Case # 30-2016-00879117-CU-BT-CXC
Date: October 6, 2016
CONSUMER PROTECTION LAWSUIT FILED AGAINST DRUG COMPANIES’
“PAY-FOR-DELAY” SCHEME BY AGREEING TO DELAY MARKETING OF LESS EXPENSIVE GENERIC VERSIONS OF CHOLESTEROL MEDICATION
*Manufacturers are accused of entering into agreements that maintained patent monopoly and higher prices
SANTA ANA, Calif. – The Orange County District Attorney (OCDA) Tony Rackauckas has filed a civil consumer protection lawsuit against five pharmaceutical companies and two generic pharmaceutical manufacturers for entering into unlawful pay-for-delay agreements not to bring to market a generic version of the brand name manufacturers’ drug Niaspan, prescribed to lower bad cholesterol. These agreements resulted in Orange County consumers paying substantially higher prices for Niaspan than they would have if generic versions had been available. The drug was first marketed in 1997, and as of 2011, Niaspan sales exceeded $1.13 billion annually.
The OCDA, with the assistance of a private law firm with long standing expertise in products liability, Robinson Calcagnie, Inc., filed a complaint for unlawful, unfair, and fraudulent business practices under California Business and Professions Code § 17200, in the Superior Court of the State of California in Orange County on Oct. 4, 2016, against Abbott Laboratories, AbbVie Inc.,Teva Pharmaceutical Industries, Ltd., Teva Pharmaceuticals USA, Inc., Barr Pharmaceuticals, Inc., Duramed Pharmaceuticals, Inc., and Duramed Pharmaceuticals Sales Corp. The Prayer for Relief in the Complaint seeks that the court declare that the defendants engaged in unlawful and unfair business acts and practices, and that the defendants cease the unlawful agreements, pay restitution to consumers, and pay civil penalties, including penalties for acts perpetrated against senior and disabled citizens.
“Healthcare costs are soaring. Consumers have the right to have companies compete fairly so that they can obtain prescription drugs at a reasonable cost,” said District Attorney Rackauckas. “Companies shouldn’t be allowed to keep their prices artificially high and not have competition by making back-door deals with their competitors. In a pay-for-delay game, consumers come out the losers.”
A pay-for-delay or reverse payment settlement agreement is a practice in which a brand name drug manufacturer brings a patent-infringement action against a generic drug manufacturer and then compensates the generic drug manufacturer for its agreement to refrain from entering the market with a competing generic version of the brand name drug until a specified date. The term “reverse payment” derives from the fact that the payment flows in the direction opposite to what one would normally expect in patent-infringement litigation; in other words, the patent holder, or patentee, pays the alleged infringer to settle the lawsuit, rather than the other way around. By paying off generic competitors in exchange for a delay in generic competition, the brand name manufacturer preserves increased profits by keeping its monopoly intact via a payment of some of the monopoly profits to the generic manufacturer, which in turn agrees to delay marketing its product.
In 2013, The United States Supreme Court held in F.T.C. v. Actavis, Inc. 570 U.S. ___(2013), that patent-related settlement agreements between brand name and generic drug manufacturers can violate antitrust laws. The Court noted that, “A reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects,” and that when payment in return for staying out of the market keeps prices at levels set by the patentee, “[t]he patentee and the challenger gain; the consumer loses.”
The Federal Trade Commission (FTC) has called such settlements “a costly legal tactic” … “to stifle competition from lower-cost generic medicines,” noting that pay-for-delay patent settlements “effectively block all other generic drug competition for a growing number of branded drugs.” According to an FTC study, “these anticompetitive deals cost consumers and taxpayers $3.5 billion in higher drug costs every year.”
Defendants’ Unlawful and Unfair Business Practices
The defendants are accused of entering into unlawful pay-for-delay or reverse payment agreements in 2005, to keep generic versions of Niaspan off the market, in violation of both consumer protection and anti-trust laws. The defendants are accused of entering into these unlawful reverse payment agreements to settle pending patent litigation involving Niaspan, where the brand name manufacturers, Abbott Laboratories, AbbVie Inc., Duramed Pharmaceuticals, Inc., and Duramed Pharmaceuticals Sales Corp. agreed to make unlawful payments to the generic pharmaceutical manufacturers, Teva Pharmaceutical Industries, Ltd., Teva Pharmaceuticals USA, Inc., and Barr Pharmaceuticals, Inc., who in turn unlawfully agreed to refrain from launching a generic equivalent of Niaspan until September 2013.
From 2005 through March 2014, the defendants are accused of unlawfully maintaining monopoly power in the national market for Niaspan and preserving Niaspan’s dominant position in the market, while sharing some of the supra competitive profits. They are further accused of selling more than $6.7 billion of Niaspan or generic Niaspan at pricing above what can be sustained in a competitive market, and maintaining the price of Niaspan at a supra competitive level. This caused California consumers, their insurers, California’s medical assistance programs, and other government payers to overpay millions of dollars by depriving them of the benefits of access to less expensive generic versions of Niaspan.
Harm to Orange County
Abbott Laboratories, AbbVie Inc.,Teva Pharmaceutical Industries, Ltd., Teva Pharmaceuticals USA, Inc., Barr Pharmaceuticals, Inc., Duramed Pharmaceuticals, Inc., and Duramed Pharmaceuticals Sales Corp. are accused of engaging in unlawful conduct that deprived purchasers of the benefits of competition, and as a result, consumers and purchasers of Niaspan were compelled to pay artificially inflated prices over a period of many years. By preventing generic competitors from entering the market, the defendants are accused of injuring purchasers by causing them to pay more for Niaspan than they otherwise would have paid had generic drugs been available. Those prices were substantially higher than the prices that purchasers would have paid were it not for the defendants’ unlawful agreements.