| Richard Brunell
Health & Pharmaceuticals, Monopolies, Unilateral Conduct
The American Antitrust Institute (AAI) has filed an amicus brief urging the Third Circuit Court of Appeals to follow a recent decision of the Second Circuit and hold that “product hopping” by brand-name drug manufacturers is not immune from antitrust review.
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. The AAI brief asks the Third Circuit to reverse a district court holding that Warner Chilcott’s reformulations of the dosage and form of the brand drug Doryx (a tetracycline used to treat severe acne) and withdrawals of earlier versions could not violate Section 2 of the Sherman Act, even if the primary purpose and effect was to defeat generic competition via generic substitution laws.
The brief explains why the case law and the peculiar characteristics of pharmaceutical markets require antitrust scrutiny of product hopping. Product hopping prevents meaningful 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 brand prescription, 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 company is able to extend its monopoly even after the original brand drug goes off patent or otherwise loses its exclusivity. Consumers and insurance plans pay millions of dollars more for drugs that may offer little or no additional therapeutic benefit.
In its brief, the AAI tells the Third Circuit that the lower court erred in reasoning that product hopping is not anticompetitive when generic manufacturers are not completely blocked from entering the market. The brief argues that this is inconsistent with monopolization law and the practical reality that entry through generic substitution laws is the only efficient means of generic entry, as the Second Circuit recently explained in upholding an injunction against a product-hopping scheme involving the drug Namenda.
AAI’s brief also questions the district court’s grant of summary judgment to the defendants on the ground that they lacked monopoly power. According to AAI’s brief, the district court ignored well-accepted principles allowing the proof of monopoly power through direct evidence of anticompetitive effects.
The brief was written by AAI Vice President and General Counsel Richard Brunell, with help from various advisors and staff. A copy is available here. AAI’s brief in the Second Circuit case is available here. For more information contact Richard Brunell, 202-600-9640.
