Transcript State Antitrust Law Compliance

State Antitrust Enforcement in
the Pharmaceutical Industry
Pharmaceuticals Conference
National State Attorney General Program
at Columbia Law School
New York, NY
May 10-11, 2007
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Elinor R. Hoffmann, Office of the
NYS Attorney General
Why do States care?
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In 2004, $188.5 Billion was spent on
prescription pharmaceuticals. One estimate
for 2006 is $213.7 billion.
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Attorneys General represent state agencies
and consumers who make significant
purchases of pharmaceuticals.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What are the relevant statutes?
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The antitrust laws.
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The patent law.
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35 U.S.C. § 101 et seq.
The Hatch-Waxman Act.
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Sherman Act §§1,2; Clayton Act §§ 4, 16. (15
U.S.C. §§ 1,2,15,26.)
State antitrust laws.
Pub.L. No. 98-417, 98 Stat.1585 (codified in
relevant part as 21 U.S.C.§355).
Elinor R. Hoffmann, Office of the
NYS Attorney General
What are the goals of antitrust law?
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To promote and protect the competitive process; to
enable consumers to access the best possible
product at the lowest possible price; to encourage
innovation.
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Contracts, combinations and conspiracies that
unreasonably restrain trade are unlawful;
Abuses of monopoly power are unlawful;
Mergers that may substantially lessen competition are
unlawful.
Elinor R. Hoffmann, Office of the
NYS Attorney General
How does state antitrust law differ
from federal law?
Not very much
 Most states have statutes that look very
much like the federal antitrust statutes.
 States enforce both federal and state
antitrust law.
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Elinor R. Hoffmann, Office of the
NYS Attorney General
What are the differences?
many states, “Illinois Brick repealers” or
other indirect purchaser statutes enable
recovery on behalf of indirect purchasers.
Supreme Court precedent generally
precludes such recovery under federal
antitrust law.
Somewhat different exemptions.
 In
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Elinor R. Hoffmann, Office of the
NYS Attorney General
What are the goals of patent law?
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To promote and protect innovation:
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By giving an inventor the right to exclude others
from making, using or selling the patented work
for a limited number of years.
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In exchange, an inventor must disclose the details
of his/her invention in a publicly available patent.
Elinor R. Hoffmann, Office of the
NYS Attorney General
The Hatch-Waxman Act of 1984
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Intended to facilitate generic competition.
Generics are “me-too” drugs: they do not
have to go through the same lengthy,
expensive clinical testing process as
innovator drugs.
The trade-off was a longer period of patent
protection for pioneer pharmaceuticals.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What was the effect of Hatch-Waxman?
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A resounding success in many ways.
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Generics on the market more quickly.
Generics, on average, are sold at a 50% discount
from brand price, and take away 50% of the brand
market within 12 months from launch. This may
differ from product to product, but the inroads
made by generics is substantial.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What was the effect of Hatch-Waxman?
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Pharmaceutical manufacturers developed
ways to manipulate the Act. Used litigation
as an offensive business strategy.
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Manipulation of regulatory processes to extend
and enhance patent monopolies.
Exclusionary settlements that delay the entry of
competition in exchange for a share monopoly
profits.
Elinor R. Hoffmann, Office of the
NYS Attorney General
Overview: Types of Cases Involving
Unilateral Conduct
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Fraud or inequitable conduct with PTO (can lead to
monopolization claims if the other elements of
unlawful monopolization are present).
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Walker Process v. Food Machinery & Chemical Corp., 382
U.S. 172 (1965).
Improper Orange Book patent listings (fraudulent
certifications to the FDA; listings of patents known to
be unenforceable). (E.g., Taxol, Buspar).
Product reformulations and product switching as a
mechanism to protect monopoly. (e.g., Ovcon,
Nexium)
Elinor R. Hoffmann, Office of the
NYS Attorney General
Types of Cases Involving Collusive
Conduct
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Patent infringement litigation settlements
delaying entry of generic defendant in
exchange for money. Agreements to delay
entry outside of the patent infringement
context.
Agreements to take advantage of provisions
of the Hatch-Waxman Act to prevent other
generics from entering the market.
Elinor R. Hoffmann, Office of the
NYS Attorney General
Examples of Cases Involving Collusion
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In re Cardizem CD Antitrust Litig.,
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Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005), cert. denied, 126 S.Ct. 2929
332 F.3d 896 (6th Cir. 2003), cert. denied, 544 U.S.1049
(2005). Exclusionary agreement between brand and generic that went beyond the scope of the patent.
Affirmed grant of partial summary judgment based on a per se rule condemning allocation of markets
among competitors.
(2006). Exclusionary agreement that did not extend beyond the scope of the patent. Tripartite test: What
is the scope of the patent? Does the agreement go beyond the scope? What are the anticompetitive
effects?
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In re Tamoxifen Citrate Antitrust Litig,
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State of Colorado v. Warner Chilcott, et al,
429 F.3d 370 (2d Cir. 2005). Affirmed dismissal on
the pleadings. Exclusionary settlements are ok so long as they are within the scope of the patent and the
litigation is not a sham. Petition for certiorari has been filed.
Civ. Action No. 05-2182 (CKK) (D.D.C.
2005). Pending case brought by 34 states and the FTC alleging agreement between brand manufacturer
and generic manufacturer to keep generic off of the market in exchange for $20 million and a supply
agreement (at twice fully loaded cost). No patent involved.
Elinor R. Hoffmann, Office of the
NYS Attorney General
Back to Enforcement
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Elinor R. Hoffmann, Office of the
NYS Attorney General
Potential State Claimants in
Antitrust Cases.
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State agencies (proprietary)
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Medicaid
State employee/retiree
benefit programs
State hospitals
Mental health facilities
State correctional facilities
Consumers
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Elinor
R. Hoffmann, Office of the
Represented through parens patriae
authority
NYS Attorney General
Remedies Available to State Attorneys
General.
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Civil and Criminal Authority
Damages (many states have laws providing
recovery for indirect purchasers)
Equitable Relief (restitution and/or
disgorgement)
Civil Penalties (Fines)
Injunctive Relief
Elinor R. Hoffmann, Office of the
NYS Attorney General
Enforcement Framework.
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States enforce both state and federal antitrust laws
in state and federal courts.
Multistate investigations and litigation coordinated
through the NAAG Antitrust Task Force.
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Pharmaceutical Industry Working Group.
Cooperate with FTC, DOJ.
Cooperate with class counsel in actions filed by
private bar.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What’s News? Product Extensions.
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Introduce next generation product with no
meaningful improvements
Switch existing patient base to new product
Take additional steps to delay generic entry
to buy time to implement this strategy.
Ovcon,TriCor, Nexium are examples.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What’s News? Authorized Generics.
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An authorized generic is a brand drug produced
under a generic label, either by the brand
manufacturer or its licensee.
Manufactured under the original NDA, so no new
FDA approval is necessary.
Do authorized generics undercut the incentives for
generic entry by undercutting the 180 day exclusivity
granted the first ANDA filer by the HWA?
Do authorized generics increase competition and
lower prices?
Elinor R. Hoffmann, Office of the
NYS Attorney General
What’s News? Federal Legislation.
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S. 316, voted out of the Senate Judiciary
Committee, would prohibit all patent
infringement litigation settlements that
involve an exchange of “something of value”
for a delay in generic entry.
Statute has bipartisan support, and there is a
parallel bill in the House, HR 1902.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What’s News? Biogenerics.
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There is no expedited FDA approval process
for biogenerics or biosimilars as there is for
traditional pharmaceuticals under the HatchWaxman Act although legislation has been
introduced. HR 1956.
Biologics now comprise approximately $32
billion or 15% of total U.S. pharmaceutical
sales, and usage is growing at about twice
the rate of other pharmaceuticals.
Elinor R. Hoffmann, Office of the
NYS Attorney General
What should the States be doing?
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Investigations and litigation.
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Tracking and commenting on legislation.
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Working with our own agencies to develop
comprehensive approaches to policy in this
area.
Elinor R. Hoffmann, Office of the
NYS Attorney General
Slides prepared by Elinor R. Hoffmann, NY OAG; with contributions by Beth Finnerty and Patrice Fatig,
Ohio OAG.
Appendix: Recent State Cases in
Pharmaceutical Industry (1).
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Relafen – SmithKline Beecham(Arthritis treatment)(fraud on
patent office, sham litigation).
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Paxil – GlaxoSmithKline (Antidepressant)(fraud on patent
office, sham litigation).
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Remeron – Organon Inc. and Akzo Nobel N.V.
(Antidepressant)(fraud on patent office, improper Orange Book
listings).
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Cardizem CD – Hoechst Marion Roussel (now Aventis
Pharmaceuticals) and Andrx Corp. (Heart
medication)(agreement to delay generic entry).
Elinor R. Hoffmann, Office of the
NYS Attorney General
Appendix: Recent State Cases in
Pharmaceutical Industry (2).
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Hytrin – Abbott Labs, Zenith Goldline
Phamaceuticals, Geneva Pharmaceuticals Inc.
(Hypertension and Enlarged prostate)(agreement to
delay generic entry)
Ovcon – Warner Chilcott, Barr Labs (oral
contraceptive)(agreement to delay generic entry).
Children’s Ibuprofen—Alpharma, Perrigo (ibuprofen)
(agreement to limit competition for OTC drug).
Elinor R. Hoffmann, Office of the
NYS Attorney General
Appendix: Recent State Cases in
Pharmaceutical Industry (3).
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BuSpar – Bristol-Myers Squibb (Anti-anxiety medication)(fraud on
patent office, improper Orange Book listing, agreement to delay
generic competition).
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Taxol – Bristol-Myers Squibb (Cancer treatment)(fraud on patent
office, improper Orange Book listings).
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K-Dur 20 – Schering-Plough, ESI Lederle, Upsher-Smith, American
Home Products Corp.(Cardiac medication)(agreement to delay
competition).
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Lorazepam and clorazepate) – Mylan Labs, Cambrex Corp.,
Profarmaco and Gyma (Anti-anxiety medications)(monopolization
using exclusionary supply arrangements).
Elinor R. Hoffmann, Office of the
NYS Attorney General