on 25% of the costs of the Medicaid program, while the state and federal governments cover the other 75%.

The city has retained outside counsel to pursue the actions on a contingency basis. Law firm Goodkind Labaton Rudoff & Sucharow is handling the Paxil and Augmentin cases. The firm is already representing Suffolk County, NY, and the United Federation of Teachers in their similar lawsuits that claim they were forced to overpay for Augmentin. The law firm Kirby, McInerney & Squire is pursuing the OxyContin case on the city's behalf.

The City of New York filed three lawsuits in May against drug manufacturers it claims overcharged it for pharmaceuticals. The suits, brought in three district courts, claim that GlaxoSmithKline (GSK) and Purdue Pharma L.P. kept prices artificially high on pain reliever OxyContin', antidepressant Paxil', and antibiotic Augmentin' by using false and misleading methods to extend their drugs' patents.

The Purdue Case

The suits follow in the wake of successful actions brought by generic manufacturers against the two brand-name drug producers. In the case of pain reliever OxyContin, for example, the U.S. District Court for the Southern District of New York found on Jan. 5 that several patents related to Oxycontin were infringed by generic drug manufacturer Endo Pharmaceuticals Inc. but that the patents on the brand-name drug were invalid due to Purdue's inequitable conduct before the patent examiners. Purdue Pharma L.P. v. Endo Pharmaceuticals Inc., 00 Civ. 8029 (SHS), 01 Civ. 2109 (SHS), 01 Civ. 8177 (SHS), 2004 U.S. Dist. LEXIS 10 (S.D.N.Y. 1/5/04). The inequitable conduct complained of was this: Although Purdue repeatedly informed PTO examiners that it had discovered an oxycodone formulation that did not simply control pain over a reduced dosage range, but controlled pain over a “four-fold” range of doses for “approximately 90% of patients,” and that this “result” was of “extreme clinical importance,” the company never informed the patent examiners that it had no actual scientific proof that OxyContin's formulation relieved pain in most users over a four-fold dosage range. This claim was based only on one of Purdue's researchers' “insights,” which in turn was based on his observation of test data combined with his knowledge of the properties of oxycodone. The Purdue case is awaiting appeal.

Two Other Cases

The other two cases — one decided in the Eastern District of Pennsylvania and the other in the Eastern District of Virginia — have already been appealed to the U.S. Court of Appeals for the Federal Circuit, which affirmed the district courts' findings of patent invalidity. New York City's suits were filed in the respective districts in which the patents were declared invalid or unenforceable.

One basis for the city's lawsuit against GSK is an allegation that the company used the Hatch-Waxman Act to extend patents on Paxil, filing claims against nine different potential generic equivalent manufacturers. Each of these suits had the effect of extending GSK's monopoly for up to 30 months, due to the act's statutory stay provisions. In one of its cases against Purdue, the city claims that the original patent on Paxil should have expired in 1992, but that the company later filed dozens of additional patents on the product that would have extended its exclusivity rights until 2019.

At stake are as-yet uncalculated damages reflecting the difference between the prices of the name-brand drugs the city purchased and the prices the city's Medicaid program would have paid for generic equivalents, had they been available on the market. In addition, because the city claims the drug companies violated federal anti-trust laws, it's seeking treble damages. In 2002, New York City Medicaid patients used more than $14 million worth of Augmentin, over $23 million worth of Paxil and approximately $5.5 million worth of OxyContin. New York City picks up the tab on 25% of the costs of the Medicaid program, while the state and federal governments cover the other 75%.

The city has retained outside counsel to pursue the actions on a contingency basis. Law firm Goodkind Labaton Rudoff & Sucharow is handling the Paxil and Augmentin cases. The firm is already representing Suffolk County, NY, and the United Federation of Teachers in their similar lawsuits that claim they were forced to overpay for Augmentin. The law firm Kirby, McInerney & Squire is pursuing the OxyContin case on the city's behalf.