On March 30, 2016, the Federal Trade Commission filed a complaint in the United States Federal District Court for the Eastern District of Pennsylvania alleging that Endo Pharmaceuticals Inc. and several other drug companies violated antitrust laws by using “pay for delay” agreements to block consumers’ access to lower-cost generic versions of Opana ER and Lidoderm. The complaint also names Allergan plc, the parent company of Watson, and Endo International plc, the parent company of Endo Pharmaceuticals Inc. According to the FTC, this enforcement action is the first FTC case challenging an agreement not to market an authorized generic – often called a “no-AG commitment” – a form of reverse payment. A no-AG (“no authorized generic”) commitment involves a branded firm agreeing that it will not launch its own generic alternative when the first generic begins to compete. Because introduction of an authorized generic from the branded company would cut into the revenues of a competing generic, a no-AG commitment can induce the generic company to delay its entry.
This enforcement action by the FTC comes thanks to a June 2013 ruling from the United States Supreme Court in FTC v. Actavis, Inc. In a nutshell, writing for the majority, Justice Breyer explained that there is no valid reason for the FTC to be denied the opportunity to pursue reverse payments as an antitrust violation. Breyer (joined by Justices Kennedy, Ginsberg, Kagan, and Sotomayor) determined that reviewing courts should apply the rule of reason when determining whether reverse payments violate antitrust law. See Supremes Say Reverse Payments May be an Antitrust Violation. Prior to the ruling in FTC v. Actavis, it was widely believed that the FTC did not have authority to challenge reverse payments as settlements of patent disputes. See Pharma Reverse Payments Are Not an Antitrust Violation.
The FTC’s complaint alleges that Endo engaged in a pay for delay scheme by paying the first generic companies that filed for FDA approval – Impax Laboratories, Inc. and Watson Laboratories, Inc. – to eliminate the risk of competition for Opana ER (an extended-release opioid used to relieve moderate to severe pain) and Lidoderm (a topical patch used to relieve pain associated with post-herpetic neuralgia, a complication of shingles), in violation of the Federal Trade Commission Act.
The FTC is asking the district court to declare that the defendants’ pay for delay conduct violates the antitrust laws, and further seeking an order that the companies disgorge their ill-gotten gains. Of course, the FTC asks for a permanent bar to prevent the companies from engaging in similar anticompetitive behavior in the future.
Simultaneously with the filing of the complaint, the Commission also filed a stipulated order for permanent injunction against Teikoku Seiyaku Co., Ltd. and Teikoku Pharma USA, Inc., settling charges for those two defendants. Under the stipulated order, the Teikoku entities are prohibited for 20 years from engaging in certain types of reverse-payment agreements, including settlements containing no-AG commitments like those alleged in the complaint. This might be viewed as heavy-handed, given that the Supreme Court has not said that all reverse payment agreements are per se antitrust violations. The agreed-upon order preserves Teikoku’s ability to enter other types of settlement agreements in which the value transferred is unlikely to present antitrust concerns, such as those providing payment for saved future litigation expenses.
The Commission vote to file the complaint was 3-1, with Commissioner Maureen K. Ohlhausen voting no and issuing a dissenting statement in connection with this vote. In her dissent, Commissioner Ohlhausen explained that she did think there was an antitrust violation, but disagreed with seeking disgorgement from the defendants.
Tags: Amneal Pharmaceuticals, antitrust, antitrust complaint, Federal Trade Commission, FTC, patent, patents, reverse payments
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