Largest Settlement Ever for Patent-Infringement Damages

Teva (Petach Tikva, Israel) and Sun Pharmaceutical (Mumbai, India) have agreed to pay USD 2.15 billion in patent-infringement damages for selling low-cost copies of heartburn reliever Protonix before the branded drug's US patent expired.

Under the terms of the settlement, Teva will pay USD 1.6 billion and Sun Pharmaceutical will pay USD 550 million to damages to Pfizer (New York, NY, USA) and Takeda Pharmaceutical (Osaka, Japan), the largest pharmaceutical company in Japan, following a trial that began last week in federal court in Newark (NJ, USA). Pfizer will receive 64% of the total, with Japan's Takeda receiving the rest. The settlement is thought to be the highest tab for damages from an "at-risk" launch of a generic drug, a tactic used by generic drug makers to begin selling a generic drug before patent litigation against it has been resolved.

The Protonix affair began in 2007 when Teva and Sun Pharmaceutical began selling low-cost generic pantoprazole sodium, before a key patent expired. The move followed a US federal judge's denial of a request by Protonix's marketer at the time, Wyeth (Philadelphia, PA, USA), for an injunction to block the sale of generic copies until patent litigation was resolved. The generic competition resulted in sales of branded Protonix plunging 80% to USD 395 million for 2008, contributing to Wyeth's decision to dismiss thousands of employees. Pfizer acquired Wyeth in 2009, inheriting Protonix and the associated litigation.

The settlement comes after a prolonged legal battle in which Pfizer and Nycomed—original owner of the patent and now part of Takeda—sought to enforce the patent for the blockbuster acid reflux medicine. As part of the settlement, both Teva and Sun have admitted that their sales of generic pantoprazole infringed the patent that was held valid by the court. Teva will pay half of its USD 1.6 billion bill in 2013, and the rest by October 2014. Pfizer said Sun's entire payment will be made in 2013.

“We are pleased with today's settlement, which recognizes the validity and value of the innovation that led to Protonix. Protecting intellectual property is vital as we develop new medicines that save and enhance patients' lives,” said Amy W. Schulman, general counsel of Pfizer. “Today’s settlement reflects our resolve to enforce our patents both in and out of the courtroom. We are proud of the work of the scientific colleagues who developed this medicine and the lawyers who defended it.”

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