Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Exclusion payment agreements suppressed competition for niacin drug, suit claims, (Dec 9, 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 Pittsburgh (Giant Eagle, Inc. v. Abbott Laboratories., December 8, 2015).

Giant Eagle is a supermarket chain with stores in Pennsylvania, Ohio, West Virginia, Indiana, and Maryland. The stores carry an array of groceries and feature a full-service pharmacy. Giant Eagle purchases substantial quantities of pharmaceutical products and other goods for resale to the public.

The complaint states that Kos Pharmaceuticals developed 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, the company received seven patents on the specific formulation and method-of-use for the drug. Kos filed a new drug application (NDA) and received FDA approval in 1997 to market Niaspan. Subsequently, Niaspan accounted for the vast majority of Kos’ sales revenue.

After Barr Pharmaceuticals filed an Abbreviated New Drug Application (ANDA) with the 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, the complaint alleges.

According to the lawsuit, both Kos and Barr had enormous incentives to settle the patent infringement litigation and avoid competition. 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’ agreement, with Barr and Teva succeeding to the 180-day exclusivity period.

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.

As a result of the settlement agreements, no generic equivalent of Niaspan was on the market in the United States until September 2013. With only one generic product on the market, purchasers were denied the lower prices that full generic competition would have brought, the plaintiff claims.

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. The launch of a generic drug therefore brings huge cost savings for drug purchasers, the complaint charges.

The plaintiff asserts claims for monopolization, attempt to monopolize, conspiracy to monopolize, and conspiracy in restraint of trade 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-01608-CRE.

Attorneys: Erin Gibson Allen, Bernard D. Marcus, and Moira Cain-Mannix (Marcus & Shapira LLP) for Giant Eagle, Inc.

Companies: Giant Eagle, Inc.; Abbott Laboratories, AbbVie Inc.; Teva Pharmaceuticals USA, Inc.; Teva Pharmaceuticals Industries, Ltd.; Barr Pharmaceuticals, Inc.

News: Antitrust PennsylvaniaNews