Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Brand drug maker allegedly used exclusion payment pacts to suppress generic competition, (May 1, 2015)

By Linda O’Brien, J.D., LL.M.

Brand drug manufacturer Takeda Pharmaceuticals entered into reverse payment agreements with several generic drug manufacturers in order to delay entry of a generic version of its brand name drug ACTOS and to maintain its monopoly in the market, according to a complaint filed in the federal district court in New York City (American Sales Company v. Takeda Pharmaceutical Company, April 27, 2015).

Takeda Pharmaceutical Company manufactures and sells a treatment to improve blood sugar control in Type 2 diabetics under the brand name “ACTOS.” American Sales Company is a giftware distributor and, through its assignor pharmaceutical distributor McKesson Corporation, purchased ACTOS from Takeda.

According to the complaint, in 1987, U.S. Patent No. 4,687,777 (the ‘777 patent) was issued to two inventors of a pioglitazone hydrochloride compound, the active ingredient for ACTOS. Accounting for applicable extensions, the ‘777 patent was set to expire in January 2011. The patent was later assigned to Takeda. In January 1999, Takeda submitted a new drug application (NDA) to the U.S. Food and Drug Administration (FDA) for approval to manufacture and sell ACTOS and ACTOS was launched into the market in July 1999. Takeda had new chemical entity exclusivity until July 2003, when competitors could file the first abbreviated new drug applications (ANDAs).

Takeda explored ways to develop products that were to be used in combination with pioglitazone. In 1999 and 2001, Takeda was issued U.S. Patent No. 5,965,584 (the ‘584 patent) and U.S. Patent No. 6,329,404 (the ‘404 patent) with claims that allegedly cover ACTOS. The patents plainly do not claim the ACTOS drug product, since they claim drug products consisting of a different organic compound and an insulin secretion enhancer, according to American Sales. Knowing that the patents could not legitimately be read to cover ACTOS, Takeda wrongfully listed the patents in the FDA “Orange Book.” Takeda’s allegedly false listing of the patents allowed the first generic drug manufacturers—Mylan, Ranbaxy, and Actavis—to submit an ANDA application for approval to sell a generic version of ACTOS and to enjoy 180-day exclusivity rights for ACTOS that otherwise would not have existed. In 2009, a fourth generic drug manufacturer, Teva, filed an ANDA, seeking to make generic versions of ACTOS, the complaint alleges.

The complaint also states that, asserting patent infringement, Takeda responded by filing suit against every manufacturer that sought FDA approval to sell generic versions of ACTOS. Takeda’s lawsuits were objectively baseless and filed solely as an anticompetitive tactic to delay the entry of generic versions of ACTOS into the market, the complaint claimed. Generic competition for ACTOS was likely to begin after the substance patent for ACTOS, the ‘777 patent, expired in January 2011. Since there was substantial risk that its infringement claims would not prevail in litigation, Takeda entered into exclusive payment agreements with the generic drug manufacturers. In exchange for the withdrawal of their challenges and the delay of the entry of generic versions of ACTOS into the market, the generic drug manufacturers received a share of the supracompetitive profits made possible in the absence of generic competition, it was charged.

Takeda, acting in concert with the generic drug manufacturers, engaged in a unlawful scheme to (1) delay the entry of less expensive generic versions of ACTOS in the United States; (2) fix the price of ACTOS and its generic equivalents; (3) permit Takeda to maintain a monopoly for ACTOS and its generic equivalents; and (4) allocate 100 percent of the United States market for ACTOS and its generic equivalent, the complaint alleges.

Generic versions of branded drugs contain the same active ingredient and are determined by the FDA to be just as safe and effective as their branded counterparts. Generic drugs are usually at least 25 percent less expensive than the brand name drug, and the discount increases to 50 to 80 percent when there are multiple generic drug manufacturers competing in the market for a given branded drug. As a result, competition from generic drugs is viewed by brand drug manufacturers as a threat to their profits, the complaint states.

The plaintiff asserts claims for monopolization, conspiracy to monopolize, and restraint of trade in violation of Sections 1 and 2 of the Sherman Act. The action seeks declaratory relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:15-cv-03278.

Attorneys: Thomas M. Sobol and David S. Nalven (Hagens Berman Sobol Shapiro LLP) for American Sales Company, LLC.

Companies: American Sales Company, LLC; Takeda Pharmaceutical Co., Ltd.; Mylan Pharmaceuticals, Inc.; Actavis Plc; Watson Laboratories, Inc.; Ranbaxy Pharmaceuticals, Inc.; Teva Pharmaceutical Industries, Ltd.

News: Antitrust NewYorkNews