Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC Brief Attacks Branded Drug Makers’ Misuse of Restricted Drug Distribution Programs to Block Generic Competition , (Mar 12, 2013)

By E. Darius Sturmer, J.D.

The Federal Trade Commission filed a friend-of-the-court brief in a federal lawsuit in New Jersey on March 11, arguing that brand name drug manufacturers’ use of restricted drug distribution programs to impede generic competition could violate the federal antitrust laws (Actelion Pharmaceuticals Ltd. v. Apotex Inc., D N.J., Case No. 1:12-cv-05743-NLH-AMD).

The Commission’s brief was submitted to the federal district court in Camden, New Jersey, for an action involving allegations that Actelion Pharmaceuticals prevented Actavis, Apotex, and Roxane from offering competing generic versions of Actelion’s brand drug products, Tracleer and Zavesca, by precluding them from obtaining samples of those drugs to perform necessary testing.

In order to receive approval from the Food and Drug Administration (FDA), the agency noted, generic firms are required to conduct bioequivalence testing to demonstrate that a generic formulation is therapeutically equivalent to the brand drug. This testing requires access to a limited amount of the brand product. In the case currently pending before the district court, the three generic drug makers allege that Actelion has imposed distribution restrictions that prevent them from buying samples of Actelion’s brand products through customary distribution channels, and that Actelion refuses to sell the products directly, thereby precluding them from meeting FDA requirements for developing generic versions of these drugs.

Actelion seeks a broad declaration that it is under “no duty or obligation” to sell its products to potential competitors. Although Actelion contends that its distribution restrictions are required by the FDA, it argues that its right to refuse to sell to the generic firms is nearly absolute and would apply even without any FDA mandate. The FTC’s brief stated that Actelion’s legal position, if adopted by the court, could pose a significant threat to competition in the pharmaceutical industry.

In the Hatch-Waxman Act, the agency explained, Congress designed a regulatory framework to encourage the introduction of low-cost generic drugs while preserving incentives for innovation. The Act created a mechanism for accelerated approval of generic drugs based on a showing that the generic formulation is bioequivalent to the brand drug, which has been very successful in facilitating generic competition and generating large savings for consumers, the FTC noted.

The brief further explains, however, that the Act cannot function as Congress intended if generic firms are unable to access samples of brand products. Without taking a position on the factual merits of the case, the brief explains that the generic firms’ antitrust claims are not barred as a matter of law. It describes how the generic firms’ allegations in this case fit within established Supreme Court precedent holding that a monopolist’s refusal to sell to its potential competitors may, under certain circumstances, violate Section 2 of the Sherman Act. It also clarifies that a distribution agreement between a brand drug manufacturer and its distributors may violate Section 1 of the Sherman Act, even when the agreement involves a patented product.

Companies: Actelion Pharmaceuticals Ltd.; Actelion Clinical Research, Inc.; Apotex Inc.; Apotex Corp.; Roxane Laboratories, Inc.; Actavis Elizabeth LLC.

News: Antitrust