Patent Challenges
Another facet of Barr's U.S. generic product activities involves
challenging patents covering certain brand products. The Company's generic-development activities include generic
versions of select branded products that are alleged to be patent protected. By utilizing the patent-challenge process
under the Hatch-Waxman Act, the Company seeks to invalidate patents or obtain a declaration that its generic version
does not infringe the patent. Barr actively challenges patents on branded products when it believes these patents are
invalid, unenforceable or not infringed by competing generic products.
The Company's patent challenges on branded pharmaceutical products
have resulted in the successful conclusion of 19 of 22 cases as of December 31, 2007. Successful outcomes have included:
court rulings in Barr's favor invalidating patents or discovering its product does not infringe an existing patent;
situations in which Barr has not been sued for patent infringement; and settlements with the patent holder.
Generic development activities in this area, including sourcing
raw materials and developing equivalent products, are designed to obtain FDA product approval. Legal activities, performed
with the assistance of outside counsel, are designed to eliminate the barrier to market entry created by questionable patents.
Successful patent challenges can result in gaining 180 days of market
exclusivity for the first company to initiate the patent challenge. If Barr receives such market exclusivity, it typically
earns significant revenues and profitability associated with that product during the six-month exclusivity period.
At the end of that period, the Company's product revenue and market
share generally decline as other generic competitors enter the market. As branded pharmaceutical companies have increased
the number of patents protecting their products, the number of Barr's generic products in development facing intellectual
property issues and possible litigation has also increased.
While the Company's record of successfully resolving patent challenges
has contributed to its growth, it has also created periods of revenue and earnings volatility and will likely do so in the future.
Despite this volatility, patent challenges continue to be an important component of Barr's generic product selection and
development strategy.
Recently, the issue of authorized generics has had an impact on generic
patent challenges. Authorized generics involve the brand pharmaceutical maker licensing its drug to a company that then markets
it as a generic product. The authorized generic versions are made by the brand-name company, and sometimes distributed by the
generic partner. Because the authorized generic is sold under the brand pharmaceutical maker's New Drug Application (NDA),
it can compete against the patent challenger's generic product during the 180-day exclusivity period following a successful patent challenge.
The Company believes that the marketing of authorized generics during the
180-day exclusivity period undermines the incentive integral to the Hatch-Waxman patent challenge process, and will provide
disincentives to generic companies seeking to challenge patents. Barr will continue to work with Congress, the Department of
Health and Human Services, including the FDA, and the generic industry association to limit the use of authorized generics.
Product Guide 
