Antitrust Law Daily Wrap Up, ANTITRUST NEWS: AAI backs injunction against Alzheimer’s drug “product hopping”, (Feb 24, 2015)

By Greg Hammond, J.D.

The American Antitrust Institute (AAI) filed an amicus brief on February 20, 2015, in support of a New York injunction against pharmaceutical manufacturers Actavis PLC and Forest Laboratories, LLC, preventing the drug makers from withdrawing a widely-used Alzheimer’s drug from the market and stifling impending generic competition (New York v. Actavis PLC, Dkt. 14-4624).

Forest, a subsidiary of Actavis, is the exclusive seller of the patented drug Namenda, a therapy approved by the Food and Drug Administration for the treatment of Alzheimer’s disease. In February 2014, the New York Attorney General’s office began investigating Forest’s plans to withdraw Namenda IR from the market, which was protected by a patent due to expire in July 2015, and to switch patients to a reformulated version—Namenda XR. After doctors refused to switch patients to the reformulated drug, due to a preference not to disrupt Alzheimer’s patients’ routines, Actavis and Forest allegedly forced the switch by restricting the supply of Namenda IR and announcing that Namenda IR would be withdrawn from the market.

New York filed an antitrust complaint against Actavis and Forest in September 2014, seeking to prevent Actavis and Forest from discontinuing sales of Namenda IR and forcing patients to switch to Namenda XR. The federal district court in New York granted the New York Attorney General’s motion for preliminary injunction, blocking Actavis from discontinuing sales of Namenda IR until 30 days after the generic equivalent will first be available, July 11, 2015. On January 6, 2015, the U.S. Court of Appeals in New York granted Actavis’ motion to expedite an appeal of the injunction.

In its brief, AAI set forth case law and identified the unique characteristics of the pharmaceutical markets that justify antitrust scrutiny of “product hopping”—“a scheme in which a brand drug manufacturer seeks to thwart FDA-approved generic competition by switching patients to a reformulated version of the drug shortly before generics enter the market,” the AAI announced. As a result of product hopping, according to the brief, “consumers are annually paying billions more for redesigned products that bring little or no additional clinical benefit as compared to the original products they replaced.”

Specifically, AAI notes that a “price disconnect”—the separation between product selection and payment obligation—exists in the prescription pharmaceutical markets, because doctors choose what products consumers buy, but consumers are the individuals purchasing the products. This disconnect, according to AAI, is a substantial market defect that fully justifies “antitrust scrutiny of a monopolist manufacturer’s product hopping that is, on its face, an effort to impair the very mechanism (generic substitution) that the regulatory scheme has adopted to ameliorate the market failure.”

AAI asserts that the defendants’ exclusionary conduct is anticompetitive because generic substitution laws are a key means by which the Hatch-Waxman Act ensures that brand manufacturers do not extend their economic monopolies beyond the exclusivity period provided by patents or FDA regulation. Consequently, AAI argues that the Second Circuit should reject efforts “to immunize brand drug manufacturers from antitrust scrutiny when they engage in ‘product hopping’ to game state drug substitution laws to thwart generic entry.”

The American Antitrust Institute is an education, research, and advocacy organization working to increase the role of competition, assure that competition serves the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy.

Attorneys: Steve D. Shadowen (Hilliard Shadowen, LLP) and Richard M. Brunell for the American Antitrust Institute.

Companies: American Antitrust Institute; Actavis PLC; Forest Laboratories, LLC

News: Antitrust