US appeals court: Alzheimer's drug swap is anti-competitive

AP News
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Posted: May 29, 2015 1:44 PM

ALBANY, N.Y. (AP) — A federal appeals court has ruled that drug manufacturer Actavis PLC's attempted switch of patented Alzheimer's medication, which halted distribution of the old drug before its patent expires this summer, violates U.S. antitrust law.

The decision unsealed this week explains the ruling last week by a three-judge panel of the 2nd U.S. Circuit Court of Appeals that requires the Irish company to keep distributing Namenda until 30 days after its patent expires on July 11.

New York Attorney General Eric Schneiderman sought that court order. He alleged antitrust and state law violations by Actavis in pushing about 500,000 patients to its new patented drug Namenda XR to avoid losses from cheaper generics.

"Defendants' hard switch crosses the line from persuasion to coercion and is anticompetitive," the court ruled. "In sum, we conclude that the combination of withdrawing a successful drug from the market and introducing a reformulated version of that drug, which has the dual effect of forcing patients to switch to the new version and impeding generic competition, without a legitimate business justification, violates Section 2 of the Sherman Act."

The 2nd Circuit panel comprised judges John Walker Jr., Reena Raggi and Christopher Droney.

Actavis, in a statement following last week's ruling, reiterated that its new drug, taken once daily instead of twice, is better and that demand is growing, now accounting for more than 50 percent of treatment.

"While we are disappointed by the court's decision to uphold this ruling, we intend to continue our strong efforts to convey the significant benefits of Namenda XR to physicians, patients and caregivers," CEO Brent Saunders said. The Dublin-based company also recently launched a new drug combining Namenda XR with the medication donepezil, which commonly have been prescribed together to treat Alzheimer's disease, he said.

The company declined to comment about the rest of the court's ruling unsealed this week.

According to Schneiderman's office, the 2nd Circuit decisions could significantly affect how pharmaceutical companies market patented drugs in the U.S., prohibiting similar attempts at forced switches from one drug with a soon-to-expire patent to a patented variation.

"With this clear verdict behind us, my office will continue to protect New Yorkers from anticompetitive practices by drug manufacturers, including forced switches," Schneiderman said Friday.

The judges cited a federal Health and Human Services estimate that withdrawal of Namenda before the entry of generic versions would cost Medicare and its beneficiaries at least $6 billion over the next decade. They also noted the tension between patent protections and antitrust laws, but they rejected Actavis' argument that antitrust scrutiny of the pharmaceutical industry will meaningfully deter innovation.

"Immunizing product hopping from antitrust scrutiny may deter significant innovation by encouraging manufacturers to focus on switching the market to trivial or minor product reformulations rather than investing in the research and development necessary to develop riskier, but medically significant innovations," the court said.