Cheap Drugs, Expensive Lawsuits 

Hayward's Impax Laboratories wants to make generic versions of some of the most popular name-brand drugs. If only it survives the lawsuits.

Impax Laboratories is a bit like the generic medicines it manufactures: a powerful agent wrapped in a nondescript exterior. The Hayward-based company is the tenth-largest generic-drug maker in the United States, which says a lot, given Americans' taste for cheaply assuaging their aches and pains with prescription medicines. Yet the company's modest headquarters are unobtrusively housed not far from I-880 in a vanilla-pudding-colored structure not much more architecturally daring than your average strip mall.

But even as some Bay Area biomedical firms pinch pennies or retrench, Impax is putting the finishing touches on a 50,000-square-foot production facility capable of churning out two billion doses of medicine a year. It plans to turn its current warehouse into an administrative command center, and has purchased still more vacant land next to its new facility upon which to build yet another production line. It's banking on the public's increasingly strong demand for low-cost generic medicines.

If the economy bears out the company's happy predictions about the future of the generic drug market, Impax Laboratories plans to more than double its workforce over the next several years. Impax currently manufactures about a half dozen different generic drugs, and has filed paperwork with the federal Food and Drug Administration to manufacture fifteen more. In the years ahead, it hopes to file six such applications every year.

Perhaps the most noteworthy addition Impax hopes to make to its roster is a generic version of Claritin -- no doubt a familiar name if you are one of the nation's 35 million seasonal allergy sufferers, or have been anywhere near a television in recent years. Like many other anti-allergy drugs, Claritin works by blocking your nasal passages' response to histamines, tiny molecules released in reaction to pollen or other irritants. But Claritin's maker, Schering-Plough Corporation, has heavily promoted it as a vast improvement upon over-the-counter allergy medications because the formula is nonsedating. That means you can pop a pill and still stay awake at the wheel.

Consequently, Claritin is one of the nation's most popular drugs, and now produces about a third of Schering-Plough's annual revenue. It's also notoriously pricey, costing as much as $85 for a month's supply. The conjunction of these factors has put Impax at the center of a heated legal battle between Claritin's inventor and the drug makers who want to sell a generic version.

Although Claritin clearly found a ready consumer market, getting it to pharmacy shelves was not easy. Schering-Plough received a patent for the underlying chemical compound in 1981, but it did not formulate Claritin and approach the FDA for approval to sell it until 1986. Agency review added more than six years to the process, partly because the FDA first thought Claritin did not substantially improve upon existing treatments, and partly because Schering-Plough modified the pill's dosing mechanism midway through the process. The drug was finally approved in 1993 -- twelve years after Schering-Plough's initial patent was granted.

But the company's patience was amply rewarded. Today, Claritin is a "blockbuster," a title given to any drug that earns its developer more than $1 billion in annual US sales. Claritin has been a prodigious cash cow for Schering-Plough, last year generating $2.7 billion. The company markets five different formulations of the drug: the original, a syrup, a quick-dissolving "Reditab," and 12- and 24-hour versions. But the good times may be about to end for Schering-Plough. The patent that covers Claritin's active chemical compound, loratadine, is set to expire this December.

Enter the competition. At least eighteen different companies are jostling for the right to make generic loratadine once Schering-Plough's patent expires. And at the head of the pack is Impax, the East Bay's only generic drug maker, which has filed applications with the FDA to make three different generic versions of loratadine -- a Reditab, 12-hour, and 24-hour doses of the drug.

Which, if any, of those pills will roll off the firm's Hayward production line will be decided by the courts. Impax was promptly rewarded for its three FDA applications with three lawsuits from Schering-Plough. Each suit seeks to prevent Impax from marketing loratadine, claiming that the company's plans infringe on at least one of the developer's patents. Schering-Plough also has sued seventeen other generic manufacturers. If the company wins its suits, the generic version of Claritin could potentially be pushed back until at least 2004 for the Reditab and 12-hour versions, and 2012 for the 24-hour formula. The extra years of market exclusivity would mean billions of dollars in sales for Schering-Plough. But even if it doesn't win in court, the resulting delay in getting a generic version of Claritin to market could cost consumers tens, if not hundreds, of millions of dollars.

Schering-Plough is hardly the only drug developer that has turned to litigation to keep Impax from manufacturing a generic knockoff of one of its products. Impax is being sued by the makers of every single drug it plans to copy, including the generic version of rival allergy drug Allegra, anti-ulcerant Prilosec, depression medication Wellbutrin, pain drug OxyContin, lipid-regulating agent TriCor, and antismoking drug Zyban. In each case, the drug developers are alleging patent infringement and asking that Impax be prevented from making their drug until litigation is resolved.

For Impax, the lawsuits are just business as usual. The entire generic drug conversion process is fraught with litigation. Given the way that patent law is currently written, it is actually in the best interest of both sides to end up in court. Generic drug makers have an incentive to approach the FDA as early as possible with applications to make copies of profitable drugs. Drug developers, on the other hand, profit by filing patent-protection lawsuits and dragging them out best they can, often extending their market monopoly. Critics say "Big Pharma" is exploiting loopholes in patent law to spin out their market exclusivity for as long as possible, keeping prices artificially high and preventing drug makers such as Impax from bringing their products to pharmacies.

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