Glaxo may sell older drug brands

GlaxoSmithKline CEO Andrew Witty defended pay-to-delay settlements to generic competitors.
GlaxoSmithKline CEO Andrew Witty defended pay-to-delay settlements to generic competitors. (AKIRA SUWA / Staff)
Posted: April 26, 2013

After reporting lower quarterly profits, drugmaker GlaxoSmithKline said Wednesday that it would reorganize its pharmaceutical divisions, with the possibility of someday selling older, "established" brands that it rarely promotes.

Glaxo is based in London, but has about 1,300 employees in Philadelphia's Navy Yard and more in other facilities in Pennsylvania and New Jersey.

Also, with United Kingdom authorities criticizing Glaxo for trying to delay the introduction of generic competitors nearly 10 years ago and the U.S. Supreme Court weighing a case, chief executive officer Andrew Witty defended the business practice.

In many countries, patents on drugs give manufacturers exclusivity in the marketplace, allowing them to charge more for a drug.

Generic companies try to challenge that exclusivity. They apply to the Food and Drug Administration for approval of a drug that they say is close to a copy of the branded product, but not so close as to infringe on the patent. The branded company sues, claiming patent infringement. Sometimes the companies settle the suit, with generic drugmakers able to sell their version later than they had sought, but earlier than they would have if they had waited for the patent to expire.

But other settlements, known as reverse payments or pay-to-delay deals, are made with the branded company paying the generic company. That practice prompted the U.S. Federal Trade Commission to object. The FTC argues that the growing number of these deals restrict trade and hurt consumers and taxpayers.

The Supreme Court heard arguments on March 25 and will likely decide whether such deals violate the Sherman Antitrust Act by the end of its term in June.

Witty declined to discuss specific cases, but he defended the general practice as better for business because it decreases legal costs and "usually leads to the generic product being made available" before the patent expires. "What is achieved in that is the elimination of uncertainty for both sides."

As for the reorganization inside the pharmaceutical division, Witty said GSK would shift about 50 "established" prescription medicines that are promoted lightly, if at all, into one category and that group's finances would be reported separately, starting in January.

Glaxo had $9.9 billion in sales in the first quarter, which was a drop from $10.1 billion in the same period in 2012. The after-tax profit for the first quarter of 2013 was $1.57 billion, which compared with $2.1 billion for the same period in 2012.


Contact David Sell at 215-854-4506, dsell@phillynews.com, or follow on Twitter @phillypharma. Read his blog at www.philly.com/phillypharma.

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