Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Retailers allege reverse payment agreements suppressed competition for niacin drug, (Mar 11, 2015)

By Linda O’Brien, J.D., LL.M.

Brand drug manufacturer Kos Pharmaceuticals entered into reverse payment agreements with generic drug manufacturers in order to delay entry of a generic version of its brand name drug Niaspan in the market, according to a complaint filed in the federal district court in Philadelphia (Walgreen Co. v. Abbott Laboratories., March 9, 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 Kos Pharmaceuticals sold an extended-release niacin product under the brand name Niaspan — a drug primarily used for the treatment of lipid disorders — and received a number of patents on the specific formulation and method-of-use for the drug. 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 continued, Barr received tentative FDA approval to market its generic Niaspan equivalents. Kos responded by preparing its own authorized generic version. 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.

According to the complaint, Barr was the first manufacturer to seek FDA approval to market generic extended release niacin beginning in 2002. Under the 2005 settlement agreements, Kos allegedly colluded with Bar to delay entry of a generic Niaspan until September 2013. Every month of delay of generic competition allowed Kos and its successors Abbott and AbbVie to preserve millions of dollars in profits from sales of Niaspan. 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, the plaintiffs charged.

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, unless the prescribing physician has specifically ordered otherwise. Also, pharmaceutical wholesalers and retailers are able to acquire generic drugs at lower prices than brand name drugs and health insurers and patients benefit from lower prices as a result of generic competition.

The plaintiffs assert claims for restraint of trade, 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-01183-JD.

Attorneys: Moira Cain-Mannix (Marcus & Shapira LLP) and Richard Alan Arnold, Scott E. Perwin, Lauren C. Ravkind, and Anna T. Neill (Kenny Nachwalter P.A.) 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; Abbott Laboratories, AbbVie Inc.; Teva Pharmaceuticals USA, Inc.; Teva Pharmaceuticals Industries, Ltd.; Barr Pharmaceuticals, Inc.

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