Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Retailers allege reverse payment agreements suppressed competition for acne drug Solodyn, (Apr 9, 2015)

By Linda O’Brien, J.D., LL.M.

Brand drug manufacturer Medicis Pharmaceuticals entered into reverse payment agreements with generic drug manufacturers in order to suppress competition, delay entry of a generic version of its brand name drug Solodyn, and extend its monopoly in the market, according to a complaint filed in the federal district court in Harrisburg, Pennsylvania (Walgreen Co. v. Medicis Pharmaceutical Corp., March 26, 2015).

Walgreen Co., Kroger, Safeway, HEB Grocery, and Albertson’s own and operate retail stores that dispense prescription drugs to the public.

The complaint states that Medicis Pharmaceutical Corp. manufactures the brand name drug, Solodyn, which contains minocycline hydrochloride as its active ingredient and is marketed for the treatment of acne. Solodyn was approved by the Food and Drug Administration (FDA) in 2006 and became Medicis’ best-selling product, generating half of the company’s revenues by 2007. For the first three years it was marketed, Solodyn was covered by U.S. Patent No. 5,908,838 (the ‘838 patent).

After Impax Laboratories filed an Abbreviated New Drug Application (ANDA) with the FDA, seeking to manufacture a generic equivalent to Solodyn in December 2007, Medicis filed a petition with the FDA requesting that the FDA not approve any generic version of Solodyn without bioequivalence testing. In November 2008, while Impax’s generic application and Medicis’ petition was pending, Medicis entered into a reverse payment agreement with Impax, paying Impax at least $55 million to drop its patent challenge in exchange for Impax’s agreement to delay marketing its generic version until November 2011.Subsequently, Medicis improperly submitted the ’838 Patent to the FDA for listing in the Orange Book, and then initiated sham patent suits against multiple potential generic competitors solely in an attempt to automatically stay FDA approval of those generic manufacturers’ ANDAs for up to 30 months, the complaint charges.

According to the complaint, having gained additional time without generic competition, Medicis introduced new strengths of Solodyn. The new strengths offered no benefits over the prior legacy strengths. Because of generic substitution laws, pharmacists could not substitute less expensive generic versions of Solodyn in one of the legacy strengths when presented with a prescription for branded Solodyn in one of the new strengths. Medicis aggressively destroyed demand for the legacy strengths, converted that demand to the new strengths using its force of pharmaceutical detailers, and ceased shipping branded Solodyn in legacy strengths altogether. By the time generic versions of Solodyn became available in November 2011, the prescription base for Solodyn in the legacy strengths was virtually nonexistent.

The complaint also alleges that 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 between generic and brand drugs, unless the prescribing physician has specifically ordered otherwise. Manufacturers are well aware of the effect of generics on brand sales and have a strong incentive to delay the introduction of generic competition into the market.

Medicis overarching anticompetitive scheme delayed and suppressed competition and enabled Medicis to sell Solodyn at artificially inflated prices without losing substantial sales. But for Medicis’ illegal conduct, generic manufacturers would have entered the market unimpeded and competed on the merits against Medicis. As a result, purchasers were deprived of generic competition and had to purchase the drug at supracompetitive prices.

The plaintiffs assert claims for monopolization, attempt to monopolize, and conspiracy to 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. 1:15-cv-11544-DJC.

Attorneys: Matthew A. Thomsen (Cappozi Alder P.C.) for Walgreen Co., The Kroger Co., Safeway Inc., HEB Grocery Company L.P., and Albertson’s LLC.

Companies: Walgreen Co.; The Kroger Co.; Safeway Inc.; HEB Grocery Company L.P.; Albertson’s LLC; Medicis Pharmaceutical Corp.

News: Antitrust PennsylvaniaNews