September 25, 2014

Antitrust Regulators Taking Aim At Drug Companies’ “Forced Switching”

By Rosa M. Morales

Signs continue to accumulate that antitrust regulators are on the lookout for innovative anticompetitive tactics by pharmaceutical companies seeking to delay entry of lower-priced generic drugs.

This growing interest by federal and state regulators in policing the anticompetitive suppression of generic drugs was the subject of a recent post on this blog by Ankur Kapoor.  Among the antitrust enforcement actions analyzed was a reverse-payment case filed earlier this month by the New York State Attorney General against Actavis and its recently acquired, wholly-owned subsidiary Forest Laboratories.

In recent comments, Eric Stock, chief of the Antitrust Bureau of the New York State Attorney General’s Office shed light on what antitrust enforcers may be looking at when he discussed “forced switching” – one of the anticompetitive tactics used by the pharmaceutical companies that is attracting the interest of antitrust enforcers.  “Forced switching” occurs when pharmaceutical companies “force” the use of new branded drugs by either pulling older branded versions from the market or reducing their supply.

Stock characterized forced switches as “most troubling” to antitrust enforcers because they “reduce choices” for the consumer, who pays “more for a drug that doesn’t seem to provide much of an incremental value.”  According to Stock, forced switches violate antitrust law unless there is a “legitimate business justification . . . [for which] the benefits outweigh the anticompetitive effects” of pulling “a billion-dollar drug from the market for any reason other than to interfere with generic competition.”

Forced switches and less extreme “product hopping” (where the manufacturer offers a new drug without pulling the older drug from the market) from branded drugs to their successors pose unique challenges for public and private antitrust enforcers because they directly implicate both of the Hatch-Waxman Act’s policy goals: promoting pharmaceutical innovation and increasing consumers’ access to affordable generic drugs.

It is unclear whether “product hopping” violates antitrust law, as courts remain split on the issue. Compare Abbott Laboratories v. Teva Pharmaceuticals USA, Inc., 432 F. Supp. 2d 408 (D. Del. 2006) (denying defendant’s motion to dismiss), and Mylan Pharm., Inc. v. Warner Chilcott Pub. Co., Civ. 12-3824, 2013 WL 5692880 (E.D. Pa. June 12, 2013) (denying defendant’s motion to dismiss), with Walgreen Co. v. AstraZeneca Pharm. L.P., 534 F. Supp. 2d 146 (D.D.C. 2008) (granting defendant’s motion to dismiss).

What is clear is that antitrust enforcers are likely to bring cases – despite the unsettled state of the law – against pharmaceutical manufacturers that they perceive to be gaming the Hatch-Waxman Act as a mechanism to suppress generic competition.

Edited by Gary J. Malone

Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

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