The New York Attorney General's Office has announced that it has reached a settlement with two generic drug manufacturers regarding allegations that an agreement between the firms not to challenge each other's eligibility for regulatory exclusivity was anti-competitive. Although not a traditional reverse payment patent settlement agreement between branded and generic drug companies, the settlement reflects a move by antitrust enforcers to apply reverse payment case law and principles to a broader range of agreements in the pharmaceutical space in the wake of FTC v Actavis (for further details please see "Federal judge limits antitrust scrutiny of pharmaceutical reverse payments"). Interestingly, the attorney general's office brought the case alone; the Federal Trade Commission (FTC), which is typically very active and aggressive on these matters, was not part of the settlement.
The settlement resolves an investigation by the attorney general's office into a 2010 agreement between Ranbaxy Pharmaceuticals, Inc and Teva Pharmaceuticals USA related to atorvastatin calcium, the generic version of Lipitor. In 2002 Ranbaxy was the first generic drug company to file an abbreviated new drug application (ANDA) to market atorvastatin calcium. Ranbaxy expected to be eligible to enjoy the 180-day exclusivity period that is generally granted to the first generic drug company to file an ANDA for a branded product coming off exclusivity. Teva and other generic drug companies also filed ANDAs for atorvastatin calcium. Although Pfizer – the maker of Lipitor – sued Ranbaxy, Teva and other ANDA filers for alleged infringement of the atorvastatin calcium patents, that litigation was settled and Ranbaxy received a licence to market atorvastatin calcium. The licence permitted Ranbaxy to enter the market in late November 2011, and Ranbaxy's first-filer exclusivity would have lasted until late May 2012.
However, before Ranbaxy's ANDA was approved, the Food and Drug Administration (FDA) suspended its substantive review of the ANDA due to concerns about some of the data underlying its application. Because of this delay, Ranbaxy was concerned that it would not be prepared to enter the market as of the date on which the Pfizer licence was to commence. In the face of this risk, Ranbaxy approached Teva and reached an agreement under which Teva would launch its generic atorvastatin drug in place of the Ranbaxy product and the two firms would split the profits.
However, the agreement also contained another provision, which was unrelated to generic atorvastatin and served as the focus of the attorney general's office's scrutiny. The provision provided that for a period of at least two years neither Ranbaxy nor Teva would:
"challenge the other Party's right to First to File Exclusivity for any ANDAs filed as of the Effective Date, or the viability, completeness or status of any ANDAs, filed with FDA as of the Effective Date."
Assuming that Ranbaxy or Teva entered the market in November 2011, the agreement would last until May 2014; Ranbaxy did indeed enter in November 2011.
Under the terms of the settlement reached with the attorney general's office, the parties agreed to pay the state $300,000 and terminate the agreement.
In its findings, the attorney general's office explicitly analogised the so-called 'no-challenge' provision to a reverse payment patent settlement because:
"the effect of a successful challenge to a [Sole First Filer Exclusivity] is not unlike the effect of a successful challenge to a brand manufacturer's patent — faster and greater entry of multiple generic competitors, leading to faster and greater price reductions."
The core theory of harm reflected in the attorney general's office's findings and its announcement of the settlement – that the agreement served only to protect each company's market position and reduce the risk that either would be deemed ineligible for first-filer exclusivity – is strongly reminiscent of language in the US Supreme Court's recent ruling on reverse payment patent settlements in Actavis. In Actavis, Justice Breyer, writing for the majority, described the competition concern in that context arising because a patentee was using its monopoly profits to "prevent the risk of competition". (emphasis added)
Although the attorney general's office's analysis relies heavily on Actavis and other principles that have been applied in the context of traditional reverse payment patent settlements, the settlement also suggests that the attorney general's office is looking to push beyond the bounds of Actavis. Specifically, in its findings the attorney general's office also analogised the no-challenge provision to "an agreement between competitors to divide markets", which – if not per se illegal – is at a minimum "inherently suspect under the antitrust laws and would be presumed unlawful by a court". In Actavis, the Supreme Court explicitly declined to adopt the position advanced by the FTC that reverse payment patent settlements should be presumptively unlawful and subject to only "quick look" rule of reason analysis.
The attorney general's office also considered whether the no-challenge provision was reasonably necessary to facilitate the sharing of confidential information in furtherance of the atorvastatin arrangement, and therefore a lawful ancillary restraint to an otherwise pro-competitive agreement. The attorney general's office ultimately concluded that it was not for three primary reasons:
- The parties needed to share only a limited amount of confidential information in order to carry out the atorvastatin arrangement and other provisions contained in the agreement were sufficient to address these concerns.
- The no-challenge provision was not "narrowly tailored to address any legitimate confidentiality concerns" because it covered a broad range of drugs and prohibited any and all challenges, regardless of the legal or factual basis.
- The parties could have used a less restrictive means to address any confidentiality concerns (eg, firewalls).
Although the specific type of agreement at issue here is likely to be rare, the analytical framework applied by the attorney general's office is potentially applicable to countless other types of agreements entered into by branded and generic drug companies. In particular, in the event that other antitrust enforcers such as the FTC or other state attorneys general adopt this approach, it could usher in scrutiny of agreements that have previously not been a primary focus of regulators and private plaintiffs. Thus, it remains important to consider carefully the antitrust implications of any agreement in the pharmaceutical space relating to the timing of generic entry into the market.
For further information on this topic please contact Robert F Leibenluft or Lauren E Battaglia at Hogan Lovells US LLP by telephone (+1 202 637 5600), fax (+1 202 637 5910) or email (firstname.lastname@example.org or email@example.com). The Hogan Lovells website can be accessed at www.hoganlovells.com.