Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Contraceptive Purchasers File Antitrust Lawsuit Against Warner Chilcott, Generic Manufacturers over Patent Settlement Agreements, (May 17, 2013)

By Tobias J. Gillett, J.D., LL.M.

A putative class of purchasers of an oral contraceptive produced by brand name pharmaceutical manufacturer Warner Chilcott Public Limited Company has filed an antitrust complaint in the federal district court in Providence, Rhode Island, against Warner Chilcott and two generic manufacturers, asserting that Warner Chilcott’s agreements with the generic manufacturers to delay generic competition to the contraceptive violated the antitrust laws (American Sales Company, LLC v. Warner Chilcott Public Limited Company, May 14, 2013).

According to the complaint, Warner Chilcott is a pharmaceutical company that has offered oral contraceptive products containing norethindrone acetate and ethinyl estradiol in the United States under the brand name Loestrin since 1973. In 1996, a scientist obtained U.S. Patent No. 5,552,394 (“the ’394 patent”) on an oral contraceptive regimen using similar amounts of the hormones contained in earlier Loestrin products in which active pills are taken for 24 days, instead of 21 days, ostensibly to decrease the incidence of breakthrough bleeding. The patent involved the use of “up to 25 mcg of ethinyl estradiol” daily. Warner Chilcott later acquired this patent.

The complaint alleges that the scientist who obtained the patent knew, but did not disclose to the U.S. Patent and Trademark Office, that human testing had shown no significant decrease in bleeding from taking the contraceptive regimen covered by the patent. Moreover, the practice of administering additional pills was allegedly obvious in light of prior art, and the scientist falsely claimed that no commercially available contraceptives contained less than 30 mcg of ethinyl estradiol when Warner Chilcott’s Loestrin 1/20 and Loestrin 21 1/20 contained 20 mcg of ethinyl estradiol.

In 2006, the Food and Drug Administration approved a product, known as Loestrin 24, containing the same active pills as Warner Chilcott’s earlier Loestrin 1/20 product, but taken for 24 days—the commercial embodiment of the ’’394 patent. The complaint alleges that, since norethindrone acetate and ethinyl estradiol are not covered by any patent, the generic pharmaceutical manufacturers Watson Pharmaceuticals, Inc. and Lupin Ltd., already sellers of generic versions of previous Loestrin products, soon applied for FDA approval to sell generic versions of Loestrin24. Watson and Lupin allegedly knew that the ‘394 patent would be invalid or unenforceable.

Under the Hatch-Waxman Act, generic pharmaceutical companies can file a Paragraph IV certification, asserting that a generic drug will not infringe patents listed in the FDA’s Orange Book. Brand name manufacturers can file patent infringement actions within 45 days of receiving notice of a Paragraph IV certification, after which the FDA will not grant approval to the generic pharmaceutical company’s application until 30 months have passed or a court has entered a final judgment that the patent is invalid or not infringed. The Hatch-Waxman Act also grants the first generic filer who challenges a patent a 180-day exclusivity period following its first launch of its generic product during which other generic manufacturers cannot obtain approval of their applications.

Warner Chilcott sued Watson upon receiving notification of its Paragraph IV certification in 2006, asserting claims for infringement of the ‘394 patent. However, Warner Chilcott allegedly intended its lawsuit to delay the entry of generic competition and to open the door to settlement agreements that would keep generic products out of the marketplace, rather than to obtain a judgment. Warner Chilcott waited until close to the end of the 30-month stay on the Watson’s application, and then reached an agreement with Watson in January 2009 under which Warner Chilcott agreed compensate Watson in exchange for Watson’s agreement to stay out of the market until January 2014. Six months after that agreement, Lupin filed its Paragraph IV certification, and Warner Chilcott filed suit against Lupin. Warner Chilcott and Lupin later reached an agreement under which Warner Chilcott would compensate Lupin for agreeing to delay its entry until July 2014.

As the expiration of those agreements approaches, Warner Chilcott has allegedly begun converting its market to a new product called Lo Loestrin Fe, also patent protected. Warner Chilcott allegedly markets Lo Loestrin Fe as superior to Loestrin 24, even though studies have shown that women have a 60% greater risk of pregnancy when taking Lo Loestrin Fe than when taking Loestrin 24. However, switching prescriptions to Lo Loestrin Fe—rather than Loestrin 24—would prevent generic versions of Loestrin 24 from being substitutable for Warner Chilcott’s brand name product when they entered the marketplace.

The putative class of purchasers asserts that Warner Chilcott’s agreements with Watson and Lupin constituted agreements in restraint of trade and conspiracies to monopolize in violation of Sections 1 and 2 of the Sherman Act. The agreements allegedly “allocate 100% of the market for Loestrin products in the United States to Warner Chilcott”; “prevent the sale of generic versions of Loestrin in the United States”; “fix the price at which direct purchasers would pay for Loestrin products at supracompetitive levels”; and “allocate100% of United States generic Loestrin sales to Watson during the first 180 days of generic sales.” The purchasers also assert that Warner Chilcott monopolized and attempted to monopolize the market and that all three defendants allegedly conspired to monopolize it, in violation of Section 2 of the Sherman Act.

The complaint requested maintenance of the suit as a class action, joint and several judgments against the defendants, the award of class damages of three times the overcharges, and an award of costs of suit, including reasonable attorney fees.

The case is No. 1:13-cv-00347-M-PAS.

Attorneys: Patrick Lynch (Patrick Lynch Law Firm) for American Sales Company, LLC.

Companies: American Sales Company, LLC; Watson Pharmaceuticals, Inc.; Actavis, Inc.; Lupin Ltd.; Warner Chilcott Public Limited Company

News: Antitrust