June 5, 2002

States Accuse Bristol-Myers of Fraud on Taxol


By MELODY PETERSEN AND MARY WILLIAMS WALSH

Attorneys general from 29 states accused Bristol-Myers Squibb yesterday of illegally profiting through several fraudulent schemes to keep lower-priced generic versions of Taxol, a life-extending cancer drug, off the market.

In a lawsuit filed in Federal District Court in the District of Columbia, lawyers for the states said one scheme involved collusion between Bristol-Myers and a small California drug company, American BioScience, to extend Bristol-Myers's exclusive right to sell Taxol in the United States. American BioScience, which was named as a co-conspirator but not a defendant in the lawsuit, has received financing from Premier Inc., a hospital-owned group that is supposed to help hospitals save money by buying medical supplies more cheaply.

''It would be ironic if it wasn't so egregious,'' said Betty D. Montgomery, the attorney general of Ohio. A Senate panel overseeing antitrust issues is already investigating Premier, in part to review its investments in medical companies.

The states' lawsuit says Bristol-Myers and American BioScience filed a ''sham court action'' that helped delay the availability of a cheaper version of Taxol, a drug that can cost up to $10,000 for a course of treatment lasting several months.

The New York attorney general, Eliot L. Spitzer, said the companies' actions had cost state governments, patients and their insurers ''many, many millions of dollars.'' The lawsuit seeks to recoup the extra money that the plaintiffs contend that state governments and cancer patients were forced to pay for Taxol from December 1997 to April 2001, when several companies began selling generic versions of the drug and the price fell.

''We cannot tolerate anticompetitive and deceptive practices that allow drug companies to fatten their bottom lines illegally at the expense of people who depend on this drug,'' Mr. Spitzer said. He said he knew of some patients who had decided against treatment because of the cost.

''They looked at it and decided it was too expensive,'' he said.

Bristol-Myers said yesterday that it planned to defend itself against the lawsuit, which it said was similar to other recent suits involving Taxol that were filed by generic drug companies and consumer groups.

''The only news in this lawsuit is that the states have chosen to enter late in the litigation,'' the company said in a statement. ''The actual events at issue are several years old and have been the subject of litigation for some time.''

Lew Phelps, a spokesman for American BioScience, said the allegations in the lawsuit were ''false and without merit.''

''The concept of collaboration between American BioScience and Bristol-Myers is preposterous,'' Mr. Phelps said.

Premier declined to comment other than to confirm that its venture capital unit still owned a minority stake in American BioScience.

That unit, which has since stopped making investments, invested several million dollars in American BioScience in 1996. A Premier executive also took a seat on the board at American BioScience; he has since left Premier and is no longer on the board of American BioScience.

Premier acts as a purchasing agent for nearly 1,500 nonprofit hospitals and is owned by many of those hospitals.

Until the arrival of generic competitors, Taxol was one of Bristol-Myers's top-selling products, with sales of more than $1 billion a year.

The states' lawsuit is the latest setback for Bristol-Myers. Its stock has declined by more than 40 percent in the last year after the company lost battles to keep competitors from selling generic versions of Taxol and two other drugs that had lost patent protection.

Taxol, which is known generically as paclitaxel, was discovered by government scientists at the National Cancer Institute. The government spent more than $32 million to develop it, according to the states' lawsuit. Later, the government granted Bristol-Myers the exclusive right to sell Taxol in the United States for five years, starting when the Food and Drug Administration approved the drug in December 1992.

The states' lawsuit contends that Bristol-Myers illegally extended the five-year period by fraudulently obtaining two patents from the United States Patent and Trademark Office. Taxol itself cannot be patented, but delivery methods can. The lawsuit contends that Bristol-Myers misused the patents to keep generic companies from selling a lower-priced version of the drug.

When that tactic eventually failed, according to the lawsuit, Bristol-Myers then colluded with American BioScience in a scheme that involved yet another patent, this one obtained by the smaller company.

In September 2000, with Bristol-Myers's extended period of exclusivity about to expire, American BioScience sued Bristol-Myers, demanding that it file information about its patent with federal regulators. That step would effectively bar any generic drug companies from selling their own versions of Taxol for as many as 30 additional months.

But that litigation, according to the states' lawsuit, was a ''sham'' aimed only at delaying the sale of lower-priced versions of the drug. The Federal Trade Commission has said that it is investigating the relationship between Bristol-Myers and American BioScience, trying to learn whether they ''were working together,'' according to a court document.

Consumer groups, which have long complained about Bristol-Myers's control of the Taxol market, praised the states' suit, which has been planned for more than a year.

''If they win, it will put up a big, strong, bright warning light to other companies that think it's in their best interest -- and in the best interests of their shareholders -- to use any means necessary to extend their patents,'' said Cynthia A. Pearson, executive director of the National Women's Health Network.

''This trend has been escalating to the point where consumers are being gouged,'' Ms. Pearson added.

State attorneys general have filed other suits contending that brand-name drug makers have illegally delayed the generic versions of their products. One such case involves BuSpar, an anti-anxiety drug, which is also sold by Bristol-Myers.

Ms. Montgomery, the Ohio attorney general, expects the states to file more such suits. ''Our biggest concern is to change the behavior of the drug companies,'' she said. ''That is what we are looking for.''


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