Dispute highlights challenges facing drug groups in the Philippines, writes Roel Landingin.

‘Power and protection to the Max — coming soon,” read the message on the blue shirts that sales representatives of United Laboratories were asked to wear in August. To the sales agents of the Philippine drugs company, the shirts were another gimmick to create interest in a new, but as yet unnamed, pharmaceutical product when they visited medical clinics and hospitals in the country. But Pfizer, the world’s biggest pharmaceutical company, is taking the message on the shirts more seriously. It cited the episode in a 17-page suit alleging patent infringement against the largest drugsmaker in the Philippines. The unprecedented legal case aims to fend off competition from UniLab’s new generic alternative to Lipitor — Pfizer’s second best- selling drug brand in the Philippines. Pfizer’s legal move underscores the tough commercial and regulatory challenges facing multinational drug companies in the poor south-east Asian nation. The Philippine government recently imposed price caps on certain drugs for the first time since the 1970s in order to make essential medicines more affordable to Filipinos.

A Manila court, which held a second hearing on the case this month, is considering Pfizer’s petition to stop UniLab from importing and selling a generic version of Lipitor, the cholesterol-lowering drug that is the US company’s best-selling product.

Pfizer has alleged that UniLab violated a patent issued in 1995 for Atorvastatin calcium, the active ingredient in Lipitor, by distributing a generics equivalent before the patent expires in 2012.

UniLab says that the initial patent for Atorvastatin, issued in 1990, has already expired. It argues that the subsequent patent in 1995 was invalid because it was merely for a new form of the substance and therefore not entitled to a patent. In July, it filed a petition asking the Philippine intellectual property office to cancel the 1995 patent for Atorvastatin calcium.

UniLab and Pfizer have met in patent disputes before but this is the first time a dispute has led to suits before the country’s patents office and a judicial court. Previous disputes were settled amicably, and Pfizer even licenses the production of one of its products to UniLab.

The dispute comes amid rising competitive pressures in the pharmaceutical industry. “It’s a competitive business,” says Patricia Pascual, Pfizer’s public affairs director. “It became even more competitive since the imposition of the MRP [maximum retail prices],” in August. While margins of branded drugmakers are being squeezed, she says generics producers are also under pressure to preserve their cost advantage and market position.

The Philippines is only the eighth-biggest pharmaceutical market in Asia. But government officials say it has the second-highest prices for many essential medicines in the region. This presents opportunities for big margins for international drug companies who control almost 70 percent of the 120bn pesos ($2.5bn) market for drugs and related products. Pfizer was particularly hard hit by the imposition of mandatory price cuts. Most of the 27 drug preparations covered by the price caps were being sold by Pfizer, including Norvasc, the country’s best-selling drug by value, and Lipitor. The government order could cut its revenues in the Philippines by 40 percent this year and trigger staff lay-offs, Pfizer said.

The introduction of a generics alternative to Lipitor three years ahead of the expected expiry of the Lipitor patent represents a fresh blow to Pfizer. It could erode its almost 30 percent share of the market segment for anti-cholesterol treatments.

According to a drug company analyst, citing figures from data provider IMS, it could also dampen Lipitor’s rising volume growth which exceeded 20 percent in 2008. Joey Ochave, a lawyer at UniLab, pointed out that the low-priced equivalents help expand the market by catering to potential customers who could not afford the original drugs. Pascual says Pfizer is planning to introduce its own generics brands in the Philippines by next year.