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Article: Direct Purchasers and End Payors Accuse Brand Pharma of Delaying Generic Entry

Business Litigation Reports

Americans want access to inexpensive pharmaceutical drugs. This demand must be balanced with the fact that brand-name, innovator pharmaceutical companies typically invest tremendous resources to research and develop new drugs, bring them to market and obtain patent protection for their inventions. To address these often competing interests, Congress passed the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, also known as the “Hatch-Waxman Act,” which created a regulatory framework that seeks to balance an incentive to innovate with public access to inexpensive generic drugs.

Specifically, the Hatch-Waxman Act provides generic pharmaceutical companies with a simplified process to compete with innovator pharmaceutical companies through the filing of an Abbreviated New Drug Application (“ANDA”), in exchange for certain exclusivity periods for the innovator. The generic companies are permitted to rely on safety and efficacy studies conducted by the innovator if the generic company can demonstrate that its drug is “bioequivalent” to the approved innovator drug product. 21 U.S.C. § 355(j)(2)(A). ANDA filers also generally seek to have their product deemed “AB-rated,” which means their drug is pharmaceutically equivalent to the brand-name drug. Without this rating, a pharmacy may not automatically substitute a generic drug for a brand-name drug.

However, the ANDA process does not always work quickly, and direct purchasers and end payors for pharmaceuticals have recently asserted several class action lawsuits against innovator drug companies alleging that certain of the innovators’ actions are subject to antitrust liability because they result in delayed generic market entry. Innovators have responded to these actions by moving to dismiss, seeking to halt what they perceive as baseless antitrust actions before they even start. This scenario played out recently in In re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antirust Litigation, MDL No. 2445.

There, the direct purchasers and end payors (the “Plaintiffs”) alleged that Reckitt Benckiser, Inc. (“Reckitt”) violated the Sherman Act and several state laws by engaging in three acts to delay the entry of a generic version of its Suboxone product: (1) a “product hopping” scheme; (2) the filing of a “sham” Citizen Petition; and (3) refusing to give favorable terms in a negotiation with the generics (the “duty to deal” claim). On December 3, 2014, the District Court for the Eastern District of Pennsylvania issued an Opinion permitting discovery to go forward on the “product hopping” and “sham” Citizen Petition claims, but dismissing the Plaintiffs’ duty to deal claim. Id., Slip Op. (D.I. 97) (E.D. Pa. Dec. 3, 2014). Reckitt has moved for reconsideration of the Court’s denial on the “product hopping” and “sham” Citizen Petition claims.

Product Hopping
The Plaintiffs alleged that Reckitt engaged in a product hopping scheme by switching from a tablet to a film version of Suboxone. Id. at 1. Reckitt pulled its tablets from the market in favor of the film, asserting that the tablet presented safety concerns regarding accidental pediatric exposure, which the film solved. Id. at 5. The Plaintiffs characterized Reckitt’s safety concerns as “a fraudulent sales and marketing campaign against the tablet for the purpose of diverting sales from the tablet.” Id. The Plaintiffs complained that Reckitt’s switch to a Suboxone film would delay generic entry because: (1) the patent for the Suboxone film extends until September 2023; and (2) generic Suboxone tablets cannot be AB-rated to the film form and, therefore, a pharmacist cannot automatically substitute the generic tablets for a prescription to the brand-name film. Id. The Court found that the “facts presented sufficiently allege that the disparagement of the Suboxone tablets took place alongside ‘coercive measures’” and, thus, denied Reckitt’s motion to dismiss the “product hopping” claims. Id. at 18-22.

“Sham” Citizen Petition
Reckitt’s safety concerns regarding the Suboxone tablets also led it to file a Citizen Petition with the FDA, asking the FDA not to approve generic versions of the Suboxone tablet until the FDA made several safety conclusions regarding the pending ANDAs seeking approval to market generic tablets. Id. at 7-8. The Plaintiffs alleged the Petition was a sham because the FDA did not have the authority to enforce any of Reckitt’s safety requests and because Reckitt was allegedly taking actions inconsistent with what it asked for in the Citizen Petition. Id. at 8-9. The Plaintiffs also noted that the ANDAs were approved immediately after the Citizen Petition was denied. Id. at 9. The Court agreed with the Plaintiffs, finding that they plausibly pleaded that Reckitt used the Citizen Petition to interfere with the ANDA approvals, and “plausibly pleaded that the Petition was objectively baseless in that no reasonable litigant could have realistically expected success on the merits.” Id. at 31-32. Thus, the Court denied Reckitt’s motion to dismiss these claims.

Duty to Deal
The FDA approved a Risk Evaluation and Mitigation Strategy, or “REMS,” for Suboxone tablets based on the concern of pediatric exposure. Id. at 6. The FDA, then, ordered the ANDA filers to collaborate with Reckitt on a Single Shared REMS (“SSRS”) that would control the distribution of both generic and branded Suboxone products. But the Plaintiffs alleged, pursuant to 21 U.S.C. § 355-1(f)(8), that Reckitt was attempting to use its REMS “to block or delay approval of” their ANDAs, and unlawfully maintain monopoly power. Id. at 27. Specifically, they alleged that Reckitt refused to attend SSRS meetings, insisted on conditions the generic manufacturers found unreasonable, and refused to disclose confidential information from its own REMS. Id. at 7.

The district court held that 21 U.S.C. § 355-1(f)(8) does not create an antitrust duty to deal in the context of negotiations for a SSRS, especially where the branded company’s REMS does not prevent generics from obtaining samples of the brand-name drug for bioequivalence testing. The Court further held that, to the extent that § 355-1(f)(8) does create a duty to deal, the statute also “provides for increased FDA oversight and diminishes the need for antitrust scrutiny.” Id. at 29. Thus, the Court granted Reckitt’s motion to dismiss the duty to deal claims.

This case is one of several recent filings where end purchasers and payors have raised these and similar issues. This is the first opinion to issue, and Reckitt’s motion to reconsider remains pending, so the ruling does not necessarily indicate what this and other courts will do in the future. That said, there is a growing trend indicating that end purchasers and payors will continue bringing these types of claims against innovator pharmaceutical companies. Those companies should monitor the developing case law and be advised of the potential pitfalls it may raise.