Antitrust accusations based on so-called “product hopping” continue to make the headlines, most recently after the Attorney General for the State of New York (the “AG”) brought an antitrust lawsuit against Actavis, PLC and its subsidiary Forest Laboratories, LLC (collectively “Forest”) based on their marketing plans for Alzheimer’s drug Namenda®. “Product hopping” is a term used by the United States Federal Trade Commission (“FTC”) to refer to the practice by some pharmaceutical companies of withdrawing one version of a drug in favor of another, as generic competition for the first version approaches.
The lawsuit alleges that Forest is planning to withdraw immediate release Namenda® (“Namenda® IR”) from the market in favor of a recently-approved extended release version of Namenda (“Namenda® ER”), and asks a New York federal court to prevent Forest from withdrawing Namenda® IR at least until generics enter the market in mid-2015. If Forest is allowed to withdraw Namenda® IR before generics are launched, the AG believes Forest will force Namenda® IR patients to switch to Namenda® ER (a so-called “forced switch”). Once switched, the AG alleges, many patients will never revert back to Namenda® IR because pharmacists will not be able to automatically substitute the generic versions of Namenda® IR for Namenda® ER. Forest counters that its new formulation is innovative and medically superior, since it is only taken once a day, and in any event that as a valid patent holder it may decide whether to use its patent rights, or not, without Sherman Act antitrust liability.
The case is moving quickly ahead. On September 24, the AG filed its motion for preliminary injunction to prevent Forest from withdrawing Namenda® IR from the market until generic competitors have entered. Forest responded in part with a motion to dismiss the complaint on the ground that it failed to state a cause of action under the antitrust laws. Arguments on the AG’s preliminary injunction motion started in Manhattan on Monday, November 10, 2014.
In his motion for a preliminary injunction, the AG argues that to succeed on its antitrust claims, the state needs only to prove two factual elements — that Forest has monopoly power, and that it is using exclusionary conduct to maintain its monopoly power. Forest has monopoly power, the AG contends, because there are no therapeutic alternatives to Namenda® in the marketplace. (There are other Alzheimer’s drugs, but they are used together with Namenda®, not as alternatives.) Forest’s efforts to force patients from Namenda® IR to Namenda® ER represents improper exclusionary conduct, according to the AG, because it allegedly lacks any legitimate business purpose and is nothing more than gaming the regulatory system.
In its defense, Forest points to the fact that no antitrust court has ever compelled a company to market an old product to help its rivals. According to the Second Circuit in the landmark Berkey Photo v. Kodak decision, “any firm, even a monopolist, may generally bring its products to market whenever and however it chooses.” Forest also contests both of the factual elements that underlie the AG’s antitrust allegations, arguing that it does not have monopoly power because nothing it can do would block entry in 2015 for the generic IR formulation — requiring it to compete on price at the pharmacy level, the prescriber level and third party payer level to maintain market share — and that its introduction of the ER version is legitimate because Namenda® ER’s easier dosing will better ensure patient compliance.
This is not the first time a branded pharmaceutical company has been accused of violating the antitrust laws based on so-called “product hopping” allegations. Several class actions have been filed by generic drug companies, unions and other third-party payers seeking recovery under the antitrust laws based on similar allegations, with the U.S. Federal Trade Commission supporting the claims in amicus briefs, some of which have settled. Given the pace of State of New York v. Actavis, PLC and Forest Laboratories, LLC and the lawsuit’s unique procedural posture, however, the case will likely be the first to decide whether a branded company can be forced to keep its old product on the market for the benefit of generic competitors. Given the Supreme Court’s so-called “pay-for-delay” decision in 2013 (in another case involving Actavis), and other antitrust cases challenging the manner in which pharmaceutical companies use their patents, it might take some time for a judicial consensus to emerge on this and similar antitrust issues.
By Clark G. Sullivan
Troutman Sanders LP
Clark Sullivan focuses his practice on patent litigation, patent prosecution, technology licensing and other intellectual property issues. He has handled numerous disputes for his clients over the years involving patent infringement, false advertising, appeals of administrative actions, and federal antitrust law. His patent prosecution work is primarily in the pharmaceutical and diagnostic industries, and he has extensive experience defending client patent positions around the world, in countries including Europe, Japan, Australia, China and India.