3. The following discussion describes a patent dispute in the pharmaceutical industry:79 In 2008, state and federal authorities were examining whether Abbott Laboratories violated antitrust laws in its efforts to prevent an Israeli company from successfully selling a generic version of its cholesterol medicine, TriCor.

Although drug companies typically have 3 to 10 years of exclusive patent rights remaining when their products hit the market, they can often find ways to extend their monopolies by patenting slight improvements to those drugs. Twenty-five states and the District of Columbia filed suit in federal court alleging that in addition to filing new patents on questionable improvements to TriCor, Abbott engaged in a practice known as “product switching.” This strategy involved retiring an existing drug and replacing it with a modified version that was marketed as “new and improved,”

preventing pharmacists from substituting a generic for the branded drug when they filled prescriptions for it. Although this strategy is not illegal, the plaintiffs argued that Abbott employed it and other strategies solely to preserve its monopoly on TriCor.

One year after TriCor hit the market in 1999, Israeli Teva Pharmaceuticals Industries applied to the Food and Drug Administration (FDA) to market a similar version of the drug. Abbott sued Teva for patent infringement, which triggered a 30-month waiting period during which the generic drug could not be launched while patent challenges were being debated. During the waiting period, Abbott altered its product, lowering the dosage and changing it to a tablet from a capsule.

It filed for a patent on this modified form of TriCor, bought back the remaining supplies of the capsules and replaced them with the lower-dose tablet. When the 30 months had elapsed, Teva could no longer launch its generic drug because it was no longer strictly bioequivalent to the modified TriCor.

This process was repeated again from 2002 to 2005. Teva filed a counter-suit alleging anti-trust law violation. The company argued that Abbott’s strategy allowed pharmaceutical companies to protect their monopolies indefinitely. Abbott said it has the right to protect its innovations and denied switching formulations for the sole purpose of warding off generic competition. It said the two switches brought improvements for patients. Teva argued that the drug’s active ingredient stayed the same and that the supposed improvements were smoke screens.

Describe the role of patents as barriers to entry in the pharmaceutical industry. In the current business media, follow up on this and other similar cases involving drug patents to determine the strategies that drug firms are currently employing to maintain their market power.