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New York Attorney General’s Product Hopping Lawsuit Raises Novel Issues Under the Antitrust Laws

11.10.14

Daniel N. Anziska

Daniel A. Ladow

Product hopping accusations 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 Namenda ®, a hugely successful drug approved for the treatment of Alzheimer’s disease. In the lawsuit, filed September 15, 2014, the AG asks a New York federal court to prevent Forest from withdrawing immediate release Namenda® (“Namenda® IR”) from distribution at least until generics enter the market in mid-2015. According to the AG’s complaint, Forest is attempting to preserve and extend its monopoly over Alzheimer’s medications by blocking generic entry and price competition.

The lawsuit alleges that Forest is planning to withdraw Namenda IR from the market in favor of a recently-approved extended release version of Namenda (“Namenda® ER”) which is protected by patent through 2029. By withdrawing the immediate-release formulation before generics are launched, the AG believes Forest will force Namenda IR patients to switch to Namenda® ER (a so-called “forced switch”) and, once switched, many patients will never revert back to the IR version of Namenda®, even after lower cost generic versions become available, because pharmacists will not be able to automatically substitute the generic IR versions 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 a 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. The preliminary injunction motion is set to be argued, after abbreviated discovery, in Manhattan beginning 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 state, 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 of generic versions of Namenda IR in 2015 — requiring it to compete on price at the pharmacy level, the prescriber level and third party payer level to maintain market share — and that 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, 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. However, 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.

We will be following the progress of the lawsuit closely. For further information, please contact any of Troutman Sanders’ antitrust or pharmaceutical industry attorneys, including:

  • Glenn Manishin (202-274-2890)
  • Dan Anziska (212-704-6009)
  • Dan Ladow (212-704-6218)
  • Clark Sullivan (212-704-6105)

© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.

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