AstraZeneca Plc's Nexium acid-reflux pill and Roche Holding AG's Valcyte antiviral, both of which Ranbaxy has the rights to, face the same situation in a month.

Consumer cost

The conflict undermines the goal of the Drug Price Competition and Patent Term Restoration Act, known as the Hatch- Waxman Act after its key congressional sponsors, passed in 1984, to get low-cost treatments to market as quickly as possible. Typically, a single generic version of a named drug leads to a price drop of 30 to 50 percent, according to IMS Health Inc., a Danbury, Connecticut-based consulting firm. After six months, when other drugmakers can start making their own copies, the price drops by 60 to 90 percent, IMS said.

Given those percentages, U.S. consumers, insurers and the government, through its Medicare and Medicaid health plans, may have lost about $900 million in cost savings, according to calculations by Bloomberg News.

"All this time, Novartis, through no duplicitous intent, has been reaping this massive benefit," said Jason Rutt, head of patents at the industry consulting firm Rouse in London. "This is working against consumers as they're paying an exaggeratedly high price because there is no generic."

Diovan was for several years the best-selling product for Basel, Switzerland-based Novartis, with global sales peaking at $6.05 billion in 2010. Ranbaxy, of Gurgaon, India, first asked for permission to copy the Novartis product in 2007.

Failed monotherapy

The medicine is prescribed to lower blood pressure by relaxing and widening the blood vessels. A version of the therapy, called Diovan HCT, pairs it with a diuretic to help rid the body of salt and water.

While there are generic versions of the HCT form on the market, Ranbaxy failed to win FDA approval to sell the generic of Diovan as a monotherapy, while retaining the right to the six-month exclusivity. Since the clock never started on Ranbaxy's six-month exclusivity, other copies are blocked.

Ranbaxy planned to manufacture Diovan in its Mohali, Punjab plant. The FDA, though, banned exports to the U.S. from that plant in September 2013. Three other plants have also been banned from selling their products in the U.S.

On April 7, Sun Pharmaceutical Industries Ltd. said it had agreed to acquire Ranbaxy from Japan's Daiichi Sankyo Co. for $3.2 billion ($4 billion including debt). Sun Chief Financial Officer Uday Baldota said it can draw from past experience resolving FDA issues.

Ranbaxy plans

Ranbaxy Chief Executive Officer Arun Sawhney said on April 7 that the company will maintain exclusivity on the three drugs, and that he wouldn't speculate on when they would reach the market. The drugmaker has declined to say why their copy of the drug wasn't approved. Sandy Walsh, an FDA spokeswoman, said the agency can't comment on the status of drug applications.

Novartis doesn't comment on regulators or competitors, said Dermot Doherty, a spokesman. "We also have no insight into the timing of the launch of a generic Diovan monotherapy in the U.S. beyond what the market has already speculated on," Doherty wrote in an e-mail.

Novartis twice raised its sales estimates last year because of the lack of competition, and has said that every month without a Diovan generic leads to $100 million of sales. That's $1.8 billion of Diovan sales Novartis has enjoyed over the 18 months since the patent expiration.

The price of Diovan per prescription has increased to $244 this month from $178 in September 2012, when the patent expired, according to Bloomberg Industries and Symphony Health Solutions.

Challenge denied

One rival tried to take away Ranbaxy's privilege. In October 2012, Mylan Laboratories challenged Ranbaxy's exclusivity right by suing the FDA on the grounds that the company was unable to obtain approval within the required 30 days after submitting its application.

The U.S. District Court in Washington denied the challenge saying Mylan failed to show it suffered "irreparable harm" from Ranbaxy's right to exclusivity. Mylan didn't appeal the decision and no other drugmaker has since challenged Ranbaxy's exclusivity right, said Karst, who wasn't involved in the case.

Lawmakers should reassess the rules surrounding generic competition, said Roger Bate, a health economist at the Washington-based American Enterprise Institute.

Looming expirations

"Other generics should be able to make this; Ranbaxy should forfeit," Bate said in an interview. "If you screw up this badly, you shouldn't be applying to make this."

With the patent expirations looming for Nexium, which had U.S. sales of $2.1 billion last year, and Valcyte, with U.S. sales of $407 million, Ranbaxy may have few options to get the generic versions on the market in time using its own manufacturing resources.

In 2011 Ranbaxy agreed to share the profit with Teva Pharmaceutical Industries Ltd. from the first six months' sales of the generic version of Pfizer Inc.'s cholesterol-lowering drug Lipitor. The companies didn't say why, and analysts speculated that the deal may have been an insurance policy for Teva to produce the drug if Ranbaxy couldn't.

With assistance from Anna Edney in Washington and Ketaki Gokhale in Mumbai.

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