Antitrust Law Daily Wrap Up, ANTITRUST NEWS: New York Attorney General reaches settlement with generic pharmaceutical companies over allegedly collusive agreement, (Feb 19, 2014)

By Linda O’Brien, J.D., LL.M.

New York Attorney General Eric T. Schneiderman today announced a settlement with two generic pharmaceutical manufacturers, Ranbaxy Pharmaceuticals, Inc. and Teva Pharmaceuticals USA, Inc., resolving concerns that an agreement between the companies unlawfully restricted competition.

The agreement between Ranbaxy and Teva relates to a type of regulatory exclusivity awarded to the first manufacturer that seeks to market a generic version of a brand manufacturer’s drug prior to expiration of the brand manufacturer’s patents. This “first to file” exclusivity protects the generic manufacturer from competition from other generic manufacturers for a period of 180 days. The exclusivity award comes at a cost, however; during the 180-day period, generic drug prices are generally significantly higher than they are when the exclusivity period expires and multiple generics are allowed to enter the market.

Ranbaxy and Teva had agreed that each would not challenge the other party’s “first to file” exclusivities for a large number of drugs, for a several year period. This collusive “no challenge” agreement was part of a 2010 agreement entered into by them relating to the sale of a single drug – generic atorvastatin calcium, the branded version of which is sold by Pfizer as Lipitor. Ranbaxy received “first to file” exclusivity for generic atorvastatin and was poised to enter the market on November 30, 2011, subject to receiving final Food and Drug Administration (FDA) approval. However, in 2010, Ranbaxy was not sure that it would receive FDA approval in time. Accordingly, it negotiated an agreement with Teva providing that, if Ranbaxy were unable to enter the market and certain other conditions were met, then Teva could enter the market instead, and the companies would split the profits. The agreement would have enabled Ranbaxy to obtain some financial benefit from its exclusivity rights even if it could not enter the market on its expected entry date.

Although the atorvastatin agreement related to the sale of only one drug, by including the “no-challenge” commitments as part of that agreement, Ranbaxy and Teva each agreed to shield dozens of their drugs from legal and regulatory challenges by the other. This agreement artificially protected each company’s market positions for numerous drugs where one of the parties held sole “first to file” status, and reduced the chances that consumers would benefit from increased generic competition on an earlier date. The “no challenge” agreement was not necessary for the success of the atorvastatin arrangement, and was not reasonably ancillary to any legitimate purpose, the state contended.

The settlement with the Attorney General requires the parties to terminate the “no challenge” agreement, refrain from entering into similar agreements in the future, and make monetary payments to New York State totaling $300,000.

“Agreements between drug manufacturers to protect each other’s market positions violate fundamental principles of antitrust law and can lead to higher drug prices,” said New York Attorney General Schneiderman. “Drug companies should be aware that my office will intervene aggressively to root out collusion among industry players and ensure that New Yorkers receive access to critical drugs at fair value.”

Companies: Ranbaxy Pharmaceuticals, Inc.; Teva Pharmaceuticals USA, Inc.

News: Antitrust NewYorkNews