Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Warner Chilcott allegedly used product hopping, reverse payments to delay competition for Asacol, (Jul 20, 2016)

By Linda O’Brien, J.D., LL.M.

Pharmaceutical manufacturer Warner Chilcott restrained generic competition for its brand drug Asacol by reformulating the drug and by entering into an exclusive payment agreement with a generic drug manufacturer to delay entry of generic versions of Asacol into the U.S. market, according to a complaint filed in the federal district court in Boston (Ahold USA, Inc. v. Allergan, plc, July 19, 2016).

In 2009, pharmaceutical company Warner Chilcott Ltd., a subsidiary of Allergan, plc, acquired the rights to Asacol, a delayed release mesalamine formulation used to treat ulcerative colitis. The two patents covering Asacol expired in July 2013. Ahold USA is the domestic subsidiary of Netherlands-based Royal Ahold, an international grocery retailer that operates supermarkets in the United States and Europe.

According to the complaint, Asacol was the 75th top selling drug in the U.S., with sales of $490 million when Warner Chilcott acquired the drug. After Asacol had less than four years of immense profitability remaining before generic entry in July 2013 would capture most of those profits, Warner Chilcott’s main purpose of acquiring the drug was to use state substitution laws to prevent entry of generic competition of Asacol. Specifically, shortly after its 2009 acquisition, Warner Chilcott reformulated Asacol into a new product—Asacol HD.

After the Food and Drug Administration (FDA) approved the reformulated version, the complaint alleges, Warner Chilcott engaged in a strategy to switch patients from Asacol to the new product. First, although Asacol and Asacol HD were not approved by the FDA to treat the same conditions, Warner Chilcott unlawfully marketed Asacol HD to treat mildly active ulcerative colitis and maintenance of remission therapy, which made up the bulk of Asacol prescriptions. Second, Warner Chilcott bribed physicians to switch patients from Asacol to Asacol HD. In October 2015, Warner Chilcott pleaded guilty to felony health care fraud charges filed by Department of Justice for paying kickbacks to prescribers of Asacol to Asacol HD between October 2009 and September 2013. Warner Chilcott also was ordered to pay a $20.74 criminal fine, forfeit $2 million in assets, and pay restitution to two insurance companies.

Additionally, the complaint claims, in 2011, generic drug manufacturer Zydus Pharmaceuticals filed the first application seeking FDA approval for generic Asacol HD. Warner Chilcott filed a patent infringement suit in order to prevent Zydus from entering the market. Subsequently, Warner Chilcott and Zydus entered into an exclusion payment agreement in which Zydus agreed to delay marketing its generic version of Asacol HD until at least November 2015.In exchange, Warner Chilcott agreed not to compete with Zydus with an authorized generic version of Asacol HD until July 2016. By paying Zydus, the first filer, Warner Chilcott guaranteed itself at least another 23 months of unencumbered monopoly profits, estimated to be $935 million, the complaint alleges.

Warner Chilcott’s anticompetitive scheme has delayed the sale of generic Asacol products in the United States and unlawfully enabled Warner Chilcott to sell its branded Asacol products at artificially inflated prices. The scheme foreclosed competition and caused the plaintiff to pay more than they would have paid for the Asacol drugs, the complaint states.

Ahold asserts claims under Sections 1 and 2 of the Sherman Act. The action seeks declaratory relief, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:16-cv-11498.

Attorneys: Thomas M. Sobol and David S. Nalven (Hagens Berman Sobol Shapiro LLP) and John D. Radice (Radice Law Firm) for Ahold USA, Inc.

Companies: Ahold USA, Inc.; Allergan, plc; Warner Chilcott Limited; Zydus Pharmaceuticals USA, Inc.; Cadila Healthcare Limited

News: Antitrust MassachusettsNews