A federal appeals court ruled Friday that Actavis must continue to sell an Alzheimer's drug it had planned to pull off the market. Critics say the company was illegally seeking to limit competition from generics.
It's a case with potential implications for pharmaceutical companies and patients nationwide, experts say.
A three-judge panel of the 2nd U.S. Circuit Court of Appeals affirmed Friday a lower court's order granting a preliminary injunction forcing Actavis to keep selling Namenda IR, an Alzheimer's drug taken twice a day. Actavis had planned to stop selling that drug, replacing it with Namenda XR, which is taken once a day. Generic versions of the original drug were set to become available in July, but no generics would yet be available for the new drug.
The State of New York alleged that Dublin-based Actavis and Forest Laboratories, a manufacturer acquired by Actavis, planned the move to stifle competition from generics in violation of antitrust laws. By pulling the old drug off the market, patients would be forced to take the new one, New York alleged. By the time generic versions of the old drug arrived, doctors and patients wouldn't want to switch to them because patients would have gotten accustomed to taking the drug once a day and not twice a day, New York alleged.
Attempts to reach Actavis for comment Friday were not immediately successful.
But in court documents, Actavis says the switch was a valid business decision meant to keep makers of generics from taking large amounts of sales. New York and many other states have laws that require doctors to prescribe generic versions of drugs when available, and if the old Namenda were still on the market, Actavis would lose business.
“Instead, generics and Forest would compete over whether the cheaper cost of the generic twice-a-day pill outweighs the benefits of Forest's new (but perhaps costlier) once-a-day pill,” lawyers for the drug manufacturers wrote.
The drugmakers argue that the court's injunction forcing it to continue selling the original drug would cost them money and have possible ripple effects for patients and drugmakers nationwide. They called the injunction unprecedented in the courts.
“The injunction sets a precedent that would chill innovation not just in pharmaceuticals, but across other industries as well,” the drugmakers argued in court documents. “Any company will think twice before retiring an older product for an improved model, if the price of innovating is for courts to dictate business decisions. Consumers would lose the benefits of innovation, and patients would lose out on clinical improvements.”
Matthew Cantor, a partner with the law firm Constantine Cannon, said Friday that an injunction forcing a drugmaker to continue selling a product is “an interesting type of relief.”
The case is also interesting, he said, in regard to New York's legal strategy, though it's difficult to know exactly how the judges considered that strategy because they issued only an order Friday, not an opinion. An opinion explaining the judges' reasoning is expected soon.
New York accuses Actavis, among other things, of violating Section 2 of the Sherman Act, an antitrust law. To prove violation of that section, a plaintiff has to show a defendant wields the power of monopoly and that the challenged action was for the purpose of maintaining that monopoly, as opposed to reasons of efficiency, Cantor said.
Government enforcers haven't litigated many Section 2 cases over the past 20 years, he added, though they have indicated in recent years they were going to bring such cases.
Arti Rai, a professor at Duke University's law school, also said she hasn't seen that strategy used in past appellate cases over such drug switches, also known as product-hopping.
“This is a fairly innovative use of antitrust law, and, I think, a more controversial use of antitrust law than in the reverse-payment situation,” Rai said, referring to another more common practice in which makers of brand-name drugs allegedly inhibit competition by reaching settlements with makers of generic drugs in patent disputes to keep cheaper versions of drugs off the market.
Rai, however, said she's not sure if this situation is the type antitrust law was created to handle. That's because the issue in this case is also one of physician behavior, she said. Doctors could still prescribe the generic versions of the old drug, once they arrived, even if the brand-name version of the old drug was off the market, she noted.
Cantor said many, including antitrust scholars, pharmaceutical executives and enforcers, are watching this case closely.
“This type of case has not been brought often before. I don't know if it will be brought again, but certainly, if the precedent stands, manufacturers—particularly in the drug industry who can sort of tweak their drugs when they go off patent to continue some sort of patent exclusivity with a modified drug—will have to take note of how the opinion could impact their distribution decisions,” Cantor said.
It's possible the drugmakers could ask the 2nd Circuit to re-hear the case before a full panel of judges.
