Namenda Switching Lawsuit May Go Actavis’ Way On Appeal

Oral arguments in Second Circuit attract overflow crowd in case that prompted amicus briefs from PhRMA, BIO and many others.

The attorney for the state of New York faced tough questioning from the U.S. Court of Appeals for the Second Circuit in the goverment’s effort to maintain an injunction that impedes Allergan PLC’s efforts to switch patients from the twice-daily immediate release version of its Alzheimer’s drug Namenda (memantine) to the once-daily extended release formulation.

During April 13 oral arguments, a panel of three judges questioned the distinction between hard and soft product switches, and whether the state of New York should get the benefit of the disinclination of patients to switch treatments.

The hearing was packed with all 36 seats in the courtroom filled and additional seats and a video feed of the hearing set up in the room immediately outside the courtroom. A group of students from a New York University antitrust class were in attendance as was a representative from a hedge fund.

The case is being closely watched by industry as it could impose limits on the ability of drug makers to switch patients to a new formulation as the patent on the original product expires. The Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization filed amicus briefs in support of Actavis. Consumer groups, including AARP, Consumers Union and Public Citizen, submitted briefs in support of the state.

New York Attorney General Eric Schneiderman filed suit against Actavis and its subsidiary Forest Laboratories Inc. in September, claiming they were attempting to maintain and extend a monopoly over Namenda.

In December, Southern District of New York Judge Robert Sweet issued a preliminary injunction ordering the company to continue to make Namenda IR available until 30 days after July 11, 2015, the date when generic immediate release memantine will be available. The company had stopped making the product (Also see "Evergreening Gets Trimmed? Product Switching Suits On Namenda, Others Proceeding" - Pink Sheet, 22 Dec, 2014.).

In a court filing, Actavis said that patent and regulatory exclusivities over Namenda XR last through at least 2026.

Generics can only be substituted if they are AB-rated to the brand and to get that rating they must have the same dosage and strength as the brand. Since the generics of Namenda IR will not be AB-rated to Namenda XR they cannot be substituted for the new product.

Why Should State Benefit From ‘Disinclination’ To Switch Treatment?

The judges peppered attorneys for both sides with questions. While it is difficult to surmise how they might rule, the questions directed to the state’s attorney, Anisha Dasgupta, indicated they may be open to Actavis’ position.

Judge Reena Raggi said someone will benefit by the disinclination of Alzheimer’s disease patients to switch products. “You’ll get it under this injunction” because patients are already on Namenda IR, she said. “Why do you get the benefit of the market desire not to disrupt?” Why should the benefit go to you “by limiting the ability to market Namenda XR exclusively?”

Raggi also asked why the injunction should stand in states without substitution laws. Dasgupta said that all 50 states have substitution laws and 30, including New York, follow the federal AB-rated standard. She said as a practical matter, substitution would not occur for those not following the standard as pharmacists would be reluctant to do so without contacting a physician.

Dasgupta asserted that the case “isn’t about letting generics enter the market.” She said that under New York’s pharmacy law a drug will not be substituted if it is comparably priced to another drug.

Judge John Walker Jr. commented that “the court has to write an opinion and make a distinction between ‘hard’ and ‘soft’ switches, unless you are saying any switch is [anti-competitive].”

Dasgupta responded that there is a difference between persuasion and coercion. She said Actavis tried discounting and advertising Namenda XR and when this persuasion didn’t succeed it “turned to coercion.”

The district court’s opinion focused on Actavis’ rationale for withdrawing Namenda IR from the market rather than employing the “soft switch” of aggressively promoting the extended release version.

In three instances the opinion quotes Actavis CEO Brent Saunders’ statement in a January 2014 earnings call that if the company did a hard switch and converted patients and caregivers to once-a-day therapy versus twice a day, it would be “very difficult for the generics to reverse-commute back, at least with the existing [prescription].”

Namenda IR Likened To Ford Model S

Judge Walker asked Actavis attorney Lisa Blatt, a partner at Arnold & Porter, why it made economic sense to halt sales of the immediate release product.

“IR was killing XR,” Blatt replied. She added an analogy to auto maker Henry Ford, asking whether he had to keep the Model S on the market when he introduced a new car in order to keep drivers happy.

Walker also asked why the switch is not reviewable under antitrust law when the purpose of the switch is to cut out the generics. Blatt said she disagreed and that Actavis is not cutting out the generics. She said the question was whether to spend tens of millions of dollars promoting two drugs against each other or retract one and assure that patients had the benefit of once-a-day dosing.

Judge Christopher Droney referred to the earnings call, saying the CEO cited financial reasons for the switch and the difficulty generics would face.

“Companies don’t have to apologize for making a profit off of innovation,” Blatt replied. “For hundreds of thousands of patients the drug is important.”

In her rebuttal, Blatt asserted that everything Dasgupta had said “is dead wrong.”

She said Dasgupta’s allegation of “coercion” does not address the fact Namenda XR is a better product. She noted that the reason for Namenda short term loses was due to the fact the company was promoting XR at a discount. She said FDA and five medical experts have said switching is safe. And she said that not a single patent case has found that a company can’t decide how much of its product to produce.

When Can Innovation Extend Monopoly?

Judge Raggi said Blatt was arguing that antitrust claims go too far and questioned at what point innovation would be sufficient to extend a monopoly.

“Courts are the last place to put my trust in the advance of medical innovation,” Blatt replied, adding that companies are going to think twice about innovation if courts are going to second guess them.

Urging the panel to reverse the injunction, Blatt said Actavis has spent $55 million promoting Namenda XR and that it is paying millions of dollars every day to health plans that are reimbursing Namenda IR at a higher rate. A company court filing notes that 250,000 patients have switched to Namenda XR.

Antitrust attorney David Balto, who filed an amicus brief on behalf of Consumers Union, Public Citizen and other consumer groups, said the Second Circuit is “probably struggling with what are the limits of the court’s power to order Actavis to keep Namenda IR on the market.”

In some sense this is not typical, he said. But he added that the Second Circuit will feel confident as to how the judge’s decision fits in with mainstream antitrust law.

But PhRMA says in its amicus brief that the ruling is a misapplication of fundamental antitrust principles.

“The district court’s preliminary injunction – forcing the innovator of a new, improved product to continue to manufacture, sell and support a legacy product solely for the benefit of generic rivals – is unprecedented,” the association asserts.