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A Global Resource for Compliance Officers & Legal Advisors
Healthcare Antitrust
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Second Circuit To Hear Expedited Appeal in “Product Hopping” Suit

by | Jan 9, 2015 | ,

On January 6, 2015, the Second Circuit granted defendants’ motion for an expedited appeal but denied their motion for a stay in New York v. Actavis PLC, 14-4624 (2d Cir. Jan. 6, 2015).  Defendants are manufacturers of Namenda, a brand name pharmaceutical prescribed to patients with moderate to severe Alzheimer’s disease.  New York Attorney General Eric Schneiderman filed suit against the defendants in September 2014, alleging that the defendants’ plan to cease production of Namenda IR, a twice-daily instant release formulary whose patent expires in April 2015, was motivated by anticompetitive concerns and violated federal and state antitrust laws.  According to Schneiderman, defendants’ motive for ceasing sales of Namenda IR was to force patients to switch to Namenda XR, an extended release formulary of the drug with a longer patent life.  Converting patients to Namenda XR before the expiration of the Namenda IR patent would negate generic manufacturers’ ability to win market share through the automatic substitution of generic drugs for brand name prescriptions required under many state laws because the generic instant release formulary is not “bioequivalent” to the extended release version.

The Southern District of New York found that the “hard switch” from Namenda IR to XR would injure competition and consumers and granted the state’s motion for a preliminary injunction on December 11, 2014.  Defendants presented evidence that switching to the extended release formula would benefit patients by reducing the number of doses they would need to take each day, which can be particularly beneficial for patients with memory problems.  However, the court concluded that the purpose of defendants’ plan was to nullify state generic substitution laws and that defendants failed to establish any cognizable harm that would result from an injunction requiring them to continue selling Namenda IR.  The harm defendants sought to avoid, the court explained, was the intended effect of the federal and state regulatory regimes at play: increased competition.

The Second Circuit’s January 6 order was brief and not accompanied by an opinion.  The court held that the defendants had not met the standard for a stay of the injunction, citing In re World Trade Center Disaster Site Litigation, 503 F.3d 167, 170 (2d Cir. 2007).  The court granted their motion for an expedited appeal and ordered them to submit an expedited briefing schedule within seven days.



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Sham-Wow! Antitrust Liability May Attach to Sham Administrative Petitions

by | Oct 1, 2014 | ,

Addressing whether the “sham” exception to Noerr-Pennington immunity is limited to sham litigation in courts, the U.S. Court of Appeals for the Federal Circuit vacated a lower court’s summary judgment of no antitrust liability, finding that antitrust liability can attach to sham administrative petitions and that the sham litigation exception is not limited to court litigation.  Tyco Healthcare Group LP v. Mutual Pharm. Co., Inc., Case No. 13-1386 (Fed. Cir., Aug. 6, 2014) (Bryson, J.) (Newman, J., dissenting).

Tyco Healthcare acquired patents relating to temazepam, an insomnia drug marketed as Restoril.  Seeking Food and Drug Administration (FDA) approval to manufacture and sell generic temazepam, Mutual Pharmaceutical filed an Abbreviated New Drug Application (ANDA), certifying that its generic product would not infringe any patents.  Tyco disagreed and sued Mutual for infringement under the Hatch-Waxman Act.  The district court rejected this claim, reasoning that products manufactured to the ANDA’s specification could not infringe.  Tyco then filed a citizen petition with the FDA, urging new guidelines to require generic temazepam manufacturers to more extensively demonstrate bioequivalence to Restoril.  The FDA denied Tyco’s citizen’s petition “indicating that, in the FDA’s view, it was wholly without merit.”

In response to Tyco’s infringement suit, Mutual brought antitrust counterclaims, including allegations that Tyco’s suit and citizen petition were shams.  In other words, Mutual argued that Tyco used illegitimate means to keep Mutual’s product off the market.  On summary judgment, the district court rejected these counterclaims, holding that it was reasonable for Tyco to proceed with its infringement action and that antitrust liability for sham claims cannot apply to filing administrative petitions because the exception “is expressly limited to litigation.” Mutual appealed.

The Federal Circuit vacated the rulings on antitrust issues and remanded for further consideration.  With regard to Tyco’s Hatch-Waxman claim, the Federal Circuit found that it was not unreasonable for a patent owner to allege infringement under Hatch-Waxman if the patent owner has evidence that the as-marketed commercial ANDA product will infringe, even though the hypothetical product specified in the ANDA could not infringe.  The Court concluded that further inquiry was necessary to determine if Tyco’s factual theory of infringement was objectively baseless.  With regard to the administrative proceeding, the Court found that the sham exception to Noerr-Pennington is not limited to court litigation, and that it has been applied to administrative petitions, including FDA citizen petitions.  Accordingly, it remanded this counterclaim for resolution of fact issues regarding whether the citizen petition was objectively baseless and motivated by a subjective desire to directly interfere with Mutual, as well as whether Mutual suffered any anticompetitive injury.

Judge Newman dissented from the court’s conversion of routine patent litigation into antitrust violations, arguing that “[e]nforcement of a presumptively valid patent against a product that infringes by statute [Hatch-Waxman] cannot be deemed objectively baseless” and patent holders have “the right to communicate with the FDA concerning public information on matters within the agency’s authority and responsibility without incurring antitrust liability.”



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New York Proposes Revised Regulations for Health Care Collaborations

by | Aug 27, 2014 |

Today, New York health regulators proposed revised rules that would allow health care providers to merge or cooperate with one another without being subject to federal or state antitrust scrutiny.

The state’s Department of Health proposed regulations establishing a process for entities to obtain a Certificate of Public Advantage (COPA) pursuant to Public Health Law Article 29-F.  Article 29-F sets forth the State’s policy of encouraging appropriate collaborative arrangements among health care providers who might otherwise be competitors, if the benefits of such arrangements outweigh any disadvantages likely to result from a reduction of competition.  The statute requires the Department to establish a regulatory structure allowing it to engage in active state supervision as necessary to promote state action immunity under state and federal antitrust laws.

The proposed regulations were initially published in the State Register on September 18, 2013, and have been revised in light of public comments received.  The revised regulations will be open for public comment for 30 days and will take effect upon publication of a notice of adoption.  A Notice of Revised Rulemaking appears in the today’s State Register, and a copy of the full text of the regulatory proposal is available on the Department’s website.



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Physicians Write Letter to FDA Regarding Biosimilar Naming Concerns

by | Aug 25, 2014 |

On Thursday, August 14, 2014, several physicians wrote a letter to Commissioner Hamburg of the U.S. Food and Drug Administration (FDA) expressing their concerns regarding the naming of biosimilar products in light of the implementation of the Biologics Price Competition and Innovation Act (BPCIA).

Unlike traditional small-molecule prescription drugs, most biologics are complex and are typically made from human or animal materials.  The BPCIA provides an abbreviated licensure pathway for biologics that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biologic.  A biologic may be demonstrated to be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved biologic.  Unlike “generic” versions of small-molecule prescription drugs, biosimilars are not bioequivalent to their reference biologics.  To date, the FDA has not approved any biosimilar products.

The licensure pathway contemplated by the BPCIA is meant to reduce the time and cost of bringing competing biosimilar products to consumers.  As the FDA begins evaluating the first U.S. applications for the licensing of biosimilars, concerns have arisen as to how approved biosimilars will be named.  In their letter to Commissioner Hamburg, the physicians argued that biosimilars “must have distinguishable nonproprietary names” from their reference biologics.  The physicians wrote that distinct names are needed to avoid confusion: if a biologic and its biosimilars share a common name, physicians may incorrectly assume that the products are approved for all of the same indications, even if the FDA disagrees.  The physicians also argued that unique names for biosimilars will help doctors track adverse events by allowing them to correctly identify what product caused the event.

However, not everyone agrees with the physicians’ position.  On July 1, 2014, a group of pharmacies, insurers and unions wrote a letter to Commission Hamburg asking the FDA to require that biologics and biosimilars share the same name.  This group argued, among other things, that requiring distinct names for biosimilars may slow the uptake of biosimilar products as substitutes for brand-name biologics, thereby limiting significant potential cost savings.



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Judge Upholds Poaching Claims in Pharmaceutical Data Antitrust Case

by | Aug 22, 2014 | , ,

On Friday, August 15, 2014, Judge Gerald McHugh of the Eastern District of Pennsylvania let stand several counterclaims that IMS Health Inc. (IMS) made against Symphony Health Solutions Corp. (Symphony) in connection with related to allegations that Symphony had poached IMS employees to steal trade secrets.

In July 2013, Symphony brought a complaint against IMS, the largest pharmaceutical data and analytics company in the world, alleging that IMS unlawfully abused its monopoly power in pharmaceutical data markets and violated the antitrust laws through various types of horizontal and vertical exclusionary conduct, including entering into exclusive long-term agreements with data suppliers, requiring data suppliers to sign most-favored-nation clauses, acquiring rivals to eliminate competition, and bundling its products.  In response to the complaint, IMS filed multiple counterclaims alleging that Symphony poached IMS employees to steal IMS’s trade secrets. Symphony then filed a motion to dismiss IMS’s counterclaims.

After reviewing Symphony’s motion to dismiss, Judge McHugh dismissed IMS’s trade secret misappropriation claims as to two former IMS employees as barred by res judicata.  Specifically, a prior consent order already addressed concerns that Symphony gained access to IMS’s trade secrets through the two former IMS employees.  Judge McHugh also dismissed IMS’s claim of tortious interference regarding a vendor because IMS’s “prediction” of future harm could not sustain its claim.

However, Judge McHugh let IMS’s poaching claims go forward and refused to dismiss IMS’s claims of improper procurement of confidential information and unfair competition.  As to improper procurement, Judge McHugh highlighted IMS’s allegation that its former employee hired by Symphony made a public presentation with IMS materials.  With respect to unfair competition, Judge McHugh ruled that IMS had stated facts sufficient to support its claim when it alleged that “Symphony targeted for hire groups of employees who worked in parts of IMS’s business that Symphony wished to duplicate, with the purpose of appropriating IMS’s trade secrets.”



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Contractual Duty to Deal Does Not Equal Antitrust Duty to Deal

by | Jul 31, 2014 | , ,

Addressing for the first time whether a patent holder under a contractual duty to deal is also subject to an antitrust duty to deal, the U. S. Court of Appeals for the Second Circuit upheld dismissal of a putative antitrust class action challenge to a drug manufacturer’s refusal to fully supply competitors’ requested quantities under patent settlement agreements.  In re Adderall XR® Antitrust Litigation, Case No. 13-1232 (2d Cir., June 9, 2014) (Sack, J.).

The defendants, Shire, hold patents covering Adderall XR.  Previously, Shire sued generic drug manufacturers Teva and Impax for patent infringement after those manufacturers—seeking U.S. Food and Drug Administration (FDA) approval to produce generic Adderall XR—argued that Shire’s patents were “invalid or will not be infringed.”  Shire settled with Teva and Impax in 2006 with variants of the traditional reverse-payment agreement.  In these settlement agreements, Teva and Impax agreed to stay out of the Adderall XR market for three years (even if FDA approval came earlier), but unlike a traditional reverse-payment agreement (where the patent holder pays money to the potential entrant), Shire agreed to grant licenses starting in 2009 for making and selling the drug and, if FDA approval had not yet occurred, to supply Teva and Impax’s requirements of unbranded Adderall XR for resale.  The 2d Circuit summarized the arrangement as follows: “Shire undertook to give its competitors both the rights and the supplies necessary to participate in the market for [Adderall XR].”  By the time Shire’s contractual exclusivity expired, the FDA had not approved either Teva or Impax’s applications, so Teva and Impax began purchasing from Shire.  Shortly thereafter, both companies alleged that Shire breached the settlement agreement obligations by refusing to fully fulfil their requirement orders.  However, both companies eventually settled with Shire.

In the present case, drug wholesaler and plaintiff Louisiana Wholesale Drug Company (LWD) brought a putative class action against Shire.  It alleged antitrust violations stemming from the effect of the supply shortfall on the prices the proposed class of drug wholesalers paid.  LWD argued that Shire’s “ordinary breach of contract” became “an unlawful act of monopolization” because, by entering into the agreements, Shire “relinquish[ed] its monopoly control over” Adderall XR vis-à-vis Teva and Impax and thereby created a “duty to deal” with its competitors under the Supreme Court’s 1985 Aspen Skiing decision.  Specifically, LWD alleged that Shire artificially inflated prices by holding back some of its supply from generic manufacturers/patent licensees Teva and Impax, from whom LWD purchased Adderall XR.  After the district court dismissed the complaint on a R. 12(b)(6) motion to dismiss, LWD appealed.

The 2d Circuit affirmed the district court’s dismissal for failure to state a claim, concluding that LWD’s “allegations amount to the self-defeating claim that Shire monopolized the market by ceding its monopoly” and that “the complaint does little more than attach antitrust ‘labels and conclusions’ to what is, at most, an ordinary contract dispute to which the plaintiffs are not even parties.”  The court reasoned that “‘the sole exception to the broad right of [...]

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Getting the Deal Through: Pharmaceutical Antitrust 2014

by | Jul 16, 2014 | ,

McDermott has contributed to the Italian chapter of the 2014 edition of “Pharmaceutical Antitrust” published by Getting the Deal Through, a valuable work tool for legal practitioners dealing with antitrust rules in the pharmaceutical sector.  The chapter addresses the most significant regulatory and antitrust issues affecting the marketing, authorization and pricing of pharmaceutical products in Italy.

Click here to read the full chapter.



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Federal Judge Puts Narcolepsy Drug Horizontal Conspiracy Claims to Bed

by | Jun 27, 2014 | ,

On Monday, June 23, 2014, a Federal Judge in the Eastern District of Pennsylvania granted summary judgment for five pharmaceutical companies on horizontal conspiracy claims brought by Apotex Inc. and direct purchaser and end payor plaintiffs regarding the popular narcolepsy drug Provigil.  Provigil’s key ingredient is modafinil, “a wakefulness-promoting agent” used to treat sleep disorders like narcolepsy.  Apotex and the Provigil buyers claimed that Cephalon, Inc. unlawfully restrained trade and maintained a monopoly on modafinil sales by facilitating a horizontal conspiracy through reverse payment settlements with generic-drug manufacturers.

Cephalon, which manufacturers Provigil, entered into reverse payment settlements (also known as “pay-for-delay”) between 2005-2008 to settle patent infringement litigation with Teva Pharmaceutical Industries Ltd., Ranbaxy Laboratories Ltd, Mylan Inc., and Barr Laboratories, Inc.  Although Judge Mitchell Goldberg previously held the plaintiffs’ claims were sufficient to withstand a motion to dismiss, on summary he judgment he found insufficient evidence of a conspiracy.

Judge Goldberg held that the plaintiffs lacked sufficient evidence to demonstrate the existence of the alleged hub-and-spoke conspiracy.  He reasoned that evidence of “conscious parallelism” among the defendants’ behavior was not enough to levy an antitrust claim when equally plausible independent explanations for their behavior exist.  For example, the generic-drug manufacturers were separately compensated and some would receive favored treatment regarding royalty rates.  The “pay-for-delay” settlement agreements also created contingent launch provisions, reassuring generic companies that they would not lose the opportunity to launch if another generic-drug manufacturer obtained an earlier date.  Had the agreements been contrary to the generic-drug manufacturers’ self-interest, the claims would have more closely resembled noteworthy hub-and-spoke conspiracy cases.

Judge Goldberg cautioned, however, that the court’s opinion does not address the legality of each individual “pay-for-delay” settlement agreements between Cephalon and the generic-drug manufacturers.  The Federal Trade Commission is separately challenging the settlements under antitrust law.



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Perspectives from the Federal Antitrust Enforcement Agencies

by , and | May 20, 2014 | , ,

At the recent Antitrust in Health Care conference in Arlington, Virginia, representatives from the Federal Trade Commission and U.S. Department of Justice Antitrust Division discussed important health care and antitrust topics.  Speakers stressed that the Affordable Care Act is not an opportunity for anticompetitive consolidation and conduct.  Providers and payers alike should continue to analyze every acquisition, collaborative arrangement, contract or unilateral action under the traditional framework of antitrust law.

Please click here to read the full article.



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The Case of Ophthalmic Drugs in Italy and France: A Lesson to Learn – Parallel Antitrust Investigations and Cooperation Between National Competition Authorities

by and | May 7, 2014 | , ,

The recent investigations into two pharmaceutical companies active in the ophthalmic drugs market in Italy and France serve as a reminder of the cooperation that takes place between national competition authorities. International groups should therefore take into account all the jurisdictions where they have a presence or do business when developing their antitrust audit and compliance programmes.

Read the full article.



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