BMS sues Mylan (Matrix) Labs for selling generic version of HIV drug Atazanavir to PAHO

Bristol-Myers Squibb (BMS) has filed a breach of contract complaint against Mylan Laboratories in the US District Court, Southern District of New York. At the heart of the complaint is the procurement of the generic version of a HIV medicine from India by Pan American Health Organization (PAHO), which was then supplied to Venezuela. The drug atazanavir was manufactured in India where no patents have been granted to Novartis or BMS on the drug or its manufacturing process and was supplied to Venezuela where BMS, again, does not have any granted patents.

A copy of the complaint is available here.

On April 17, 2011, Mylan Labs and BMS entered into a commercial agreement on the key HIV drug atazanavir, now recommended by WHO as the first option for second-line treatment. Generic atazanavir is manufactured in India where no patents have been granted on the drug [Note: atazanavir patent applications are under examination in India and have been opposed by civil society and generic companies including by Mylan (Matrix) Labs itself.]

Under the 2011 agreement with BMS, Mylan acquired an assurance of immunity-from-suit to manufacture, distribute and sell atazanavir in certain developing countries, mostly restricted to Sub-Saharan Africa and India.

According to the complaint, in November 2011 Mylan sought permission from BMS to supply generic atazanavir in Venezuela – a country not included in the territories listed in the agreement. BMS refused because it had been supplying branded atazanavir (Reyataz) to the government of Venezuela for at least 5 years.

BMS alleges that Mylan violated their agreement by providing PAHO with over a year’s supply of atazanavir for use in Venezuela and estimates lost profits on sales to be in excess of 15 million USD. Furthermore, BMS claims that as a consequence of Mylan’s actions, its “negotiation strength with the Venezuelan government going forward has been severely damaged.” BMS is demanding minimum damages of no less than 15 million USD plus applicable interest.

Excerpts from the agreement provide details of the non-assert arrangements as well as limits of the “immunity-from-suit” provisions, including the following language:

“3.1 For the avoidance of doubt, the immunity from suit, as referred to herein, shall provide to Company a defense against a suit or other enforcement of the Intellectual Property on any ground of infringement arising from Company’s exercise of the grant in accordance with the terms and conditions of this Agreement.

a. Subject to the terms and conditions set forth herein, BMS grants to Company immunity from suit under the Intellectual Property for the: (i) manufacture of Products by Company or Company Affiliates in the Territory; (ii) sale or other distribution of Products by Company or Company Affiliates, or their authorized distributors and agents, within the Territory; and (iii) use of Products obtained from Company or Company Affiliates, or their authorized distributors and agents, for treating HIV/AIDS in the Territory.

b. The immunity from suit provided by this Agreement shall not prevent the exportation of Products to or distribution of Products within countries outside the Territory where Patents do not exist. However, the immunity from suit shall not extend to patents and patent applications not explicitly included within the Patents, nor shall it extend to know-how not explicitly included within the Know-How rights, nor shall it extend to Patents outside the Territory.”

Particularly problematic is the definition of Patent in the agreement that includes not only granted patents but pending patents applications as well. BMS does not have any granted patents in Venezuela but seeks to bar Mylan Labs from supplying the drug based on claims of two pending patent applications: VN 2005-000854 and VN 1999-000084.

However, a preliminary search of the status of the patents on the SAPI (Servicio Autónomo De La Propiedad Intellectual)  database indicates that the VN 1999-000084 application which covers the bisulfate salt of Atazanavir was rejected by the Venezuela Patent Office and the decision is under appeal by BMS. The VN 2005-000854 is an application for a process to make the bisulphate salt and is undergoing patent opposition proceedings in Venezuela. The search results are available here.

Use of the broad definition of “Patent” sets up strong restrictions on the immunity-from-suit, especially given the common practice of originator companies registering a series of secondary patent applications on the same drug in numerous jurisdictions which does not indicate whether the patent applications are undergoing opposition or if the likelihood of being accepted or deemed valid is actually low.

Other voluntary licenses (VLs) are likely to have similar overly broad definitions (licenses on HIV medicines like rilpivirine and raltegravir are also expected to have an over-broad definition of patents). The terms of such agreements are ritually kept secret in spite of the implications for patient access and public health. This case not only highlights the risks associated with closed negotiations but is an illustration of the litigation to which generic companies may similarly be subjected for supplying middle income developing countries.

Big pharmaceutical companies are advancing voluntary licenses with Indian generic firms as the cornerstone of their access programs. This dispute between BMS and Mylan highlights the danger of such voluntary licenses that are applied as a means of controlling the generic competition by limiting the geographical scope of supplying the drugs and raises questions about the ability of VL arrangements to meet the objectives of improving access to essential medicines across the developing world.

This court case is a wakeup call particularly for the Indian generic industry which has recently signed a spate of VLs without actually considering the impact of the terms of the contracts.