Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Drug store claims exclusion payment agreements suppressed competition for niacin drug, (Apr 17, 2015)

By Linda O’Brien, J.D., LL.M.

Brand drug manufacturer Kos Pharmaceuticals entered into exclusion payment agreements with generic drug manufacturers in order to delay market entry of a generic version of its brand name drug Niaspan, according to a complaint filed in the federal district court in Philadelphia (Rite Aid Corporation v. Abbott Laboratories., April 14, 2015).

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 states that Kos Pharmaceuticals sold an extended-release niacin product under the brand name Niaspan — a drug primarily used for the treatment of lipid disorders. Since niacin was in the public domain, Kos was unable to patent the active ingredient in Niaspan; however, it received seven patents on the specific formulation and method-of-use for the drug. Subsequently, Niaspan accounted for the vast majority of Kos’ sales revenue. After Barr Pharmaceuticals filed an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA), seeking to manufacture a generic equivalent to Niaspan in 2001, Kos filed a series a patent infringement suits against Barr. As the first filer of an ANDA, Barr received a 180-day period during which the FDA did not approve any other ANDAs filed by other generic manufacturers.

While the litigation was pending, Barr received tentative FDA approval to market its generic Niaspan equivalents. Kos responded by preparing its own authorized generic version that would have deprived Barr of its 180-day exclusivity period as the sole generic on the market. However, both Kos and Barr had enormous incentives to settle the patent infringement litigation. In 2005, Kos and Barr entered into three separate but interrelated contracts—a settlement and licensing agreement, a co-promotion agreement, and a manufacturing agreement—resolving the litigation. Abbott Laboratories later acquired Kos, and then spun off its prescription drug business to AbbVie, Inc. Meanwhile, Teva Pharmaceuticals USA, Inc. acquired Barr. The acquiring companies continued to perform under the terms of Kos’s agreement with Barr and Teva succeeded to the 180-day exclusivity period, the complaint alleges.

The complaint also states that, between 2006 and 2012, Abbott, and later AbbVie, took additional steps to ensure that the exclusion payment agreement was not disrupted or the generic competition for Niaspan would commence before September 2013. Abbott filed numerous additional patent infringement suits against generic manufacturers that filed certifications with the FDA with respect to potential generic Niaspan products. Seven of those cases were settled without any judgment entered on the infringement, validity or enforceability of any of Abbott’s patents.

According to the complaint, Barr was the first manufacturer to seek FDA approval to market generic extended release niacin and received tentative FDA approval in 2003. Under the 2005 settlement agreements, Kos colluded with Bar to delay entry of a generic Niaspan until September 2013. Had Barr or its successor Teva launched a generic version of Niaspan earlier than September 2013, other generic manufacturers would have been allowed to launch their products after the lapse of Barr’s 180-day exclusivity period and the plaintiffs would have paid lower prices than they actually paid.

Generic versions of brand name drugs contain the same active ingredient and are determined by the FDA to be just as safe and effective as their brand name counterparts. The only material difference between the generic and brand name drugs is the price. Generics are generally at least 25 percent less expensive than their brand name counterparts and the discount increases to 80 percent or more when there are multiple generic competitors on the market for a given brand. Pharmacists liberally substitute for a generic version when presented with a prescription for a brand name drug due to the price differentials, unless the prescribing physician has specifically ordered otherwise. Until a generic version of the brand drug enters the market, there is no bioequivalent drug to compete with the brand drug and brand drug manufacturers can charge supra-competitive prices with losing sales, the complaint charges.

The plaintiff asserts claims for monopolization, attempt to monopolize, and conspiracy 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, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-01950-JD.

Attorneys: Barry L. Refsin and Monica L. Rebuck (Hangley Aronchick Segal Pudlin & Schiller) for Rite Corporation, Rite Aid Headquarters, Corp., JCG USA, LLC, Maxi Drug, Inc., and Eckerd Corporation.

Companies: Rite Corporation; Rite Aid Headquarters, Corp.; JCG USA, LLC; Maxi Drug, Inc.; Eckerd Corporation; Abbott Laboratories, AbbVie Inc.; Teva Pharmaceuticals USA, Inc.; Teva Pharmaceuticals Industries, Ltd.; Barr Pharmaceuticals, Inc.

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