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Executive Summary

Schein's anticipated 180-day ANDA exclusivity for a generic version of ICI's Tenoretic appears to have been preempted by a perfunctory filing of a certification statement by ICI's IPR subsidiary that its generic atenolol/chlorthalidone product would not infringe ICI's patent. Schein announced in June that it expected to receive 180-day ANDA exclusivity for an atenolol hypertension indication and for a generic version of ICI's Tenoretic following a successful patent challenge of ICI's patent covering the use of atenolol in hypertension ("The Pink Sheet" June 29, T&G-1). An ANDA filed by Schein's Danbury subsidiary for the atenolol/chlorthalidone product was approved by FDA on July 2. FDA's position is that the first company to file a complete ANDA and a paragraph IV certification statement that the brandname product's patent is not infringed should be the only company eligible for ANDA exclusivity. In the case of generic Tenoretic, IPR, which is a subsidiary created by ICI to market generic versions of Tenormin (atenolol), Tenoretic and possibly other major brands several months before patent expirations, was the first to file a complete ANDA and a paragraph IV certification with FDA. IPR's paragraph IV certification, however, did not challenge the validity of the parent company's hypertension claim patent but only noted IPR's intent to market a generic prior to the January 1993 expiration of ICI's patent based on a licensing agreement. Because IPR did not challenge the patent, FDA has decided that there will be no award of ANDA exclusivity for any generic versions of Tenoretic despite a court finding that the sole patent protecting the branded product -- the atenolol hypertension claim patent -- is invalid. Attorneys for Schein successfully argued in Delaware federal court last October that the ICI patent for atenolol's use in hypertension is invalid because a number of earlier clinical studies with other beta blocker compounds had already demonstrated that the chemical class effectively treated hypertension. In addition, the district court found that ICI's patent for the hypertension use did not contain enough information for someone of ordinary skill to determine the effective dose. The district court's decision was upheld by a federal circuit court in early June. FDA's decision to consider only the first complete ANDA with paragraph IV certification for the purpose of awarding 180-day ANDA exclusivity is, for the most part, consistent with the agency's position in 1987 when it granted 180-day ANDA exclusivity for a generic version of Maxzide to Vitarine. The Vitarine decision was greeted by lawsuits from Barr Labs, which was the first to file a paragraph IV certification but submitted its bio studies after Vitarine, and American Therapeutics, which received the first ANDA approval but was not the first to challenge the patent. However, two new twists in the agency's Tenoretic decision may give the generic drug industry cause for concern. FDA's decision to consider a paragraph IV certification statement based on a licensing agreement, and not a patent challenge, as the operative filing for determining 180-day ANDA exclusivity may lead to roadblocks for patent challenges in the future given the growing number of outlicensing agreements between innovator firms and generic companies prior to patent expiration. In addition, FDA's consideration of IPR as a separate entity, independent from ICI for the purpose of determining 180-day exclusivity could give innovator firms another tool for protecting patents vulnerable to a court challenge. An innovator firm conceivably could "out"-license generic marketing rights to a subsidiary years before a patent is due to expire, giving the subsidiary sufficient lead time to file an ANDA and paragraph IV certification before any generic firms. An announcement by the brandname company of the licensing agreement and ANDA filing might be sufficient to dissuade generic firms interested in challenging a patent from doing so. A generic company interested in challenging the patent would be taking on the costs and risks associated with a patent challenge without the guarantee of an exclusive marketing period if the patent challenge were successful. A number of innovator firms already have generic subsidiaries (Warner-Lambert, Ciba-Geigy and Lederle, for example) and several other companies recently have established subsidiaries to market generic versions of their own products just prior to patent expiration (ICI's IPR and Marion Merrell Dow's Blue Ridge Labs, for example). However, there is no indication that either ICI or MMD considered the possibility of preempting generic challenges when they established their respective subsidiaries. Most of the protection MMD's Cardizem line has received from generic competition has come from Waxman/Hatch exclusivity rather than from patents. FDA's decision not to grant 180-day exclusivity to Schein could turn out to be a negative for ICI. Instead of just one generic competitor to Tenoretic until January 1993, IPR may have to compete against several generic products if FDA proceeds to approve additional atenolol/chlorthalidone ANDAs in the meantime. IPR is currently in the midst of launching its generic version of Tenoretic at a 25% discount to the brand name product ("The Pink Sheet" June 29, T&G-1). IPR's generic of the atenolol/chlorthalidone combination was approved on May 31, 1990. Schein expects to launch its generic atenolol/chlorthalidone "in the next few weeks," the company said. Danbury is currently gearing up for a post-approval validation by FDA inspectors. The company will not discuss pricing for its generic atenolol/chlorthalidone until the launch.

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