On October 10, 2018 President Trump signed into law the “Patient Right to Know Drug Prices Act” (S.2554) which requires antitrust scrutiny of biosimilar settlements by the Federal Trade Commission (FTC). The law amends the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to require Reference Product Sponsors and biosimilar applications to submit their settlement agreements to the FTC for review. The bill was introduced in March 2018 by Senators Susan Collins (R-Maine), Clair McCaskill (D-Missouri), and Debbie Stabenow (D-Michigan).
The new law will allow the FTC to access the terms of a deal without seeking additional authority from the commission. It will also allow the FTC to track biosimilar deals and develop a data record of relevant terms, similar to what has been down with small molecule generics.
The law comes at an important time. Humira®, which is the best-selling drug in the world yielding more than $18 billion in sales in 2017, entered the market in Europe this past Tuesday on October 16, 2018. However, no biosimilars of Humira® are expected to enter the market in the US until at least 2023. This is because in the US, AbbVie not only maintains a robust patent portfolio protecting Humira®, it has also reached deals with multiple biosimilar manufacturers, including Amgen, Samsung Bioepis, Mylan, Sandoz, and as of yesterday, Fresenius Kabi, to hold off competition until 2023.
Apart from this new law, other legislations addressing settlement agreements are also moving forward in Congress. It will be interesting to see if these legislations will increase the entry of biosimilars on the US market.
We will keep you informed of any new developments in this field.
Brand companies employ a variety of mechanisms to maintain their market exclusivity and delay generic entry. We have recently written about Johnson & Johnson’s rebate and bundling schemes in trying to hinder uptake of a Remicade® biosimilar. We have also written about Allergan’s attempts to sell its patents covering Restasis® to an Indian tribe in an effort to avoid inter partes review challenges. Well, Allergan again finds itself again in the middle of a dispute that touches on intellectual property, this time Allergan is alleged to have engaged in anticompetitive practices to delay generic competition because of its misuse of citizen petitions.
While citizen petitions are supposed to allow citizens an opportunity to raise legitimate safety concerns with the U.S. Food and Drug Administration (FDA), they have often been misused by innovator drug companies as a way of delaying generic market approval. One study analyzed all citizen petitions filed with the FDA between 2011 and 2015 that targeted pending generic drugs and found that innovator manufacturers file 92% of all the citizen petitions, with the FDA denying nearly all these petitions.
This situation arose recently in a class action case filed against Allergan Inc. alleging antitrust violations aimed at protecting its dry-eye drug Restasis®. Amongst other violations, the suit alleged that Allergan filed four baseless citizen petitions in an effort to hinder generic competition. Allergan filed a motion to dismiss this claim asserting that the suit was “meritless”.
Last week, however, U.S. District Judge Nina Gershon shot down Allergan’s efforts to sidestep the suit and sided with plaintiff union benefit plans and various pharmaceutical purchasers, claiming that it is probable that Allergan acted dishonestly in hindering generic competition.
In its ruling, the Federal judge declined to apply the Noerr-Pennington doctrine, which shields good-faith petitioning of the government even if it results in a competitive edge. She provided two reasons for not applying the doctrine.
First, Judge Gershon noted that the doctrine does not protect “objectively baseless” petitioning. Since the FDA denied each of Allergan’s petitions, the Judge found that it could be probably that the petitions were scientifically unfounded.
Second, Judge Gershon noted that that the doctrine does not protect actions that are solely intended to hinder competition. Since Allergan petitioned the FDA repeatedly asking for testing of generic Restasis® in human, something not required for generic drugs, and then did not appeal the FDA’s rejections of its petitions but instead filed subsequent petitions using duplicative motives, the Judge found that Allergan’s actions could show that Allergan filed the petitions with improper motives. According to Judge Gershon, “[i]t is highly plausible that a company willing to engage in such conduct was intending to delay the entry of generics into the market, rather than seeking to protect the public health.”
Citizen petitions are a legally protected act so attacking them under antitrust law has traditionally been difficult. To prove that a citizen petition violates the law, plaintiffs have to show they are so baseless that they constitute a total sham. This case shows that its is possible to clear the first hurdle in demonstrating that citizen petitions are a sham and thus shows a possible path forward for generic drug plaintiffs hit with such petitions in future disputes.
I recently spoke at a biosimilars conference in Boston, MA and one topic that came up multiple times is the antitrust issue relating to Remicade®. I reviewed the recent decision involving Remicade® and its biosimilar, Inflectra®, to see if the court provided any insights into how antitrust issues dealing with biosimilars, particularly those involving “exclusionary contracts” and rebates, will be addressed.
On August 10, 2018, the Pennsylvania Court denied Johnson & Johnson’s (“J&J”) motion to dismiss Pfizer’s antitrust lawsuit relating to its Remicade® biosimilar, Inflectra®. We previously wrote how Pfizer sued J&J in the U.S. District Court for the Eastern District of Pennsylvania in September 2017 alleging that J&J has been conducting “anti-competitive practices” to prevent biosimilar competition by effectively preventing health insurers, hospitals, and clinics from offering Pfizer's lower-priced biosimilar product. According to Pfizer, J&J forced hospitals and insurers to enter exclusive arrangements and bundled rebate programs to ensure that Remicade® was given preferential treatment over Inflectra®.
J&J moved to dismiss the lawsuit, but on August 10, the Court denied Janssen’s motion and is allowing the antitrust suit, the first lawsuit of its kind in the biosimilar field, to continue. In it’s ruling, the Court provides insights as to how some antitrust issues relating to biosimilar market entry may be analyzed.
First, the Court addressed the issue of exclusionary agreements. In Pfizer’s lawsuit, Pfizer alleged that J&J forced hospitals and insurers to enter exclusive arrangements to exclude biosimilars other than Remicade® from coverage under their plans, thereby making Remicade® the exclusive infliximab available to patients covered by that plan. These exclusionary agreements are particularly important in the context biologics. Remicade® and Inflectra®, like most biologics, are administered intravenously at a clinic or hosptial. They are a “medical benefit” product, rather than a “pharmacy benefit” product, which means they must be stocked in advance by providers, rather than directly purchased by patients on an as-needed basis. Since the providers bear the financial risk of reimbursement, there is an incentive for them to stock the drug that will actually be covered by most insurers.
J&J tried to argue that there is no correlation between Inflectra’s® poor market traction and sales and J&J’s exclusionary contracts with insurers and providers and pointed to a number of alternative theories to explain the marked difference in sales between the two products. In particular, J&J argued that the lack of commercial success of Inflectra® was independent of J&J’s exclusionary agreements, and instead were due to provider’s lack of comfort with biosimilars, Inflectra's® status as a “biosimilar” rather than as an “interchangeable”, and Remicade’s® cost-effectiveness.
In the end, the Court dismissed J&J’s argument that Pfizer needed to disprove all of their alternate theories of why sales of its product were lagging at this stage of litigation. By holding that Pfizer was not required to disprove all other theories on a motion to dismiss, the Court left open the possibility that J&J, or a future innovator, could exonerate itself using one or more of these alternate theories. That is an important takeaway because it suggests that even though J&J’s actions could lead to antitrust liability, i.e., by entering into exclusionary contracts, it also provided ways to avoid such liability.
Bundled Rebates and Multi-Product Bundling Programs
Second, the Court addressed the issue of bundled rebates and multi-product bundling programs. In one instance, Pfizer alleged that J&J introduced a rebate program that would provide savings off Remicade®’s increasing list price for all existing Remicade® patients, which would, in effect, bundle the base of existing Remicade® patients with new patients entering the infliximab market. To this end, the Court held that bundled rebates can be anticompetitive when they preclude competition for new infliximab patients by being linked to noncontestable (existing) patients. This, of course, assumes that new patients are contestable because they are not anchored to a product while existing patients are incontestable because they are anchored to a product. Under this reasoning, the Court found that J&J’s rebate program could be anticompetitive since it “bundled its power over existing Remicade patients to break the competitive mechanism and deprive new infliximab patients (and their insurers) of the ability to make a meaningful choice between Remicade and its biosimilars.” The Court, therefore, refused to dismiss Pfizer’s bundling claim. Since most biologics have legacy patients, this factor may be relevant to future rebate schemes. Specifically, this shows that rebate schemes may be tailored by innovators to potentially exclude non-competitive products and avoid antitrust liability
Additionally, Pfizer alleged that J&J bundled rebates across multiple products to force insurers to grant exclusivity to Remicade® or pay higher prices on other J&J products. J&J argued that this claim should be dismissed because Pfizer failed to offer its own multi-product bundles. The Court appears to have sided with J&J on this issue and held that bundling rebates across multiple products is not, per se, an antitrust violation. The Court noted that Pfizer was not a single-product company and therefore had the capacity to offer such bundles itself. This seems to suggest that whether or not rebates schemes are permissible will depend, in part, on who the biosimilar competitor actually is.
Companies developing innovator and biosimilar products, alike, should be aware of the outcomes of this dispute. At least one United States District Court has found that certain pricing tactics may rise to the level of impermissible monopolization. The outcome of this case will likely provide more insights on which pricing practices are permissible under antitrust laws and which are not.
We will continue to monitor the case and provide updates as they become available.
BioPharma Law Blog posts updates and analyses on IP topics, FDA regulatory issues, emerging legal developments, and other news in the constantly evolving world of biotech, pharma, and medical devices.