U.S. FTC files amicus curiae brief supporting generics’ claim in patent dispute

On 11 March 2013 the U.S. Federal Trade Commission (“FTC”) filed an amicus curiae brief in the case Actelion Pharms Ltd. V. Apotex Inc. which is being heard in the U.S. District Court for New Jersey supporting the defendants’ claim of the plaintiff’s anticompetitive use of Risk Evaluation and Mitigation Strategies (“REMS”).

This case is about the generic access to branded products for making Hatch-Waxman patent challenges. Actelion sued Apotex, Actavis and Roxane (“Apotex”) for a declaratory judgment to affirm the legality of its practice of not supplying generics that prevented Apotex from preparing an Abbreviated New Drug Application (“ANDA”) to the U.S. Food and Drug Administration (“FDA”) (an application for approving bioequivalent generic drugs under the Hatch-Waxman Act). Actelion claimed that the drugs in question were under a REMS program restricting access to the drug and therefore it had the near absolute right to refuse to sell even without the FDA mandate. The defendants countered by claiming that the plaintiff violated Sections 1 and 2 of the Sherman Act.

REMS programs allow certain drugs with known risks to be approved by the FDA, if their use is closely monitored in patients. One of the drugs in question (Tracleer) is under a REMS program including an ETASU (Elements to Assure Safe Use) provision which imposes drug handling restrictions on distributors and pharmacies. For the other drug in question, Zavesca, Actelion voluntarily implemented distribution restrictions, as it has a potential side effect concerning birth defects.

The FTC filed its amicus curiae brief when Actelion asked the courts to dismiss the counterclaims. The FTC makes three important points:

1.         The Hatch-Waxman Act’s primary goal was to balance innovation and competition in that industry sector. Access to the branded product is necessary for generic firms since they need to reverse engineer and perform studies on the drug in question to demonstrate to the FDA the bioequivalence of the generic drug to the branded product. This mechanism provides for accelerated approval of generic drugs and has been successful in generating large savings for consumers and facilitating generic competition.

2.         Refusing to sell a product to rivals may be regarded as exclusionary conduct which on the one hand does not serve the goal of balancing innovation and competition. On the other hand Section 2 of the Sherman Act cases may apply. More importantly, the FTC does not say whether there has actually been a violation of Section 2 of the Sherman Act. However, both the FTC and the Generic Pharmaceutical Association (“GPhA”), which also filed an amicus curiae brief, point out that according to the 2007 FDA Amendments Act a drug patent holder may not block or delay the approval of an ANDA by using safety assurances.

3.         Distribution arrangement should not be immune from the application of antitrust rules because of REMS restrictions.

It will be interesting to see how the courts resolve this issue as the Supreme Court is reluctant to expand the application of antitrust rules where the conduct in question is already covered by sector-specific regulation.

The FTC will probably continue to assert the views it expressed in this amicus curiae brief in other similar cases. [Nicole Daniel]