By Kevin E. Noonan —
Federal Trade Commission Chairwoman Edith Ramirez and Debbie Feinstein, Director of the Commission's Bureau of Competition, held a thirty-minute press conference on Monday to discuss the latest foray in the Commission's crusade against the pharmaceutical industry (branded and generic). Seemingly emboldened by its partial victory at the Supreme Court in FTC v. Actavis, in this action the Commission has expanded its allegations of anticompetitive behavior beyond cash payments from branded to generic drug companies (provocatively termed "pay-for-delay" agreements) to other forms of agreements (and not for the first time).
The drug at issue is Androgel, "a topical pharmaceutical gel product approved for testosterone replacement therapy in men with low testosterone", which has been the subject of other FTC actions, (including FTC v. Actavis); the Commission stated that the branded drugmakers, AbbVie and Besin Helathcare, had annual sales of over one billion dollars for this drug. The e-mail announcing the press conference (as well as statements made during the conference) was awash with the scarlet rhetoric (and self-congratulatory hagiography) that has characterized the Commission's anti-reverse settlement campaign. This is "the latest action to ensure competition in the nation's healthcare markets" according to the Commission, its aim to stop "several major pharmaceutical companies [from] illegally blocking American consumers' access to lower-cost versions of the blockbuster drug AndroGel." The Commission describes the goal of its efforts as "stop[ping] anticompetitive conduct by AbbVie, Besins Healthcare and Teva which has forced consumers to overpay hundreds of millions for the drug AndroGel," and by filing the lawsuit to "reinforce[] the Commission's longstanding commitment to protect American consumers from collusive arrangements between branded and generic pharmaceutical companies that inflate the prices of prescription drugs and harm competition." The Commission also wants to force the parties to "disgorge their ill-gotten gains" (a remark the brings to mind Humphrey Bogart's comment in The Maltese Falcon that "the cheaper the gunsel, the gaudier the patter") in addition to having a court issue a permanent injunction against the parties regarding this settlement.
The Commission describes its complaint as alleging that "AbbVie Inc. and its partner Besins Healthcare Inc. filed baseless patent infringement lawsuits against potential generic competitors to delay the introduction of lower-priced versions of the testosterone replacement drug AndroGel," a charge also asserted by Ms. Feinstein during the press conference. The specific ground for the complaint is a settlement between the parties that the Commission characterizes as "an anticompetitive pay-for-delay settlement agreement." But as further explained by Chairwoman Ramirez and Director Feinstein, the complained-of agreement was in fact not a "pay-for-delay" agreement. On the contrary, what the Commission wants to ban in this case is an agreement wherein AbbVie agreed to permit Teva to market an authorized generic for a cholesterol drug called TriCor. The Commission makes much of the fact that annual U.S. sales of this drug were more than $1 billion in 2011, and thus "highly profitable for Teva" (of course, this can also be characterized as "consideration"; as noted in In re Lamictal Direct Purchaser Antitrust Litig., 2014 U.S. Dist. LEXIS 9257, at *24, "[a] law student learns in the first semester that consideration is an essential element of any enforceable contract. In this sense, there is 'payment' in every settlement.") Also, the Commission contends that this arrangement "made no independent business sense for AbbVie." Thus the agreement constituted anticompetitive behavior. Such contentions are a far cry from the Supreme Court's holding in the Actavis case.
The Commission's complaint also asserts as one ground that the branded drug makers' lawsuit was a sham (an allegation also made by Teva in the underlying ANDA litigation in support of an antitrust counterclaim but one that comes close to finding anticompetitive behavior by way of statutory compliance). The litigation is asserted to be a sham because the Orange Book listed patent, U.S. Patent No. 6,503,894, claimed a testosterone formulation containing a specific (skin) penetration enhancer, isopropyl myristate (IPM), and the generic formulations comprised other penetration enhancers (specifically, isostearic acid or isopropyl palmitate). The complaint alleges that the Besin's plaintiff and patentee Unimed (a predecessor-in-interest to AbbVie) had narrowed broad claims as filed to any penetration enhancer to encompass only formulations comprising IPM, and had distinguished over formulations comprising other enhancers. Thus, the Commission contended in its complaint that the generic formulations did not literally infringe the '894 claims and could not infringe under the doctrine of equivalents because prosecution history estoppel barred the claims from having this scope. (Ironically, the Commission should be in exactly the position foretold by Chief Justice Roberts in his Actavis dissent, of having to prove the patenting issues as a predicate to considering the antitrust issues.) Moreover, the Commission alleged in its complaint that plaintiffs had successfully used a Citizens' Petition to convince the FDA to require generic defendants to file NDA's on their formulations, based on differences between IPM and the other penetration enhancers. The Commission also alleged that the incentive for filing ANDA litigation was to trigger improperly the 30-month stay in FDA approval mandated by the statute.
It is possible that this attempt to expand the factual grounds for putting ANDA settlement agreements under the Commission's antitrust microscope may be going too far for some of the Commissioners; as Chairwoman Ramirez and Director Feinstein admitted, for the first time the vote to bring the complaint was not unanimous, and indeed was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting (there is no public record of either the deliberations or the dissents). The complaint was also filed in light of rejection of the FTC's theory that actions other than cash payments can trigger application of the Supreme Court's Actavis precedent, in a decision in the District Court of Rhode Island regarding the drug Loestrin. In that case, District Court Judge William E. Smith (on September 4, 2014, four days before the FTC filed its complaint in this case) granted defendants' motion to dismiss an antitrust claim based on an agreement over an authorized generic rather than a cash payment (while recognizing that how district courts are deciding the question of whether non-cash arrangements fall within the scope of the Actavis decision has been inconsistent, an outcome also anticipated by Chief Justice Roberts in his Actavis dissent).
The complaint, alleging violations of the FTC Act for monopolization and restraint of trade, was filed under seal in the U.S. District Court for the Eastern District of Pennsylvania on September 8, 2014 and only a redacted version has been made public.
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