AAI Supports New York Injunction Against Drug “Product Hopping” (New York v. Actavis)

The American Antitrust Institute (AAI) has filed an amicus brief in the first pharmaceutical “product hopping” case to reach an appeals court.  The AAI brief urges the Second Circuit to uphold an injunction obtained by the Antitrust Bureau of the New York Attorney General’s Office to prevent the maker of a widely used Alzheimer’s drug from withdrawing the drug and short circuiting impending generic competition.

The AAI brief explains why the case law and the peculiar characteristics of pharmaceutical markets require antitrust scrutiny of “product hopping.”  Product hopping is a scheme by which a brand drug manufacturer seeks to thwart FDA-approved generic competition by switching patients to a reformulated version of the drug shortly before generics enter the market.  Such switching impairs, if not precludes, generic entry because it undermines the state drug product substitution laws that enable generic competition.  Those laws, which allow the pharmacist (with the consumer’s consent) to substitute a cheaper generic for a prescription written for a brand drug, only apply when the brand and the generic are essentially identical.

If the prescription is written for a reformulation (a different form or a different dosage), consumers cannot buy the cheaper generic.  As a result of product hopping, the brand drug is able to extend its monopoly even after the original brand drug goes off patent.  Consumers and insurance plans pay millions of dollars more for drugs that may offer little or no additional therapeutic benefit.

In the New York case, the brand drug manufacturer of Nameda IR, a widely-used Alzheimer’s drug, introduced a new version of the drug about a year before generics were scheduled to enter the market.  The next drug, Namenda XR, is taken once a day, while Namenda IR is taken twice a day.  When many doctors declined to switch because they preferred not to disrupt the routines of their Alzheimer’s patients, the brand drug manufacturer forced the switch by sharply restricting the supply of Namenda IR and announcing that Namenda IR would be withdrawn from the market.  New York Attorney General Eric Schneiderman sought and obtained a preliminary injunction to require the drug manufacturer to continue to offer Namenda IR until generic entry, which is expected in July 2015.

In its brief, AAI tells the Second Circuit: “Just as the Supreme Court in Actavis rejected the pharmaceutical industry’s arguments that drug manufacturers should be immune from antitrust scrutiny when they game the Hatch-Waxman Act to delay generic entry by agreement, so too should this Court reject the industry’s efforts to immunize brand drug manufacturers from antitrust scrutiny when they engage in “product hopping” to game state drug substitution laws to thwart generic entry.

The brief was written by AAI Advisor Steve Shadowen with AAI’s General Counsel Richard Brunell.  AAI Advisors Josh Davis and Michael Carrier assisted.

For more information contact Richard Brunell, 202-600-9640.