IP Law Daily, PATENT—D.D.C.: FTC fails in bid to allege another illegal agreement between Endo and Impax, (Apr 4, 2022)

By Donielle Tigay Stutland, J.D.

Patent laws protected the exclusive license agreement between Endo Pharmaceuticals Inc. and Impax Laboratories for its extended release opioid drug from being a violating of antitrust laws.

The federal district court in Washington D.C. has dismissed a case brought by the FTC alleging that drug manufacturer Endo Pharmaceuticals Inc. and the exclusive licensee Open ER, Impax Laboratories, LLC, were engaging in anticompetitive and monopolistic actions in violation of the Sherman Act. The court dismissed the case, finding that Endo and Impax were parties to a valid exclusive licensing agreement, which is protected by patent laws. The court determined that the parties’ actions were not threatening competition in areas not protected by patent (FTC v. Endo Pharmaceuticals Inc., March 30, 2022, Lamberth, R.).

Endo’s Opana ER (oxymorphone extended release) product is a long-acting opioid indicated for the treatment of moderate to severe pain. In June 2017, the FDA asked Endo to voluntarily withdraw its drug from the market because of safety concerns about the reformulated version of Opana ER that Endo launched in 2012. Specifically, the FDA was concerned that the reformulated Opana ER resulted in increased intravenous abuse. Following the withdrawal, Impax’s generic version of the original formulation of Opana ER was the only extended-release oxymorphone drug on the market.

The FTC previously found that a 2010 agreement between Endo and Impax was an illegal reverse-payment settlement. In 2017, Endo and Impax entered into a new agreement for Impax to have an exclusive license to a new oxymorphone drug.

The FTC alleged that the 2017 agreement eliminated potential competition from Endo by sharing Impax’s monopoly profits, with Endo in the role of a potential entrant paid to stay out of the market. Impax was allegedly able to exercise and maintain monopoly power in the market for FDA-approved oxymorphone ER tablets. Endo argued that the agreement was not an exclusive agreement, as Endo has the right to freely re-enter the market at any time. In the alternative, Endo argued that if it had an exclusive license agreement with Impax, it argues that the patent laws give patent holders the right to exclude others from using the patented technology.

Patent and antitrust law intersection. The court began by analyzing the relationship between the controlling patent laws and the relevant antitrust laws that the FTC claimed govern the asserted anticompetitive behavior. The court noted that a patent holder in essence has the right to exclude others from profiting from the invention. Further, the court highlighted that the D.C. Circuit found that “the protection of patent laws and the coverage of antitrust laws are not separate issues. Rather the conduct at issue is illegal if it threatens competition in areas other than those protected by the patent.” Thus, the court determined the proper inquiry for an alleged anticompetitive practice would be whether the patentee sought am advantage “beyond what the patent itself gave.”

First, the court determined that the 2017 Agreement between Endo and Impax constituted an exclusive license agreement. In rejecting the FTC’s argument that it was a non-compete agreement, the court noted that the agreement gives Endo a royalty as consideration in return for Impax having an exclusive license. After determining that the 2017 agreement is an exclusive license, the court determined that the activity it governs would be protected under the patent laws. Endo has valid patents for the drug, which have been upheld by courts. As such, it’s right to exclude others from the use of those patents is “undisputed.” Further, the court noted that “The Patent Act explicitly gives a right to maintain a patent monopoly.” Although, the FTC would argue that only one company is the exclusive provider of oxymorphone ER for the entire country, the Patent Act gives permission for one company to hold monopoly power over its patent. The fact that the company is Impax and not Endo is contemplated by the Patent Act, as it provides for “exclusive licenses.”

Finally, the court looked at whether the agreement impedes competition more so than previous arrangements that have been deemed reasonable. Here, the court noted that in cases where arrangements did not have the protection of patent laws, there were facts to show additional anticompetitive behavior outside of an exclusive license and patent monopoly. Additionally, the court noted that the FTC did not allege a reverse payment scheme. Additionally, the court indicated that the FTC did not allege that the licensing agreement is overly restrictive or that Endo or Impax have attenuated to dominate the industry or control the market. As such, the court found the behavior of Endo and Impax “within the bounds of anticompetitive activity expressly protected by patent laws.”

The Case is No. 1:21-cv-00217-RCL.

Attorneys: Eric Matthew Sprague for the FTC. George G. Gordon (Dechert LLP) for Endo Pharmaceuticals Inc.

Companies: Endo Pharmaceuticals Inc.

Cases: Patent DistrictofColumbiaNews