Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Direct purchasers file antitrust suit over delayed generic competition to acne treatment, (Sep 10, 2013)

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

A direct purchaser of Solodyn, a brand name prescription acne treatment, has filed a complaint in the federal district court in Boston on behalf of itself and other direct purchasers of the drug, alleging that its manufacturer, Medicis Pharmaceutical Corp., and various generic drug manufacturers colluded to delay generic competition to Solodyn (Ahold USA, Inc. v. Medicis Pharmaceutical Corp., filed September 9, 2013).

Medicis produces minocycline hydrochloride extended release tablets, a prescription drug for the treatment of acne, under the brand name Solodyn. Ahold USA, Inc. is an assignee of McKesson Corporation, a direct purchaser of Solodyn during the relevant period. According to Ahold’s complaint, Solodyn, which represented about half of Medicis’ revenues, was not protected by a valid patent or by regulation. However, Medicis allegedly took a series of actions to delay and prevent generic competition to the drug.

Solodyn was covered since its inception by U.S. Patent No. 5,908,838 (“the ‘838 patent”). However, the complaint asserts that the patent was invalid due to Medicis’s prior sale of a different minocycline drug called Dynacin. Moreover, Medicis allegedly engaged in inequitable conduct, such as failing to disclose the prior sales of Dynacin, before the United States Patent and Trademark Office that would have rendered the patent unenforceable.

In December 2007, Impax Laboratories, Inc. announced it was seeking FDA approval to market a generic version of Solodyn, and began a declaratory judgment action to have the ‘838 patent declared invalid and not infringed by Impax. In response, Medicis filed a citizen petition with the FDA requesting it not to approve any generic versions of Solodyn without requiring in vivo bioequivalence testing for each strength of the drug. The request was allegedly baseless, and Medicis had argued against such testing when applying for approval of Solodyn. Although the FDA rejected Medicis’s request, Medicis allegedly succeeded in delaying Impax’s application. Despite receiving approval from the FDA, however, Impax reached an agreement with Medicis to delay its entry for three years, until November 2011, and drop its patent challenge, in exchange for at least $55 million.

On October 8, 2008, Congress amended the Food, Drug, and Cosmetic Act to apply certain provisions of the Hatch-Waxman Act to drugs containing older antibiotics such as Solodyn. Medicis then allegedly submitted the ‘838 patent for inclusion in the FDA’s Orange Book, even though the listing was improper because Medicis knew the patent was invalid or unenforceable.

Following the listing, Medicis received notifications from Mylan Inc., Sandoz Inc., and Barr Laboratories, Inc. (a subsidiary of Teva Pharmaceutical Industries, Ltd.) that those companies had filed Abbreviated New Drug Applications (ANDAs), seeking to market generic versions of Solodyn in 45mg, 90mg, and 135mg strengths, with Paragraph IV certifications and stating that the ‘838 patent was invalid, unenforceable, or would not be infringed. Medicis responded by filing allegedly baseless patent infringement lawsuits against the generic companies and filed a another sham petition with the FDA seeking application of the Hatch-Waxman Act’s 30-month stay on approval of generic drugs under certain conditions to the generic manufacturers’ applications. The request allegedly had no legal basis, but nonetheless delayed FDA approval of the applications.

Medicis then entered into exclusion payment agreements with Teva, Sandoz, and Mylan to drop their patent challenges and delay entry to the market of their generic versions of Solodyn until November 2011. Under the agreements, each of the manufacturers would be able to sell a limited supply of their generic drugs free from competition from each other or from a Medicis authorized generic for six-month periods. Medicis also settled litigation with Impax over those manufacturers’ generic entries, again paying Impax to drop its claims.

Having acquired a period of time free from generic competition, Medicis then introduced 55mg, 65mg, 80mg, 105mg, and 115mg strengths of Solodyn. These versions allegedly had no benefits to consumers over the existing strengths, but could not be substituted by pharmacists for generic drugs in the 45mg, 90mg, and 135mg strengths. Medicis then promoted the new strengths and destroyed demand for the previous strengths, finally stopping shipping of the legacy strengths entirely. By the time 45mg, 90mg, and 135mg generic versions entered the market in November 2011, therefore, the prescription base for those versions had been virtually eliminated.

Finally, when the generic manufacturers approached FDA approval for generic versions of the 55mg, 65mg, and 115mg strengths, Medicis reached further agreements with the manufacturers to delay their entry. Medicis paid Teva, the first filer with respect to the 65mg and 115mg strengths, to drop its patent challenge, delay its entry, and “park” its 180-day exclusivity period. Medicis then entered into agreements with Ranbaxy Inc., Lupin Limited, and Mylan to delay their entry and prevent them from obtaining a court decision that would trigger Teva’s 180-day exclusivity period. Medicis’ agreement with Lupin also “parked” its 180-day exclusivity period with respect to the 55mg strength.

The complaint asserts claims for monopolization and attempted monopolization under Section 2 of the Sherman Act against Medicis; a claim for conspiracy to monopolize under Section 2 of the Sherman Act against all defendants; a claim for conspiracy and combination in restraint of trade under Section 1 of the Sherman Act against all defendants; and claims for conspiracy and combination in restraint of trade against Medicis and Impax, Medicis and Teva, Medicis and Sandoz, Medicis and Mylan, Medicis and Ranbaxy, and Medicis and Lupin.

The complaint seeks a declaration that the alleged conduct violated Sections 1 and 2 of the Sherman Act, treble damages, costs of suit, attorneys’ fees, and other just and proper relief.

Ahold’s action is the latest in a series of complaints filed over alleged suppression of competition to Solodyn, including actions filed by end-payors and direct purchasers in the federal district court in Philadelphia.

The case is No. 1:13-cv-12225-JCB.

Attorneys: Thomas M. Sobol (Hagens Berman Sobol Shapiro LLP) for Ahold USA, Inc.

Companies: Ahold USA, Inc.; Medicis Pharmaceutical Corp.; Impax Laboratories, Inc.; Lupin Limited; Ranbaxy Inc.; Sandoz Inc.; Mylan Inc.; Matrix Laboratories Ltd.; Teva Pharmaceutical Industries, Ltd.; Barr Laboratories, Inc.; Valeant Pharmaceuticals International, Inc.

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