Lilly and Canadian government spar over drug patents

|By:, SA News Editor

Many industry observers are watching the IP-related dispute between Eli Lilly (LLY -0.4%) and the Canadian government. Several years ago, Canadian courts invalidated Lilly's patents on its ADHD drug Strattera (atomoxetine HCL) and its antipsychotic Zyprexa (olanzapine) thereby opening the market for generic competitors. The company filed for arbitration last fall under the rules of NAFTA seeking $500M in damages. It hopes to force Canada to alter the way it administers patent rights.

Lilly asserts that the Canadian courts erred in ruling that it should have offered more proof of effectiveness at the time of the initial filings. It says that the courts relied on a government doctrine that produced absurd results and accuses the government of expropriating its IP.

The Canadian Department of Foreign Affairs, Trade and Development issued a 45-page rebuke on June 30 asserting that Lilly's argument is full of misstatements and offers a misleading account of the facts. It claims that the firm is a "disappointed litigant" that refuses to accept "reasoned, principled and procedurally just court decisions."

The notion of a "supranational court of appeals" alarms consumer advocacy groups because of the potential ability of companies to circumvent domestic laws and courts.

The Office of the U.S. Trade Representative has yet to weigh in on the matter.