Antitrust Law Daily Wrap Up, TOP STORY—C.D. Cal.: Potential competitor’s exclusion from drug market could be result of monopolization, (Aug 12, 2014)

By Jeffrey May, J.D.

Biopharmaceutical company Retrophin, Inc. adequately alleged monopolization claims against Questcor Pharmaceuticals, Inc. based on Retrophin's exclusion from the market for therapeutic preparations of adrenocorticotropic hormone (ACTH)—a drug used to treat certain life threatening and often fatal diseases, the federal district court of Santa Ana, California, has ruled (Retrophin, Inc. v. Questcor Pharmaceuticals, Inc., August 8, 2014, Staton, J.).

Questcor’s ACTH drug, sold under the brand name H.P. Acthar Gel, is the only long-acting ACTH therapeutic drug approved by the Food and Drug Administration (FDA) for use in the United States. Acthar is used in the treatment of Infantile Spasms and Nephrotic Syndrome. According to Retrophin, after Questcor acquired the rights to Acthar in 2001, the company raised the price of the drug dramatically from around $50 a vial to $28,000 a vial.

Retrophin alleged that it was prevented from competing with Questcor by Questcor’s antitrust violations. The complaining company contended that it attempted to acquire from Novartis AG the rights to Synacthen ACTH—a drug similar to Acthar but not approved for use in the United States. However, according to Retrophin, Questcor “swept in” and acquired the rights to Synacthen to preserve its monopoly. Retrophin claimed that it is now attempting to develop a new drug from scratch to match Synacthen and compete in the market.

Antitrust standing. The court denied Questcor's request to dismiss Retrophin’s complaint based on lack of antitrust injury and antitrust standing. Retrophin sufficiently alleged antitrust injury based on its inability to acquire Synacthen to compete with Questcor’s Acthar. At this stage, the court was not convinced by Questcor's argument that the alleged harm was too speculative to support standing. Retrophin sufficiently alleged an intent and preparedness to enter the market, the court ruled. Moreover, the necessity of FDA approval for Synacthen did not foreclose standing under the circumstances.

Monopoly power. Questcor also unsuccessfully argued that it lacked monopoly power to violate Sec. 2 of the Sherman Act. While Retrophin failed to offer direct evidence of market power, it sufficiently alleged facts that, if true, could constitute circumstantial evidence of market power, according to the court. Retrophin alleged that Questcor had monopoly power in the following three U.S. markets: (1) ACTH therapeutic drugs, for which Questcor “effectively has 100% of the market”; (2) therapeutic drugs to treat Infantile Spasms, for which Questcor has “more than 50%” of the market”; and (3) last resort therapeutic drugs to treat Nephrotic Syndrome, for which Acthar was the “primary and dominant” treatment. In response, Questcor argued that entry barriers were low to establish monopoly power. The court concluded, however, that whether there were in fact significant barriers to entry could not be decided on a motion to dismiss. Retrophin alleged significant entry barriers based on (1) the difficulty of developing a new drug from scratch; (2) Questcor’s “Orphan Drug Designation” for Infantile Spasms; and (3) the need for FDA approval.

Harm to competition. Retrophin adequately alleged harm to competition based on its exclusion from the markets. The court rejected Questcor’s suggestion that any harm was too transient to sustain an antitrust violation. The harm alleged was more properly considered indefinite than transient, the court noted.

Attempted monopolization. The court also rejected Questcor's position that Retrophin could not allege attempted monopolization because it had already alleged actual monopolization. Questcor’s argument evinced a fundamental misunderstanding of the liberal pleading policy embodied in the Federal Rules of Civil Procedure, the court explained.

The case is No. 8:14-cv-00026-JLS-JPR.

Attorneys: Tami Kameda Sims (Katten Muchin Rosenman LLP) for Retrophin, Inc. John F Cannon (Stradling Yocca Carlson and Rauth PC) for Questcor Pharmaceuticals, Inc.

Companies: Retrophin, Inc.; Questcor Pharmaceuticals, Inc.

Companies: Novartis AG; Retrophin, Inc.; Questcor Pharmaceuticals, Inc.

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