Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Drug store alleges reverse payment agreement suppressed generic competition for Lidoderm, (Apr 22, 2015)

By Linda O’Brien, J.D., LL.M.

Brand name pharmaceutical manufacturer Endo Pharmaceuticals and generic drug manufacturer Actavis, Inc. entered into a reverse payment agreement to block generic competition for the pain medication, Lidoderm, according to a complaint filed in the federal district court of Oakland, California (Rite Aid Corporation v. Endo Pharmaceuticals, Inc., April 21, 2015).

Endo Pharmaceuticals markets and sells under the brand name Lidoderm (lidocaine), a prescription drug topical skin anesthetic used to treat pain associated with post-herpetic neuralgia. Teikoku Seiyaku manufactures Lidoderm in Japan for distribution by Endo. Rite Aid Corporation operates nearly 4,600 drug stores through its affiliates nationwide that purchase pharmaceuticals and other goods for resale to the public.

The complaint alleges that Endo and Teikoku have exclusive licenses to several patents relating to Lidoderm, including U.S. Patent No. 5,827,529 (the ‘529 patent) that will expire in October 2015. To delay generic competition, Teikoku listed the patents in the Food and Drug Administration’s (FDA) “Orange Book.”

After the generic manufacturer, Actavis, filed an application with the FDA to market a generic version of Lidoderm in 2009, Endo and Teikoku filed suit against Actavis for infringing the ‘529 patent. Actavis entered into a reverse payment agreement with Endo resolving the litigation. Under the agreement, Actavis agreed to delay the launch of its generic version of Lidoderm until September 2013 in return for Endo providing Actavis with at least $96 million in branded Lidoderm until the FDA approved Actavis’ abbreviated new drug application. Endo also agreed to delay marketing its own generic version of Lidoderm and Actavis would pay a royalty to Endo until another generic version of Lidoderm entered the market, the complaint charged.

According to the complaint, but for the reverse payment agreement, a generic version of Lidoderm would have been marketed long before September 2013. Generic drugs are less expensive than the brand name drugs. As a result of the defendants’ illegal conduct, purchasers allegedly were deprived of the opportunity to buy lower priced generic versions of Lidoderm and were compelled to pay inflated prices for Lidoderm.

Rite Aid claimed that the reverse payment agreement has enabled the defendants to (1) delay the entry of less expensive generic versions of Lidoderm in the U.S.; (2) delay the introduction of an authorized generic lidocaine patch; (3) fix, raise, maintain, or stabilize the price of Lidoderm and its equivalents; (4) maintain a monopoly in the U.S. market for lidocaine patch products; and (5) allocate the U.S. market for and sales of Lidoderm. In the absence of the illegal agreement, Actavis would have sold a less expensive generic version of Lidoderm after August 2012 but before September 2013.

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

The case is No. 4:14-cv-01784-SBA.

Attorneys: Anna T. Neill (Kenny Nachwalter, P.A.) and Barry L. Refsin and Monica L. Rebuck (Hangley Aronchick Segal Pudlin & Schiller) for Rite Corporation and Rite Aid Headquarters Corp.

Companies: Rite Corporation; Rite Aid Headquarters Corp.; Endo Pharmaceuticals, Inc.; Teikoku Pharma USA, Inc.; Teikoku Seiyaku Co., Ltd.; Actavis, plc; Watson Laboratories, Inc.

News: Antitrust CaliforniaNews