Bristol-Myers Squibb Deal on Plavix Generic under Criminal Investigation
- United States
- 08/07/2006
- Arent Fox PLLC
In a highly unusual move, Federal Bureau of Investigation agents searched the Manhattan offices of Bristol-Myers Squibb Company (BMS) on July 26, 2006, including the office of CEO Peter Dolan, as part of a criminal antitrust investigation into a patent settlement deal between BMS, Sanofi-Aventis SA and Apotex Inc. But it is highly unlikely the agencies are treating patent settlements themselves as crimes.
According to press reports, BMS and Sanofi, a Paris-based company and developer of Plavix, had been embroiled in patent litigation with Apotex, a Toronto-based company, which challenged BMS’s Plavix patents. In an effort to settle the litigation, BMS, Sanofi and Apotex constructed a deal, in which BMS and Sanofi would pay Apotex at least $40 million to forestall Apotex’s release of a generic version of Plavix, BMS’s top-selling drug, until the main patent protecting Plavix expired in 2011. In return, BMS would enjoy five more years without generic competition, affording protection to the $4 billion in annual Plavix sales BMS records as the exclusive marketer of the drug in the United States. Consummation of the settlement deal was, however, contingent upon approval by the Federal Trade Commission and state attorneys general. A first attempt by BMS, Sanofi and Apotex to obtain government ratification was unsuccessful, and a subsequent attempt to gain approval of a modified settlement was pending at the time of the FBI raid.
At present, all parties, including the government, are refusing comment on the specifics of the investigation. Toronto newspaper The Globe and Mail speculates that the criminal probe may have been prompted by suspicion that BMS, Sanofi and Apotex misled the FTC and the states during their respective reviews of the settlement or in response to suspicion that the parties shared information on pricing and other confidential information during negotiations leading up to the deal. Either may give rise to charges of price fixing and per se market allocation under the Sherman Act.
It is unlikely, but possible, that the agencies are now viewing the settlement agreement itself as a crime. The FTC’s cases against Schering and Warner Chilcott for entering similar agreements were civil and strongly suggest that the agencies do not view these agreements as criminal violations. The FTC’s important loss in Schering, however, does send a signal to business that these settlements are not antitrust violations irrespective of what the FTC and Justice Department say. It is conceivable that the agencies would bring criminal charges in order to reassert their enforcement authority and chill the behavior Schering may now encourage. A criminal prosecution would certainly do that. If the agencies are indeed taking that position, parties to these agreements would be strongly advised to consider a comprehensive internal audit if they have entered into any of those agreements. That audit should include a factual investigation and an antitrust assessment. If the facts developed proved particularly bad, a party may have to consider terminating the agreement or even approaching the Justice Department under its leniency program.
Doing so now is entirely premature. It is far more likely that the FTC found evidence of a hard-core antitrust violation in the submissions and are following up on it rather than changing their position on patent settlements. Indeed, it is not even clear that the Justice Department would ultimately be successful criminalizing these agreements. Nonetheless, it is important to watch this case. If it turns out that the agencies are now viewing these patent settlements as criminal violations, companies will need to audit their settlements comprehensively.
