The Federal Trade Commission (FTC) for the first time ever filed a complaint in federal district court this week alleging that an agreement not to market an authorized generic – often called a “no-AG commitment” – is a form of reverse payment and violates antitrust laws.
The complaint alleges that Endo Pharmaceuticals and several other drug companies violated antitrust laws by blocking access to generic versions of the pain drug Opana ER (oxymorphone) and the local anesthetic Lidoderm (lidocaine).
“Settlements between drug firms that include ‘no-AG commitments’ harm consumers twice – first by delaying the entry of generic drugs and then by preventing additional generic competition in the market following generic entry,” said FTC Chairwoman Edith Ramirez.
In 2009, Endo generated close to $1 billion from Opana ER and Lidoderm, comprising approximately 64% of Endo’s total annual revenues. The threat of generic entry for either of these products posed significant financial risks for Endo, according to FTC’s complaint.
Endo allegedly paid Impax Laboratories more than $112 million to forgo entering the market with its Opana ER generic for 2½ years.
In May 2012, Endo and its partners, Teikoku Seiyaku Co. and Teikoku Pharma USA, also agreed with Watson Laboratories, that until September 2013, Watson would not market a generic version of Endo’s Lidoderm patch. In exchange, Endo paid Watson hundreds of millions of dollars, including $96 million in free branded Lidoderm product. As a result, Endo illegally maintained its monopoly over Lidoderm.
Endo and Watson also allegedly agreed that, for 7½ months after September 2013 (including the 180-day first-filer exclusivity period for which Watson was eligible), Endo would not compete by marketing an authorized generic version of Lidoderm.
As FTC explains, under federal law, the first generic applicant to challenge a brand-name pharmaceutical’s patent, referred to as the first filer, may be entitled to 180 days of exclusivity as against any other generic applicant upon final FDA approval.
But a branded drug manufacturer is permitted to market an authorized generic version of its own brand product at any time, including during the 180 days after the first generic competitor enters the market. As the FTC has previously argued in amicus briefs, a no-AG commitment can be extremely valuable to the first-filer generic, because it ensures that this company will capture all generic sales and be able to charge higher prices during the exclusivity period.
The FTC is seeking a court judgment declaring that the defendants’ agreement violates the antitrust laws and the commission orders “the companies to disgorge their ill-gotten gains, and permanently barring them from engaging in similar anticompetitive behavior in the future.”
With the complaint, the Commission also filed a stipulated order for permanent injunction against Teikoku Seiyaku Co. and Teikoku Pharma USA, settling charges. Under the order, the Teikoku entities are prohibited for 20 years from engaging in certain types of reverse-payment agreements, including settlements containing no-AG commitments.
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. The Commission vote to accept the Teikoku settlement was 4-0. The complaint was filed in the US District Court for the Eastern District of Pennsylvania on 30 March 2016.