Antitrust Law Daily FTC pay-for-delay claims against Endo severed
Friday, October 21, 2016

FTC pay-for-delay claims against Endo severed

By Jeffrey May, J.D.

FTC claims that brand-name drug maker Endo Pharmaceuticals Inc. entered into separate anticompetitive pay-for-delay agreements with potential generic competitors in order to block lower-cost generic alternatives to two different prescription drug products—opioid Opana ER and pain-relief patch Lidoderm—were severed with respect to each drug at the defendants’ request. The defendants successfully argued that under Rule 21 of the Federal Rules of Civil Procedure, they were misjoined because there was no logical relationship between the claims. The FTC’s Opana-related claims and its Lidoderm-related claims did not arise from the same transactions or occurrences. These claims concerned "different drugs, different markets, different patents, different patent litigations, different agreements, different alleged payments, different parties, and different timeframes." Rejected was the FTC’s assertion that the claims were logically related because Endo entered into two similar reverse-payment agreements in pursuit of an "overarching plan to forestall generic competition to Opana ER and Lidoderm" (FTC v. Endo Pharmaceuticals Inc., October 20, 2016, Diamond, P.).

In granting the defendants’ motion to sever, the federal district court in Philadelphia also took the FTC to task for purportedly threatening to voluntarily withdraw its claims if severed and refile them in federal districts courts where related private multidistrict litigation (MDL) actions were pending.

"Having chosen to litigate in this District, it comes with ill grace for the FTC to pick up its marbles and play in venues more to its liking," the court said. "If the FTC is determined to leave this forum before I rule on Defendants’ dismissal Motions, it does so at its own peril," the court warned. The agency was told that if it were to voluntarily withdraw the claims, then the court would entertain the defendants’ requests for fees and costs.

Transfer. The agency did not formally request transfer. It had suggested that if the court were to grant the motion to sever, then it should transfer the cases to the Northern District of California and the Northern District of Illinois where the MDLs were pending. While the FTC could still seek a transfer, the court explained that the agency would have to make out a case for "changed circumstances" or some basis in the "interest of justice."

Underlying suit. The FTC filed the action in March, alleging that Endo paid Impax Laboratories, Inc. and Watson Laboratories, Inc. to eliminate the risk of competition for Opana ER and Lidoderm, respectively. Pharmaceutical patch manufacturer Teikoku Seiyaku Co. Ltd., which developed Lidoderm and granted Endo a license for the exclusive right to sell Lidoderm in the United States, also was charged with entering into the anticompetitive agreement concerning Lidoderm, and agreed to settle the agency charges.

Opana ER. Endo purportedly agreed to pay Impax millions of dollars to abandon a patent challenge and forgo entering the market with a lower-cost generic version of Opana ER for two and a half years. Endo allegedly used this period of delay to transition patients to a new formulation of Opana ER, thereby maintaining its monopoly power even after Impax’s generic entry. After Impax entered the market with its generic, Endo agreed to refrain from offering an authorized generic of its own branded Opana ER during Impax's initial 180-day exclusivity period, according to the FTC. The agency contended that this type of "no-AG commitment" —an agreement under which the brand company agrees not to market an authorized generic for a specified period—can be extremely valuable to the first-filer generic, because it ensures that this company will capture all generic sales and be able to charge higher prices during the exclusivity period.

Lidoderm. Endo and its partner Teikoku also were charged with illegally agreeing with Watson (now Allergan plc) to abandon a patent challenge and forgo entering the market with a lower-cost generic version of Lidoderm. Endo allegedly agreed to refrain from offering an authorized generic of Lidoderm for the first seven and a half months of Watson's generic sales and to provide Watson with $96 million of free branded Lidoderm patches. In addition, under the Lidoderm agreement, Watson allegedly acquired an exclusive field-of-use license that temporarily prevented Endo from launching an authorized generic and substantially lessened competition in the generic lidocaine patch market in violation of Section 7 of the Clayton Act.

An order was entered severing the suit into two separate actions.

The case is No. 2:16-cv-01440-PD.

Attorneys: Markus Meier for the FTC. Charles Weinograd (Arnold & Porter LLP) and Christine C. Levin (Dechert LLP) for Endo Pharmaceuticals Inc. and Endo International PLC.

Companies: Endo Pharmaceuticals Inc.; Endo International PLC; Impax Laboratories, Inc.; Teikoku Pharma USA, Inc.; Teikoku Seiyaku Co.; Watson Laboratories, Inc.

MainStory: TopStory Antitrust FederalTradeCommissionNews PennsylvaniaNews

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