The biggest test of Sherman’s loyalty to his protégé came in 2016, when Desai and Apotex faced serious allegations of industrial espionage. Teva Pharmaceutical Industries, the Israeli generic firm that had purchased Apotex rival Novopharm years before, had alleged to the FBI that Desai and a female Teva executive had a romantic relationship and that the executive had emailed Desai sensitive Teva data on a generic drug in development. The FBI investigated and no charges were laid. Teva did not give up. In the summer of 2017, six months before the Sherman murders, Teva sued Desai, Apotex, and the now-fired female executive in a Pennsylvania court. Legal filings reveal that Desai and Apotex vigorously denied the allegations, though Desai admitted that the Teva executive did have contact with him by email and he did have a personal—Desai said it was not romantic—relationship with her. At one point during the legal filings, the former Teva executive was dropped from the claim, with no explanation on the public record. The messy lawsuit was settled in 2019 and the terms of the settlement are confidential.
Throughout the scandal, Sherman stuck by his CEO. Apotex insiders say that any other company owner confronted with that situation would have made Desai a scapegoat and fired him. Not Sherman. His unwavering support of Desai led to whispers in the pharmaceutical community, never substantiated, that Sherman was personally involved in a plan to learn information about his bitter rival’s new drug. It was not until shortly after Sherman’s death that an agreement was reached with the Apotex board of directors for Desai to resign to “pursue other opportunities.” It is likely that, had Sherman not died, Desai would still be the president and CEO of Apotex.
As just one of the many oddities that contributed to the theories spun by armchair detectives after the Sherman deaths, the announcement of Desai’s departure from Apotex went out on January 26, 2018, just hours after the Toronto Police declared that the Sherman probe was now a double homicide investigation. Was there some connection? people wondered. “Pure coincidence,” an Apotex spokesman said. “We had no idea the police were going to make that announcement.”
While there is speculation that Desai was fired, he maintains it was his decision to leave. Barry Sherman was one of the big reasons he was at Apotex. Departures from a company, no matter how they occur, can be difficult. Reflecting on that in interviews, Desai and Kay both noted that Sherman never had the stomach for delivering bad news and would get them to do the firing, making sure that a plan was put in place so the fired employee would be able to get back on his or her feet. “Imagine what their families will think when they go home tonight,” Sherman would say, as he gave instructions on how the dismissal should be handled. “We have to remember, when we make these decisions, we are playing with their lives.”
* * *
—
The decision to hire Desai in 2002 was just one of a series of moves Sherman made that boosted Apotex to new heights of financial success, beginning in the early 2000s. The company expanded its manufacturing facilities in Canada and began the process that eventually saw Apotex set up manufacturing plants in India and Mexico, hire more chemists to formulate drugs (“bench scientists,” as Desai calls them), and bring more lawyers on staff to fight brand name companies and the federal regulator Health Canada in court. Harry Radomski, the outside legal counsel who was Sherman’s top litigator, had never been busier. The generic landscape in Canada had changed dramatically in the 1990s. As Radomski recalls, the seismic shift they experienced mirrored what had taken place earlier in the United States, where governments wanted to protect homegrown intellectual property: “The world was changing, and the idea of encouraging innovation through patent protection was in vogue.” Meanwhile, Sherman was still looking for new pharmaceuticals to genericize and new ways to bring these cheaper drugs to market.
Suddenly, that became much harder to do in Canada. Prime Minister Brian Mulroney’s Conservative government had done away in 1993 with the very comfortable system of compulsory licensing that had allowed Canada’s generic industry to thrive. Gone were the days when a generic company like Apotex could replicate a brand name drug and sell it at a lower cost, paying just a 4 percent royalty to the brand company, based on the generic drug’s total annual sales. Now, the federal government had linked its drug approval regime to a patent system, giving brand name companies patent protection for twenty years after the drug came to market. Unless the generic company could find a legal way around the patent, they were stuck in a long waiting line. This new system brought constant tension. The federal government wanted to reward the innovation of the brand name companies by promoting sales of their drugs, but the provincial governments and private insurance plans that funded drug purchases preferred the cheaper generic forms.
From 1993 until his death twenty-five years later, Sherman devoted a great deal of his energy to finding ways to use science and the courts to get around patents. Along with his personal skirmishes in court, this intensification of legal action in the pharmaceutical world perpetuated the notion of Sherman as one of the most litigious men in Canadian business history, and certainly the most litigious in the Canadian pharmaceutical world. There are great elements of truth to the first statement, and the second is a simple fact. But those statements come with an important caveat. When Mulroney created the new system, he replaced compulsory licensing with a system that mandated litigation if a generic firm wanted to bring out a generic copy. Since Apotex was the biggest of the Canadian generic firms in volume of drugs produced, it stood to reason that it would be the most litigious.
Navigating this new reality required an understanding of how government and drug companies were now expected to interact. Post 1993, once Health Canada had approved what is known in pharmaceutical circles as the “safety and efficacy” of the product, it issued a notice of compliance that allowed the new drug to be made available to the public. For a generic company to try to bring a similar product forward, it now had to file a case in federal court called a notice of allegation, challenging the patent or patents that protected the drug from being copied. Smart brand name manufacturers made sure they had multiple patents on the formulation of the drug, the process used to make it, and other related items, which sometimes even included a patent on how the drug was packaged. But as Sherman and his legal team proved over the years after 1993, there were a number of ways to show the patent was either not valid or that making a copy of the drug would not infringe on the patent. In some cases, Sherman would seek to show that he had made a “bio-similar” drug but formulated it in a different way. In others, he would aim to show that the brand company had really not done anything unique. Radomski says he and his team were sometimes able to demonstrate to a court that “the patent should never have been issued because somebody invented it before,” or that, because it was such an obvious creation, “any moron” could have come up with the drug.
Sherman, Desai, and Kay thrived in this atmosphere. All three men enjoyed the challenge. For Sherman, who liked reading and even drafting legal briefs, it hearkened back to the early 1970s, when he had first learned he could use the courts to get what he wanted. It was not unusual for Sherman, pleased with a court pleading he had helped Radomski prepare, to email the document to friends like Fred Steiner, or to his daughter Alex. As he described to business associates and friends, he thought of the courts as a tool, one that he knew very well. Sherman and other Canadian generic leaders believed the federal government had sold out to the powerful Big Pharma lobby and that they had a duty to consumers to fight back. Of course, they also made a great deal of money when they were successful. But their constant mantra in many deputations to government was that they were keeping drug costs down. If they did not, Canadians and the Canadian healthcare system would be paying far too much for their drugs, since a generic version cost only a fraction of the price of a branded pill.
For their part, the brand name pharmaceutical companies maintained that in order for them to innovate they needed patent protectio
n. After all, they argued, it was their scientists who were coming up with the initial drug formulations. This philosophical difference of opinion was at the centre of the brand name versus generic battle.
Canadian court files are filled with hundreds of cases involving Apotex. The battles were lengthy, sometimes taking decades, and they were expensive for both sides. It was not unusual for several hundred million dollars or more to be at stake. Some Apotex won, and the company was able to bring a drug to market and rake in millions of dollars in new sales. When Apotex lost, it often had to pay millions of dollars to the aggrieved brand company due to patent infringement. Over years, motions went back and forth, and there were discoveries and hearings and appeals in front of judges who struggled with the scientific formulas that were hotly debated by lawyers on both sides. Many of these cases continued even after a drug went to market. In some instances, in anticipation of a win he had not yet secured, Sherman took the financial risk of ordering his factories to make millions of dosages of a drug and have them ready for the moment a ruling went in his favour so that he could flood the pharmacies with the cheaper alternative. If a case went against him, Sherman always appealed. He did not give up, no matter the odds.
Lawyer Brian Greenspan, who would eventually lead the private investigation into the Shermans’ deaths, recalls with great clarity his discussions with a man he calls “fascinating and challenging.” Sherman’s patent lawyer, Radomski, brought Greenspan into a case in which Sherman and Apotex were accused of contempt of court in the 1990s for selling a drug in violation of a court order obtained by a Big Pharma company. Greenspan advised Sherman that if he admitted wrongdoing and accepted a fine from the court, it would be a modest payment and he could put the matter behind him. “Barry told me, ‘I will never accept doing something I think is wrong in principle,’ ” Greenspan recalls. The legal battle raged for seven years through various court levels, and ultimately Sherman lost and paid a modest fine.
The man who drove an old car and hated to pay for parking often said that he was fighting these fights for two reasons: one, to grow Apotex and keep jobs in Canada; two, to reduce the cost Canadians paid for their medication. When the difference in price between a brand name and a generic pill could be 5 to 1, or 100 to 1, or 400 to 1, depending on the type of drug, it was hardly surprising that company health insurance firms and provincial drug programs loved generic drugs.
One unusual offshoot of the tension between the desire to drive innovation at the brand name companies and the need to keep drug costs low is that some brand name firms now sell generic versions of their drugs through a related company. It’s all about keeping as big a slice of the pie as possible, industry watchers say. “There’s a lot of animosity between brand and generic companies,” says Barry Fishman, a pharmaceutical executive who has worked on both sides. Fishman, who was Canadian vice-president of sales for brand company Eli Lilly and later ran generic rival Teva’s Canadian arm, says there is also a symbiotic aspect to the brand–generic relationship. “But I never saw generics as enemies. I saw them as keeping us on our toes constantly to innovate and come out with new products.”
For the layperson, it is nearly impossible to understand how a chemist can invent a new drug and how another chemist (or engineer, in Sherman’s case) can come up with what is called a bio-similar version of the drug that is somehow not an exact copy. Radomski explains that in some cases chemists have come up with a way to “pack” the molecules differently. When you add the courts into this equation, and with the understanding that judges are typically not scientists, it becomes even more difficult to understand. Desai recalls how Sherman, if he did not like the ruling he was given, would lash out with a quick comment that made clear what he thought. “Judges are idiots!” he said on more than one occasion. Yet Radomski, a lawyer with no scientific training, says that during his many years in court, he has noticed that some judges have become quite adept at grasping the difficult scientific concepts involved.
Perhaps the best known Apotex battle occurred in 2010 over the generic version of Lipitor, which was then the most popular drug in the world. Lipitor is the brand name version of a drug called atorvastatin. A statin is a drug that reduces fatty acids, or lipids, in the blood. With cholesterol levels rising fast in populations around the world, often due to bad diet, doctors were looking for a way to counteract those levels. In 1985, a scientist at Warner-Lambert’s Parke-Davis research facility in Michigan developed atorvastatin and began almost a decade of clinical trials, which were required before the US Food and Drug Administration would approve a product. Other companies had similar drugs, but the team behind atorvastatin believed theirs would prove the most effective. The firm entered into a partnership with Pfizer, and in 1996 Lipitor came to market in the United States. The two-company partnership then sought approvals in international markets. In 2001, Pfizer Canada was granted a notice of compliance by Health Canada and Lipitor began selling to a waiting and very eager audience. Just as Jack Kay and Barry Sherman had combed through documents to find the top-selling drug in the 1980s at the fledgling Apotex offices, they continued to do so decades later. Jeremy Desai had just joined Apotex, and Sherman instructed Desai and his team to make Lipitor a priority. Though he lacked any formal chemistry background, Sherman began conducting his own experiments in an attempt to create a different form of atorvastatin that would have the same effect on cholesterol levels in the bloodstream. Desai says, “Barry came up with an ingenious, alternative form” of the active pharmaceutical ingredient at the heart of the drug. As he always was when he felt he had a breakthrough, Sherman was excited, telling everyone Apotex was going to be successful with the new drug. Jack Kay would urge Sherman to be cautious, reminding him that moving from the laboratory and scaling up to production of millions of pills was a big step. Sherman would laugh and tell his friend he was “full of shit” and then wander off to tell someone else of the plan.
With the Lipitor generic science well underway, it was time for the lawyers to get involved. Radomski and other Apotex counsel started preparing their notices of allegation in federal court, and the battle began. A great deal of money was at stake. Pfizer’s Lipitor during this period had earned about $1.2 billion in annual sales. On May 19, 2010, after years of work, Apotex issued a press release announcing that its Apo-Atorvastatin drug was approved and on the market. Sherman had prepared for this day and had shipments ready to go as soon as they received federal approval. According to the release, Apotex had “invented its own crystal form” of the drug, “thus overcoming the patents twelve years ahead of when they were legally set to expire.” Apotex estimated in the release that over the next twelve years this would result in “close to $7 billion of cost savings for the Canadian healthcare system.”
Kay, who was then the president and chief operating officer (Desai would later take over as both president and CEO), said at the time, “This is a historic moment as provincial governments are struggling with increasing deficits….The risks for companies like ours to develop products and to litigate are huge, but the real beneficiaries are the public and private payers and consumers.”
A story in the Wall Street Journal describing the product launch noted that Lipitor sales accounted for half of Pfizer Canada’s 2010 revenue. Pfizer told the Journal that it had foreseen the eventual generic approval, and within two years the company would sell its own generic form of Lipitor.
As successful as Barry Sherman was in building his empire, those around him often had to shield him from the world of regulators. Over time, Kay and Desai realized that having Sherman present at a negotiation with, for example, Health Canada was counterproductive. Desai was better suited temperamentally to participate in the proceedings. Before Desai flew to Ottawa for meetings, the three men would sit in Kay’s office and discuss strategy. There was no point sitting in Sherman’s office, because the round table there was always completely covered with stacks of files. Desai would provide a briefin
g, Kay would weigh in, and then Sherman would cut them off. It could be an issue with a brand company, Health Canada, or the very powerful Food and Drug Administration (FDA) in the United States.
“They’re full of shit,” Sherman would say. “Sue them.”
Desai would patiently try to explain his position, Sherman would interject, then Kay would smooth things over, convincing Sherman to listen to the man he had hired from England to eventually run Apotex. Once, over Desai’s objections, Sherman sued the US government, seeking $520 million in damages for slapping an “import alert” on Apotex, which warned American customers to beware of certain Apotex products (the United States is Apotex’s second largest market after Canada). The US court filings in that case reveal that in 2009, FDA officials discovered that “Apotex had distributed products in the US market contaminated with hair, glue, plastic, nylon, metal, rust and acetate fibers.” Inspections were carried out by the FDA at the Toronto plant in question, and according to the US government’s allegations, inspectors found problems with the production system serious enough to warrant the import alert. Regulators on both sides of the border worked with Apotex and the issue was eventually solved, but Sherman sought damages from the Americans for loss of revenue. That losing battle cost an estimated $5 million in legal fees. Desai believes that the suit, which went to an arbitration panel and was ultimately unsuccessful, subsequently caused the FDA to target Apotex. More and more inspections of Apotex’s international plants followed in what Desai calls “payback” for Sherman daring to take the US government to court. A series of other negative inspection reviews by both US and Canadian regulators over the years were reported on in the Toronto Star by David Bruser and Jesse McLean. Desai, who was interviewed for those stories, explained his belief that “compliance is a journey,” given that the manufacturing of drugs on such a large scale imposes constant challenges, including contamination, and all companies have to be vigilant in order to deliver a high-quality product.
The Billionaire Murders Page 17
