Antitrust Law Daily Wrap Up, TOP STORY: High Court asked to review preliminary injunction in Namenda monopolization suit, (Nov 9, 2015)

By Jeffrey May, J.D.

Allergan plc is asking the U.S. Supreme Court to “restore innovators’ patent rights and clarify their antitrust duties” by taking up a decision of the U.S. Court of Appeals in New York City that the brand drug manufacturer contends is “chilling critical efforts to develop life-saving medications.” In a petition for certiorari, filed on November 4, Allergan is questioning the Second Circuit's decision to affirm a preliminary injunction in a monopolization action brought by the State of New York that requires the drug maker to continue selling an earlier version of an Alzheimer's drug nearing the end of its patent protection in order to facilitate the use of “bioequivalent” generic drugs (Allergan plc v. State of New York, Dkt. 15-587).

In September 2014, the State of New York sued Actavis plc, now Allergan, in an effort to prevent the company from “forcing Alzheimer’s patients to switch medications as part of an anti-competitive strategy designed to maintain high drug prices.” According to the State, as Namenda IR—a twice-daily drug designed to treat moderate-to-severe Alzheimer’s disease—neared the end of its patent exclusivity period and was about to face generic competition, the defendant planned to withdraw it from the market and to force patients to switch to a once-daily version of the drug with a longer patent—Namenda XR. The alleged conduct undermined generics’ ability to compete, the State alleged. In December 2014, the federal district court in New York City issued a preliminary injunction prohibiting the defendant from discontinuing sales of Namenda IR until 30 days after the generic equivalent would first become available in July 2015.

The Second Circuit heard an expedited appeal. Noting that this was an issue of first impression in the circuit courts, the appellate court explained the case raised a novel question of under what circumstances conduct by a monopolist to perpetuate patent exclusivity through successive products, commonly known as “product hopping,” violates the Sherman Act. The appellate court concluded: “the combination of withdrawing a successful drug from the market and introducing a reformulated version of that drug, which has the dual effect of forcing patients to switch to the new version and impeding generic competition, without a legitimate business justification, violates § 2 of the Sherman Act.” The drug maker unsuccessfully argued that the mere exercise of patent rights was categorically immune from antitrust scrutiny and that product hopping was not anticompetitive or exclusionary under § 2. The preliminary injunction was upheld.

Allergan has asked the Supreme Court: (1) whether exercising rights granted by the Patent Act—in particular, not selling one patented product and selling a different patented product instead—can violate the Sherman Act; and (2) whether drug manufacturers have a federal antitrust duty to facilitate the operation of state drug substitution laws to maximize competitors' sales.

Allergan contended that the appellate court’s decision could not be reconciled with long lines of cases that antitrust liability cannot arise from the mere existence of rights granted by the Patent Act and that a patent owner's rights include the right to refuse to use, sell, or license the invention, while excluding competitors. The drug maker also argued that the Second Circuit “invented an expansive new antitrust duty” that “[b]rand manufacturer must continue to sell outdated drugs so that state drug laws can encourage or even force patients to buy generic substitutes.”

Attorneys: Lisa S. Blatt (Arnold & Porter LLP) for Allergan plc.

Companies: Allergan plc

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