ANTITRUST AND HEALTH LAW - GENERIC-BRAND PHARMACEUTICAL COMPANY INSISTS "PRODUCT HOPS" OF NAME-BRAND DRUG WERE ANTI-COMPETITIVE - MYLAN PHARMS. INC. V. WARNER CHILCOTT PB, LTD. CO.
Mayne Pharmaceuticals has an agreement with Warner Chilcott to sell Doryx, the name-brand version of doxycycline hyclate, an oral antibiotic used primarily to treat acne, in the United States. (6) In 2003, Mylan started the process of producing a generic version of Doryx with the idea that they would piggy-back off of the name-brand patent when the time came. (7) Between 2005 and 2011 Mayne and Warner made four significant changes to Doryx. (8) The first change made to Doryx was manufacturing tablets instead of capsules, which involved discontinuing and buying back the remaining inventory. (9) The subsequent changes made the tablets easier for the patient to control their dosage by creating a "score" in the middle. (10) Mylan viewed the change from capsule to tablet as a "hard switch", and the additions of "single-score" and "double-score" to the tablet as anticompetitive "product hopping" in order to keep generic equivalents off the market. (11)
In 2005, Myl an ceased all efforts to manufacture and sell a generic capsule version of Doryx, and began developing a tablet version of 75mg and 100mg of doxycycline hyclate. (12) After Mylan completed the new tablet formula in 2006, Mylan filed an abbreviated new drug application ("ANDA") for approval in 2008, however the FDA delayed the release of the generic tablet until 2012 in order for Mylan to alter the tablet design so that Mylan could meet the requirements for an "AB rating". (13) Mylan encountered problems again with the release of its generic version when Mayne and Warner changed the dosage and scores on the Doryx tablets. (14) Mylan filed a lawsuit against Mayne and Warner in July 2012 and claimed their product changes constituted as "product hopping," therefore creating a monopoly, which violated the Sherman Act as well as the Hatch-Waxman Act. (15)
Both parties filed a motion for summary judgment in the United States District Court for the Eastern District of Pennsylvania. (16) The court granted Mayne and Warner's motion for summary judgment, agreeing in part with Mylan's claim that Mayne and Warner made "product-hops" to delay generic market entry, however, the court found that Mylan failed to give sufficient evidence that Mayne and Warner had monopoly power. (17) The United States Court of Appeals for the Third Circuit affirmed, holding that Mylan failed to show any direct or indirect evidence that Mayne and Warner had monopoly power and that the changes to Doryx were justified and did not represent anticompetitive conduct. (18)
The FDA regulates pharmaceutical companies by requiring specific standards be met before a drug is approved. (19) Prior to 1984, the first step for every new drug was to conduct numerous animal and human tests before filing the New Drug Application ("NDA"). (20) If the drug passed the various tests, then the company must file a NDA where the EDA weighs the benefits, risks, and quality of the drug, subsequently approving or denying the drug. (21) However, in 1984 Congress passed the Hatch-Waxman Act, which allows generic drug manufacturers a faster and cheaper entry into the market by applying with the ANDA instead of the NDA. (22) In addition to this new federal statute, substitution laws in every state require pharmacists to dispense the generic brand if the doctor has not specifically requested the name-brand for their patient. (23)
The Second Circuit was the first court to decide a case with the issue of "product hopping". (24) In New York v. Actavis PLC ("Actavis"), the court discussed whether the manufacturer pulling the name-brand drug off the market before the patent expired was anti-competitive and exclusionary. (25) The court in Actavis found that the purpose behind pulling the name-brand drug off the shelves and releasing a new drug was solely to avoid competition with generic brands and "in effect" deprive consumers of a choice. (26) The court held that the manufacturer must keep the old version of the name-brand drug on the market until the patent expires to ensure consumers have access to the generic brand. (27) The decision the second circuit made in Actavis to issue a preliminary injunction still remains controversial. (28)
Section 2 of the Sherman Act prohibits monopolization or attempted monopolization of trade or commerce within the United States. (29) The nature of patents can make it look like name-brand drug manufacturers are monopolizing the market however, the Sherman Act does not punish a business that unintentionally "dominates" the market. (30) The intention behind patents is to promote innovation and encourage companies to introduce new and better drugs into the market. (31) The Hatch-Waxman Act and state substitution laws try to strike a balance between protecting name-brand/patent protected drugs and generic brand drugs while also protecting consumers who benefit from greater access to low-cost drugs. (32)
In Mylan Pharms. Inc. v. Warner Chilcott Pb. Ltd. Co., the Third Circuit affirmed the district court's decision to grant Mayne and Warner's motion for summary judgment and denied Mylan's motion for summary judgment after finding that Mylan failed to show any harm done by Mayne and Warner. (33) Mylan's two main arguments were that Mayne and Warner violated Section 2 of the Sherman Act, and the four product changes to Doryx were anticompetitive and served no therapeutic benefit. (34) The Third Circuit found that Mylan failed to provide direct or indirect evidence of monopolization needed to prove the claim of market power under Section 2 of the Sherman Act. (35) In contrast to the district court's opinion that Mayne and Warner's four product changes to Doryx were intentional to delay generic market entry, the Third Circuit found that Mylan also failed to prove Mayne and Warner had engaged in anti-competitive behavior. (36)
The Court did not think facts in Mylan were comparable to Actavis. (37) The Second Circuit in Actavis upheld the preliminary injunction in order to protect the generic brand's entrance into the market and public interest. (38) In Actavis, the exclusivity period attached to the patent of the name-brand drug "Namenda" was expiring when the manufacturers decided to redesign the drug, essentially causing the generic version to be kept off the market until Mylan submits a new ANDA. (39) The Third Circuit found that since the facts in Mylan are not parallel to those in Actavis, they did not deserve the same analysis and holding. (40)
The courts need to be more consistent with how they interpret pharmaceutical antitrust and patent cases. (41) These cases should be distinguished from cases outside of the area of health science because unlike some technology patents, as a whole drugs and medical technology are engineered to give someone something their body is missing or needs in order to remain healthy or alive (42) The enactment of the Hatch Waxman Act and ANDA are widely supported for its' social/humanitarian and economic properties. (43) These laws are beneficial in order to allow greater access to drugs at competitive prices that do not harm consumers. (44) However, the pharmaceutical and biotech industry should continue to be afforded the same rights and protections for their innovations as all other sectors under U.S. patent law. (45) This view supports the value placed on competition in the U.S. which is the basis of our economic policy. (46)
The Court's holding on the issue of Mayne and Warner's product hops is inconsistent with past cases like Actavis. (47) The court properly held that the product hops did not meet the threshold to prove a violation of Section 2 of the Sherman Act; however, the court should have remained consistent with the lower court's decision and acknowledge that the number of product changes were unnecessary to achieve the desired result for Doryx. (48) In acknowledging Mylan's argument that the issues here are similar to those in Actavis, the court balances protecting consumers and innovation in the pharmaceutical industry by showing that some product changes are ill-intended. (49) However, the court warns that it is not their place to become a "tribunal over innovation sufficiency" where Congress has already spoken. (50) The Court's decision to dodge this issue is problematic as it blurs the line for future claims of product hopping. (51)
Both the Third Circuit and the district court reasoned that Mylan did not have enough evidence that Doryx controlled the market on oral tetracycline because patients had no preference when it came to using another oral tetracycline over Doryx. (52) Additionally, Doryx only maintains about eighteen percent of the market share, which is relatively small when measuring a company's monopoly power. (53) Moreover, the Court correctly held that Mylan failed to produce evidence of Doryx's monopoly power, therefore failing to prove one part of Section 2 of the Sherman Act. (54)
In Mylan, the United States Court of Appeals for the Third Circuit considered whether the product changes Mayne and Warner made to the oral tetracycline, Doyrx, and other actions reached the level of anti-competitiveness needed to violate Section 2 of the Sherman Act. The Court properly reasoned that Mylan failed to reach the burden of proof necessary to establish that Mayne and Warner had monopoly power in the oral tetracycline market and their actions constituted as anticompetitive. However, the Third Circuit chose not to uphold the lower court's decision that found the changes to Doryx unnecessary to achieve the desired result. Moreover, this specific decision might cause confusion in other circuits when faced with determining whether product changes are unnecessary and violate the Sherman Act.
Katherine Collins, J.D. Candidate, Suffolk University Law School, 2018; B.A., cum laude, University of Rhode Island, 2015. Ms. Collins may be contacted at firstname.lastname@example.org.
(1) 15 U.S.C. [section] 2 (2012); Mylan Pharm. Inc. v. Warner Chilcott Pb. Ltd. Co., 838 F.3d 421, 433 (3rd Cir. 2016). "Section 2 of the Sherman Act 'makes it unlawful to monopolize, attempt to monopolize, or conspire to monopolize, interstate or international commerce.'" Id. (quoting 15 U.S.C. [section] 2). See Nat'l Soc'y Profl Eng'r v. U.S., 435 U.S. 679, 695-96 (1978) (refusing to equate competition with deception under Sherman Act). 'The Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services." Id.
(2) See 21 U.S.C. [section] 355 (2016); Drug Price Competition and Patent Restoration (Hatch-Waxman Act) Act of 1981, Pub. L. No. 98-417, 98 Stat. 1585 (1984); Mylan, 838 F.3d at 427. The Hatch-Waxman Act "loosened the approval rules for generics by creating an Abbreviated New Drug Application ("ANDA") process." Id. The purpose of this legislation was to reduce the cost for generic drugs to come into the market and increase competition with the drugs' brand-name equivalent. Id. But see Cynthia M. Ho, Should All Drugs Be Patentable?: A Comparative Perspective, 17 VAND.J. ENT. & TECH. L. 295, 305 (2015) (explaining strict criteria must be met to be granted a patent). "Both of the requirements on patentability and disclosure are intended to ensure that the social harm of higher prices is limited to situations where society would most benefit, justifying the burden of a patent." Id.
(3) 838 F.3d 421 (3rd Cir. 2016).
(4) See Mylan, 838 F.3d at 431 (listing claims Mylan made against defendant Warner Chilcott). "Mylan further claims that Defendants' anticompetitive 'product hopping' strategy was designed to frustrate their efforts to release a generic version of Doryx to the market." Id.
(5) See id. at 434, 438-41 (affirming lower court's decision). The appeals court agreed with the lower court's findings that Mylan failed to show monopoly power through direct and indirect evidence, as well as anticompetitive conduct. Id. Mylan is the only remaining plaintiff in the suit against Mayne and Warner Chilcott. Id. at 427.
(6) See id. at 426. See also Mylan Pharm., Inc. v. Warner Chilcott Pub. Ltd. Co., No. 12-3824, 2015 U.S. Dist. LEXIS 50026, at *6 (E.D. Pa. Apr. 16, 2015). Mayne Pharmaceuticals is an Australian based company that allows Warner Chilcott to distribute and promote Doryx in the United States through a licensing agreement. Id. Mylan is a generic drug manufacturer and the third largest pharmaceutical company in the world. Id. at *5.
(7) Mylan, 838 F.3d at 430; Mylan, 2015 U.S. Dist. LEXIS 50026, at *15.
(8) Mylan, 838 F.3d at 429-30 (explaining in detail all changes made to Doryx between 2005 and 2011). In order to switch the market for Doryx capsules to tablets, Mayne and Warner:
(1) stopped selling the capsules to wholesalers (Mylan Ex. 59); (2) removed Doryx capsules from the Warner Chilcott website (Mylan Ex. 62); (3) worked with retailers to "auto-reference" the Doryx tablet whenever a doctor filed a Doryx prescription (Mylan Ex. 61); (4) informed wholesalers, retailers, and doctors that "Doryx Capsules have been replaced by Doryx Tablets" (Mylan Ex. 63); (5) destroyed some of their remaining capsule inventory (Mylan Ex. 73); and (6) bought back some portion of the remaining capsule inventory. (Mylan Ex. 68, 69, 71).
Mylan, 2015 U.S. Dist. LEXIS 50026, at *10-*11.
(9) Mylan, 838 F.3d at 429. These changes effect companies producing generic equivalents by delaying time to market and increasing costs because the FDA requires the company to refile an ANDA and await approval for the AB-rating. Id. "Each of these changes would have required generic manufactures to file, and await approval of, a new ANDA demonstrating the similarities between their product and the reformulated Doryx product in order to continue selling generics that were AB-rated to the newest Doryx product." Id.
(10) Id. at 429-30 (describing how the changes allow for flexible dosages from a single pill). "The 150mg tablet would have a 'score', which the District Court described as a 'groove running across the tablet's surface.'" Id.; Mylan, 2015 U.S. Dist. LEXIS 50026, at *11. The "score" allows for a patient to easily break a tablet in half to adjust dosage. Mylan, 838 F.3d at 430.
(11) Id. at 429 (claiming the steps were undertaken to stifle generic competition). "Mylan refers to these steps as a 'hard switch' from capsules to tablets and claims that this was done in effort to stifle generic competition." Id. See also New York v. Actavis PLC, 787 F.3d 638, 648 (2d Cir. 2015) (adopting the terms 'hard switch' and 'forced switch"). The Second Circuit described "hard switch" or "forced switch" as the manufacturer's decision to pull the drug off the market for reasons other than "pressing safety concerns". Id. at 648. It is "tantamount to withdrawal." Id. at 648. See also Michael A. Carrier & Steve D. Shadowen, Article, Product Hopping: A New Framework, 92 NOTRE DAME L. REV. 167, 68 (2016) (explaining product hopping can have negative effects on consumers).
(12) Mylan, 838 F.3d. at 430; Mylan, 2015 U.S. Dist. LEXIS 50026, at *13. (E.D Penn April 16 2015). v
(13) Hatch-Waxman Act, [section][section]101-106, 98 Pub. L. No. 417, 98. Stat. 1585 (1984). See Mylan, 838 F.3d at 427, 430-31. "[T]he FDA delayed its approval when Defendants' scored version of Doryx was released, because among other complications, Mylan was then required, in accordance with FDA regulations, to alter its original tablet design to achieve an AB rating." Id. at 430.
To rely on a name-brand's NDA (new drug application), however, the generic drug manufacturer must demonstrate that the proposed generic product is both a "bioequivalent" and a "pharmaceutical" equivalent of the name brand drug ... these two equivalences require a generic company filing an ANDA to show a certain level of design and formulaic similarity between its product and the approved drug. ANDA filers that successfully show that their drug is bioequivalent and pharmaceutically equivalent can have their product deemed "AB-rated" to the name-brand drug by the [FDA].
Id. at 427-28 (citing 21 U.S.C. [section] 355(i)(2)(A)(iv)). "To receive an AB-rating, a generic must not only be bioequivalent but pharmaceutical equivalent to the brand drug, meaning it has the same active ingredient, dosage form, strength, and route of administration as the brand drug." Mylan, 838 F.3d at 428.
(14) See Mylan, 838 F.3d at 431 (describing the change of scoring on different dosages of the tablets).
(15) Id. See also Maria Salgado, Antitrust Issues In "Product-Hopping Cases, AMERICANBAR.ORG (Mar. 3, 2016), http://ww.americanbar.org/content/dam/aba/administrative/healthlaw/12_antitrustissues_in_product_hopping_cases_panel.au thcheckdam.pdf. This article explains what "product-hopping" is and how it effects generic drugs entrance into the market. Id. "Product-hopping" is an introduction of a product line extension, encouraging customers to switch from the old product, so as to discourage eventual generic competition. Id. Also, the article specifically dissects the issues in the Mylan case and Schneiderman v. Actavis case. Id. at 6-12. See also Mark A. Ford et al., 3rd Cir. Weighs In On Product-Hopping, LAW360 (OCT. 31, 2016, 12:03PM), https://www.law360.com/articles/855055/3rd-circ-weighs-in-on-product-hopping (distinguishing product-hopping in Mylan to other landmark cases).
(16) Mylan, 838 F.3d at 431.
(17) See id. at 431-32 (describing court's basis for granting summary judgement). "[T]he District Court found ... that Defendants had indeed made the Doryx 'hops' primarily to 'delay generic market entry.'" Id. at 431. See also Mylan, 2015 U.S. Dist. LEXIS 50026, at *17. "I am compelled to find that Defendants made the Doryx 'hops'--even the six-year developmental 'hop' from capsules to tablets--primarily to defeat generic competition." Id.
(18) See Mylan, 838 F.3d at 434-41. Despite the district courts finding that the product-hops were legitimate, the Third Circuit found that Mayne and Warner's actions in the market were not a violation of the Sherman Act. Id. at 433-42.
(19) See What Is the Approval Process for Generic Drugs?, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/drugs/resourcesforyou/consumers/buyingusingmedicinesafely/genericdru gs/ucm506040.htm (last updated Aug. 31, 2017) (explaining basic approval process). See also The FDA's Drug Review Process: Ensuring Drugs Are Safe and Effective, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/drugs/resourcesforyou/consumers/ucml 43534.htm (last updated Nov. 24, 2017) (explaining new drug approval process and continuous regulation of approved drugs).
(20) See What Is the Approval Process for Generic Drugs?, supra note 19. Drug companies seeking FDA approval to sell a new prescription drug in the United States must test it in various ways. See Development & Approval Process (Drugs), U.S. FOOD & DRUG ADMIN., https://www.fda.gov/Drugs/DevelopmentApprovalProcess/ (last updated Jan. 16, 2018). First are laboratory and animal tests, and the next are tests in humans to see if the drug is safe and effective when used to treat or diagnose a disease. See id.
(21) See id. (explaining drug approval and regulation in more detail).
(22) See Drug Price Competition and Patent Term Restoration Act, 21 U.S.C. [section][section]101-106 (1984). See Generic Drugs: Questions and Answers, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/Dmgs/ResourcesForYou/Consumers/QuestionsAnswers/ucml00100.htm#effective (last updated Jan. 4, 2018).
A generic drug is a medication created to be the same as an already marketed brand-name drug in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use. These similarities help to demonstrate bioequivalence, which means that a generic medicine works in the same way and provides the same clinical benefit as its brand-name version. In other words, you can take a generic medicine as an equal substitute for its brandname counterpart.
Id. (emphasis in original)
(23) See New York v. Actavis PLC, 787 F.3d 638, 644-45 (explaining how Hatch-Waxman and state substitution laws work and benefit generic drug manufacturers).
(24) See id. at 643.
This case raises a novel question of antitrust law: under what circumstances does conduct by a monopolist to perpetuate patent exclusivity through successive products, commonly known as "product hopping," violate the Sherman Act, 15 U.S.C. [section][section] 1 and 2. This question is an issue of first impression in the circuit courts. Determining whether Defendants' actions are unlawfully anticompetitive....
Id. See also Pat Pascarella, Product-Hopping Cases: Bad Prescription For Consumers, law360 (Aug. 14, 2015, 10:41 AM), https://www.law360.com/articles/690297/product-hopping-cases-a-badprescription-for-consumers.
In May 2015, the Second Circuit became the first Circuit court to address "product-hopping." The court upheld a lower court's injunction against Forest Laboratories LLC (owned by Actavis) that required Forest to keep the old version of a drug in the market (despite Forest's development of an improved formulation) until after the patent expired on the old version.
(25) See Actavis, 787 F.3d at 643, 652-54.
(26) Id. at 655 (agreeing with district court that pulling the drug to avoid competition negatively effects consumers).
[Actavis] decided to withdraw virtually all Namenda IR from the market in order to force Alzheimer's patients who depend on Namenda IR to switch to XR before generic IR becomes available. Because generic competition depends heavily on state drug substitution laws that allow pharmacists to substitute generic IR for Namenda IR--but not for XR, New York alleges that Defendants' forced-switch scheme would likely impede generic competition for IR.
Id. at 642-43. The court further noted that:
Had Defendants allowed Namenda IR to remain available until generic entry, doctors and Alzheimer's patients could have decided whether the benefits of switching to once-daily Namenda XR would outweigh the benefits of adhering to twice-daily therapy using less-expensive generic IR (or perhaps lower-priced Namenda IR). By removing Namenda IR from the market prior to generic IR entry, Defendants sought to deprive consumers of that choice.
Id. at 655. See Salgado, supra note 15 (presenting information on types of anticompetitive acts used by brand pharmaceutical companies). See also Carrier, supra note 11 (stating that pharmaceutical companies' drug version these switches could significantly decrease consumer welfare and impair competition). See e.g. Michael A. Carrier & Carl Minniti, Lead Article, Citizen Petitions: Long, Late-Filed, and At Last Denied, 66 AM. U.L. REV. 305, 307 (2016) (explaining court's scrutiny of "product-hopping" purpose).
(27) See Actavis, 787 F.3d at 650.
(28) See Lisa Schneker, Appeals Court Orders Actavis To Continue Selling Alzheimer's Drug, MOD. Healthcare (May 22, 2015), http://www.modernhealthcare.com/article/20150522/NEWS/150529952. "The drugmakers argue that the court's injunction forcing it to continue selling the original drug would cost them money and have possible ripple effects for patients and drugmakers nationwide." Id. The injunction sets a precedent that would chill innovation across many industries. Id. "Any company will think twice before retiring an older product for an improved model ... Consumers would lose benefits of innovation, and patients would lose out on clinical improvements." Id. But see Michael A. Carrier & Steve D. Shadowen, Article, Product Hopping: A New Framework, 92 NOTRE DAME L. REV. 167, 68 (2016). Carrier and Shadowen noted that:
[C]ourts have offered inconsistent approaches to product hopping. Some have emphasized the regulatory structure while others have ignored it. Some have offered a simplistic analysis of consumer choice, while others have adopted an underinclusive test based on coercion. Nearly all have focused on whether the brand firm removed the original drug from the market (a hard switch') or left it on the market (a 'soft switch").
(29) 15 U.S.C. [section]2 (2012).
(30) See id. See also Frequently Asked Questions on Patents and Exclusivity, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/Drugs/DevelopmentApprovalProcess/ucm079031.htm (last updated Feb. 6, 2018) (explaining drug patents and the allowance of exclusivity). "To support a claim for actual monopolization, a party must prove: '(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'" Mylan, 838 F.3d at 433 (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)). See also Broadcom Corp. v. Qaulcomm Inc., 501 F.3d 297, 307 (3rd Cir. 2007) (explaining that plaintiff must prove evidence used other firm's dominance in the market).
To support an inference of monopoly power, a plaintiff typically must plead and prove that a firm has a dominant share in a relevant market, and that significant 'entry barriers' protect that market. Barriers to entry are factors, such as regulatory requirements, high capital costs, or technological obstacles, that prevent new competition from entering a market in response to a monopolist's supracompetitive prices.
Id. at 307. See also United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 (1966) (finding that the company did not unintentionally hold 87% of market power). "In the present case, 87% of the accredited central station service business leaves no doubt that the congeries of these defendants have monopoly power--power which, as our discussion of the record indicates, they did not hesitate to wield--if that business is the relevant market." Id. at 571. See also American Tobacco Co. v. United States, 328 U.S. 781, 797 (1946) (finding controlling over "two-thirds of the entire domestic field of cigarettes, and over 80% of the field of comparable cigarettes constituted a substantial monopoly). See also Mylan, 838 F.3d at 433 (quoting Crossroads Cogeneration Corp. v. Orange & Rockland Util., Inc., 159 F.3d 129,141 (3rd Cir. 1998)). "[T\o succeed on a claim of attempted monopolization under [section] 2, a plaintiff must prove '(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.'" Id.; Broadcom, 501 F.3d at 317 (finding lower court erred in holding patent did not automatically confer a monopoly); Crossroads Congregation Corp. 159 F.3d 129, 141 (discussing factors used to analyze whether there is a monopoly).
(31) See Broadcom Corp., 501 F.3d at 308. "The primary goal of antitrust law is to maximize consumer welfare by promoting competition among firms." Id. See Tyler J. Klein, Comment, Antitrust Enforcement Against Pharmaceutical Product Hopping: Protecting Consumers or Reaching Too Far?, 10 ST. LOUIS U.J. HEALTH L. & POL'Y 213, 214 (2016) (detailing the backbone of medical connections between the law and pharmaceutical drugs via patenting). "To ensure that these drugs become affordable to the masses, there is legislation that provides incentives to stimulate innovation while also encouraging generic drug manufacturers to enter the market and provide drugs at a more affordable price." Id. See also Larissa Burford, Note, In re Cardizem & Valley Drug Co.: The Hatch-Waxman Act, Anticompetitive Actions, and Regulatory Reform, 19 BERKELEY TECH. L.J. 365, 367 (2004). "The Act must be vigilantly evaluated to insure [sic] a proper balance-weighing the need to spur new drug research against the need to increase the market entry of generic drugs, which help alleviate rising drug and health care costs." Id.
(32) See Gerald J. Mossinghoff, Striking the Right Balance Between Innovation & Drug Price Competition: Understanding the Hatch-Waxman Act: Overview of the Hatch-Waxman Act & Its Impact on the Drug Development Process, 54 Food & Drug L.J. 187-94 (1999) (explaining relationship between patented drugs and generics controlled by Hatch-Waxman); Cynthia Ho, Note, Should All Drugs be Patentable?: A Comparative Perspective, 17 VAND. J. ENT. &TECH. L. 295, 303 (2015). "[P]atents have involved a balance of competing policy interests. Since patents generally result in a cost increase for the patented item, granting a patent is only a reasonable policy if there is a countervailing social policy that is promoted." Id. It may be argued that patents promote technology transfer for developing countries, but patents are mostly considered predominantly as a way to promote domestic innovation. Id. See also Larissa Burford, Note, In re Cardizem & Valley Drug Co.: The Hatch-Waxman Act, Anticompetitive Actions, and Regulatory Reform, 19 BERKELEY TECH. L.J. 365, 384-385 (2004). Burford state that:
[t]he incentives, goals, and policies of antitrust law and patent protection must be balanced to determine the socially optimal equilibrium between competition and innovation. The exclusionary patent rights necessary to encourage innovation must be continuously monitored to prevent unjustifiable exploitation of competition barriers. Yet, increasing antitrust risk and lessening patent protection could make it unprofitable for pharmaceutical companies to develop new drugs. The short-term consumer benefits of decreased drug prices from generic competition must be weighed against the long-term health benefits that arise from the discovery of new drugs by pharmaceutical companies. Courts and legislatures must cautiously analyze complex antitrust liability, considering the public health benefits of promoting new drug innovation by monopolistic patent protection.
Id. at 366.
(33) Mylan, 838 F.3d at 427.
(34) Id. at 431. See 15 U.S.C. [section] 2 (2004) (prohibiting monopolization of any part of trade or commerce). Cf. In re Loestrin 24 Fe Antitrust Litig., 814 F.3d 538, 552 (1st Cir. 2016) (finding the Plaintiff stated claim for unlawful product in violation of the Sherman Act). The court accepted Mylan's argument that design and formula changes could be anticompetitive in nature, "however in this case the other facts outweigh the possibility of Doryx's design changes creating a monopoly in the market." Mylan, 838 F.3d at 431. "It is also important to our discussion to note Mylan's parallel efforts to effectively compete with Defendants when they made each of the above-mentioned changes to name-brand Doryx. In particular, these efforts will be relevant to our discussion of whether Defendants' product changes had exclusionary effects on generic competition." Id. at 430. See also Wisconsin v. Indivior Inc. (In re Suboxone (Buprenorphine Hydrochloride & Naloxone) Antitrust Litig.), No. 13-MD-2445, 2017 U.S. Dist. LEXIS 171322 (E.D. Pa. Oct. 16, 2017). "[l]n order for such 'product hopping' to be illegal, a monopolist must combine product withdrawal with some other conduct, the overall effect of which is to coerce consumers rather than persuade them on the merits." Id. (quoting Namenda, 787 F.3d at 654).
(35) Mylan, 838 F.3d at 434. "The Third Circuit stated that "monopoly power is 'the ability to control prices and exclude competition in a given market.'" Id. (quoting Broadcom Corp., 501 F.3d at 307). "We also stated there that, '[i]f a firm can profitably raise prices without causing competing firms to expand output and drive down price, that firm has monopoly power', and therefore '[t]he existence of monopoly power may be proven through direct evidence of supracompetitive prices and restricted output.'" Id. The district court concluded that the expert testimony Mylan provided failed to establish through direct evidence that Mayne and Warner had monopoly power. Id. The court further reasoned that:
Mylan has not made a serious effort to present direct evidence of Defendants' monopoly power ... Mylan offers no evidence of Defendants' price-cost margins for Doryx, nor does it explain whether those margins were abnormally high ... [i]t is still required to prove monopoly power directly. Mylan has not made such a showing.
Id. at 434-35. Mylan also failed to show Mayne and Warner had monopoly power through indirect evidence. Id. at 435. "The second and more common way that a party may prove monopoly power is by providing indirect evidence, which includes 'structural evidence of a monopolized market.'" Mylan, 838 F.3d at 435. "To support a claim of monopoly power through indirect evidence, Mylan must show that: (1) defendants had market power in the relevant market; and (2) that there were barriers to entry into the market." Id. See also Broadcom Corp., 501 F.3d at 307 (citing U.S v. Microsoft Corp., 253 F.3d 34, 51 (D.C. Cir. 2001)).
(36) Mylan, 838 F.3d at 431. "[T]he District Court found, viewing the facts in the light most favorable to Mylan, that Defendants had indeed made the Doryx 'hops' primarily to 'delay generic market entry.'" Id. (citing Mylan, 2015 U.S. Dist. LEXIS 50026, at *17). "1 am compelled to find that Defendants made the Doryx 'hops'--even the six year development 'hop' from capsules to tablets--primarily to defeat generic competition." Mylan, 2015 U.S. Dist. LEXIS 50026, at *17.
(37) See Mylan, 838 F.3d at 439. "[W]e find Namenda to be factually and procedurally distinguishable from this case." Id. There is no "patent cliff' problem with Doryx because the market was already open to generic brands. Id. See also Actavis, 787 F.3d at 649; Jeung-Whan Han & Chie Hoon Song, Patent Cliff and Strategic Switch: Exploring Stratege Design Possibilities In the Pharmaceutical Industry, 5(1) SPRINGERPLUS 692 (May 23, 2016). See also Salgado, supra note 15 (describing the strategic choices in the case of a patent cliff)). "In withdrawing Namenda IR from the market, Defendants' explicit purpose was to impede generic competition and to avoid the patent cliff--which occurs at the end of a drug's exclusivity period when generics gain market share through state substitution laws." Adams, 787 F.3d at 649. Patent cliff is a term referencing the time after a drug's exclusivity period end allowing for increased competition among generic drugs due to the lack of exclusivity. Id. Avoiding patent cliffs can be prolonged, as done in this case, through product expansions. Id.
(38) See Adams, 787 F.3d at 662. "[T]he preliminary injunction serves the public's interest in a competitive market for memantine drugs." Id.
(39) See Verizon Commc'ns Inc. v. Law Offices Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)); Actavis, 787 F.3d at 652-54. The court in Actavis stated that:
Defendants' hard switch--the combination of introducing Namenda XR into the market and effectively withdrawing Namenda IR--forced Alzheimer's patients who depend on memantine therapy to switch to XR (to which generic IR is not therapeutically equivalent) and would likely impede generic competition by precluding generic substitution through state drug substitution laws.
Id. at 655. See also Wisconsin v. lndivior Inc. (In re Suboxone (Buprenorphine Hydrochloride & Naloxone) Antitrust Litig.), No. 13-MD-2445, 2017 U.S. Dist. LEXIS 171322 (E.D. Pa. Oct. 16, 2017). Here, the court stated:
[t]o establish monopolization in violation of [section] 2, a plaintiff must prove not only that the defendant possessed monopoly power in the relevant market, but that it willfully acquired or maintained that power 'as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'
Id. "As a general rule, courts are properly very skeptical about claims that competition has been harmed by a dominant firm's product design changes." Id. (quoting United States v. Microsoft Corp., 253 F.3d 34, 65 (2001)). See also Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 544-45 (9th Cir. 1983). Product innovation generally benefits consumers and inflicts harm on competitors, so courts look for evidence of "exclusionary or anticompetitive effects" in order to "distinguish 'between conduct that defeats a competitor because of efficiency and consumer satisfaction" and conduct that impedes competition through means other than competition on the merits. Trans Sport, Inc. v. Starter Sportswear, Inc., 964 F.2d 186,188-89 (2d Cir. 1992) (quoting U.S. Football League v. Nat'l Football League, 842 F.2d 1335,1359 (2d Cir. 1988)); Actavis, 787 F.3d at 652 (describing the anticompetitive effect of integration).
(40) Mylan, 838 F.3d at 440. "[T]he evidence demonstrates that there were plenty of other competitors already in the oral tetracycline market ... there was no evidence of consumer coercion, because generics 'had already entered the market at the time of the defendants' product reformulation.'" Id.
(41) See Robert Pearl, Why Patent Protection In the Drug Industry Is Out of Control, FORBES (Jan. 19, 2017, 09:00 AM), https://www.forbes.eom/sites/robertpearl/2017/01/19/ why-patentprotection-in-the-drug-industry-is-out-of-control/2/#613faf773481. There must be a balance between the use of patent law to encourage drug companies to develop new medications for diseases while at the other end, the needs of patients to benefit from those drugs without bankrupting either themselves or state and federal budgets. Id.
(42) See Austin Frakt, How Patent Law Can Block Even Lifesaving Drugs, NEW YORK TIMES (Sept. 28, 2015), https://www.nytimes.com/2015/09/29/upshot/how-patent-law-can-block-evenlifesaving-drugs.html. The patent system is credited with protecting and promoting innovation. Id. However, when it comes to pharmaceuticals, it may be preventing valuable therapies from coming to market. Id.
(43) See Martha M. Rumore, The Hatch-Waxman Act--25 Years Later. Keeping the Pharmaceutical Scales Balanced, PHARMACY TIMES, (Aug. 15, 2009), http://www.pharmacytimes.com/print.php?url=/publications/supplement/2009/genericsupple ment0809/generic-hatchwaxman-0809 (describing the impact of the Act in recent studies). See also Amanda Baltazar, The Hatch-Waxman Act: Changing the Playing Field for Branded and Generic Drugs, VERY WELL (Apr. 29, 2017), https://www.verywell.com/the-hatch-waxman-act-how-itchanged-the-pharma-industry-2663817?print (explaining the impact of regulations from the act).
(44) See Garth Boehm et al., Development of the Generic Drug Industry In the U.S. After the Hatch-Waxman Act of 1984, 3(5) ACTA PHARMACEUTICA SINICA B 297, 297-311 (2013) (describing the most important events following the approval of the act).
(45) See Standard Oil v. F.T.C., 340 U.S. 231, 248-251 (explaining that competitive and lawful lower prices are acceptable if done in good faith). But see Cynthia Ho, Should All Drugs be Patenable? A Comparative Perspective, 17 VAND. J. ENT. & TECH. L. 295,306 (2015). "Many countries--but not the U.S.--bar patents on inventions that would be contrary to morality ... higher cost of patented drugs would limit access to affordable medicine." Id. As an alternative, some countries allow patents on the method instead of the product. Id.
(46) See Nat'l Soc. of Prof. Eng. v. U.S., 435 U.S. 679, 695 (1978). "The heart of our national economic policy long has been faith in the value of competition" Id. (quoting Standard Oil, 340 U.S. at 248).
(47) See Mylan, 838 F.3d at 440-42. See Actavis, 787 F.3d at 652-54.
(48) See 15 U.S.C. [section] 2 (2012). See also Mylan, 838 F.3d at 434.
(49) See Mylan, 838 F.3d at 439-42. The court explains that Mylan did not face a patent cliff like the company did in Namenda and therefore was not entitled to the court "ensuring] fair competition under the antitrust laws." Id.
(50) Id. at 440. "Courts should also be wary both of second-guessing Congress's legislative judgment and of turning courts into tribunals over innovation sufficiency." Id.
(51) Id. at 440-41 (agreeing with the district court and leaving future claims to case-by-case analysis). The court decided not to investigate the product hops made by Mayne and Warner, claiming the court was not presented with a "close call", thereby setting the bar for future claims of product hopping. Id. at 441.
(52) Mylan, 838 F.3d at 437. (showing that patients were willing to switch to generic brand when Doryx's price increased).
(53) Mylan, 838 F.3d at 437-38. The court reasoned that:
[G]iven the high degree of interchangeabilite' and cross-elasticity demonstrated in the record, we agree with the District Court that the relevant market consisted of Doryx and other oral tetracyclines prescribed to treat acne. And, within that market, we generally require a plaintiff alleging antitrust injury under Section 2 to show that Defendants maintained a market share "significantly larger than 55%" to establish antitrust liability. However, Defendants' market share in the oral tetracycline market was relatively small. It never exceeded 18%.
(54) Mylan, 838 F.3d at 441. The court ruled this was "[b[ecause Mylan's [section] 2 claims each require[d] a showing of anticompetitive conduct in addition to monopoly power ..." Id.
Mylan also argues, alternatively, that Doryx is an antitrust "submarket" within the market for tetracyclines. We disagree. As noted, the evidence shows that Doryx is interchangeable with a wide variety of other tetracyclines. It therefore cannot be argued that the public recognizes Doryx as a distinct submarket within the class of tetracyclines.
Mylan, 838 F.3d at 441 n. 90 (elaborating on Mylan's argument on the alternative). See also U.S. v. Microsoft Corp, 253 F.3d. 34 (D.C. Cir. 2001). "It must harm the competitive process and thereby harm consumers. In contrast, harm to one or more competitors will not suffice. 'The [Sherman Act] directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.'" Id. at 58 (quoting Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993)).
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|Publication:||Journal of Health & Biomedical Law|
|Date:||Jan 1, 2018|
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