The Federal Trade Commission (FTC) recently filed an amicus brief before the U.S. Court of Appeals for the Third Circuit in a case involving conduct by pharmaceutical manufacturers known as “product hopping.” Product hopping refers to a tactic by which brand name pharmaceutical companies attempt to obstruct generic competition by making modest reformulations that offer little to no therapeutic advantages to patients. By combining minor product reformulations with efforts to damage or destroy the market for the original formulation, brand-name pharmaceutical companies can avoid generic competition and preserve monopoly profits. Product hopping is in violation of Section 2 of the Sherman Act, which makes it an offense to “monopolize, or attempt to monopolize … any part of the trade or commerce among the several States.” The conduct can harm consumers and cost the federal government a significant amount of money.

The FTC filed its amicus brief in a case involving a private antitrust action in which Mylan Pharmaceuticals Inc. alleges that Warner Chilcott PLC/Mayne Pharm Group maintained a monopoly in the market for its antibiotic Doryx. The claims involve allegations that the Defendants’ company suppressed generic competition through three successive insignificant reformulations of the drug, combined with various efforts to curtail the availability of the original formulations. The district court granted the Defendants’ motion for summary judgment, and the Plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit.

In its amicus brief, the FTC explains that “If a brand-name manufacturer tweaks its brand-name product shortly before anticipated generic entry and begins eliminating the market for the original formulation, it can impede competition from would-be generic entrants, which have sought FDA approval to sell a generic version only of the original formulation but not the replacement.” The FTC argued that when analyzing whether pharmaceutical product hopping is unlawful, courts should account for the unique aspects of the pharmaceutical marketplace, including the nature of competition between branded pharmaceutical products and their generic counterparts.

The FTC’s brief explains that the district court’s analysis of the monopoly-power question fails to account for the special characteristics of the pharmaceutical marketplace, including that generics are unique sources of competition for brand-name prescription drugs. The brief argues that the district court’s broad ruling effectively embraces a rule of nearly per se legality for product-hopping conduct. The brief states:

The district court held that a brand company may with impunity destroy what is often the only means of generic distribution – automatic substitution – so long as generics remain hypothetically free to pursue new and more costly distribution alternatives, such as direct advertising to physicians.

Antitrust cases based on pharmaceutical product hopping are relatively new and lawyers at Beasley Allen have been actively following these cases nationwide. If you have any cases involving product hopping, antitrust, or fraud, contact Ali Hawthorne, a lawyer in our Consumer Fraud and Commercial Litigation Section, at 800-898-2034 or by email at Alison.Hawthorne@beasleyallen.com.

Source: Federal Trade Commission

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