AAI Asks Third Circuit to Reconsider Product Hopping Decision (Mylan v. Warner Chilcott)

The American Antitrust Institute (AAI) filed an amicus brief asking the full Third Circuit Court of Appeals to rehear a panel decision that sharply restricts the use of the Sherman Act to police anticompetitive “product hopping.”

Product hopping is a scheme by which a brand-name drug manufacturer seeks to prevent or delay FDA-approved generic competition by switching patients to a reformulated version of the drug with little or no additional therapeutic benefit.  The switch typically occurs just before generic entry and often involves removing the original drug from the market.  With prescriptions written for the reformulated drug, pharmacists generally may not substitute the generic. It forces generic firms to apply for new FDA approval to market the reformulated drug, which can take months or years.

The case involves a challenge to product hopping involving the acne medicine Doryx.  The delay in generic entry allegedly cost consumers and insurance companies millions dollars in higher drug prices.  The AAI previously filed a brief requesting that the Third Circuit reverse the district court’s dismissal of the complaint.

The AAI’s new brief argues that the Third Circuit panel of judges erred by assuming that conduct by a monopolist is not anticompetitive unless it completely bars entry into a market. The brief argues that this assumption is inconsistent with the law in the Third Circuit and elsewhere.  It also ignores the reality that generic drug companies cannot meaningfully compete unless they can rely on the automatic substitution of the generic at the pharmacy, which product hopping prevents.

The brief also argues that the panel erred by holding that the defendants lacked monopoly power because there were other acne drugs available.  This was a mistake, according to the brief, for several reasons.  Most notably, the panel ignored the direct evidence of defendants’ monopoly power, namely that generics’ eventual entry significantly lowered the price for consumers of Doryx.

The brief was written by Professor Michael Carrier (an AAI Advisory Board Member), and Richard Brunell (AAI’s Vice President and General Counsel).  They were assisted by Randy Stutz (AAI Associate General Counsel) and Mark Angland (AAI Research Fellow).  A copy of the brief is available here.  AAI’s brief on the merits is available here.