Allergan and New York State have settled a heated antitrust lawsuit that accused the drug maker of switching patients from an older dementia pill to a newer and more expensive version in order to avoid generic competition. As part of the deal, Allergan (AGN) agreed to pay $172,000 in litigation expenses and withdraw an appeal filed last month with the US Supreme Court.
The arrangement ends a bitterly fought battle over a pharmaceutical industry practice known as forced switching or product hopping. This involves pushing consumers from one product to another. The case was closely watched because it held the potential to decide the extent to which a drug maker can force a product switch without running afoul of antitrust laws.
The lawsuit triggered a debate over the sometimes controversial practice of reformulating a medicine and then obtaining a patent to extend its product life cycle. But the move by Allergan highlighted competing arguments over whether the strategy is really a ruse to create an unfair monopoly or is a legitimate use of intellectual property to protect a profitable product.
Known as Actavis at the time, the company two years ago planned to end sales of its twice-a-day Namenda IR tablet for Alzheimer’s. The drug maker wanted to pull its drug from the market several months before the patent on the medicine was set to expire, and before facing generic competition. The plan was to push a newer, once-daily Namenda XR, which has patent protection until 2025.
However, New York Attorney General Eric Schneiderman argued the tactic was “unethical and illegal,” because patients would have been forced to switch to the newer pill long before lower-cost generics would have become available for the older version. Late last year, a federal judge issued an injunction preventing Allergan from making the switch and, last May, a federal appeals court upheld the decision.
“Our lawsuit prevented Allergan from pursuing its plan to block competition, thus preserving patient choice for hundreds of thousands of Alzheimer’s patients, and protecting the public from bearing hundreds of millions of dollars in unnecessary drug costs,” Schneiderman said in a statement discussing the settlement.
If Actavis had discontinued sale of its older Namenda pill and switched patients toward its newer version, the move would have cost Medicare Part D up to $288 million during the last six months of 2015, according to a recent study by the Assistant Secretary for Planning and Evaluation, which advises the US Department of Health and Human Services on policy and economic analysis.
Despite the setback, Allergan hoped to convince the Supreme Court that Schneiderman was wrong. More importantly, as we noted previously, the drug maker wanted the court to send a message that patent holders do not violate antitrust laws when they stop selling a patented product in order to sell another, reformulated version protected under a different patent.
The drug maker, in fact, contended the larger issue remains unresolved. In a statement, Robert Bailey, an Allergan executive vice president and chief legal officer, stressed that the company remains “committed to clarifying the law in this area” along the lines found in its petition filed last month with the Supreme Court. He added that “we expect that there will be opportunities to do so in the future.”