Decision in Lannett THALOMID Bioequivalence Study Sample Antitrust Lawsuit Could Reignite Debate on Generic Drug Availability and REMS Restrictions

April 4, 2011

By Kurt R. Karst –      

Last week, the U.S. District Court for the Eastern District of Pennsylvania issued a pair of decisions in a long-running dispute between Lannett Company, Inc. (“Lannett”), the self-proclaimed “oldest generic drug manufacturer” in the United States (founded in 1942), and Celgene Corp. (“Celgene”) concerning Lannett’s efforts to obtain sample of Celgene’s THALOMID (thalidomide) Capsules for purposes of bioequivalence testing and ANDA submission and approval.  The first decision, a brief Memorandum Opinion, was made in the context of Lannett’s motion “to enforce a purported settlement agreement” with Celgene – which the court denied “because there was no settlement agreement.”  The second decision was an Order denying Celgene's Motion to Dismiss the case.  The decisions could free up the case for a decision on the underlying antitrust issues and perhaps reignite a debate on generic drug availability for products that, like THALOMID, are approved and marketed under a restricted distribution system or Risk Evaluation and Mitigation Strategy (“REMS”).  (The 2007 FDA Amendments Act, or FDAAA, amended the law to create FDC Act § 505-1, which provides FDA with the authority to require a REMS if the Agency determines that such a strategy “is necessary to ensure that the benefits of the drug outweigh the risks of the drug.”  FDA may require that a REMS “include such elements as are necessary to assure safe use of the drug, because of its inherent toxicity or potential harmfulness,” which, in turn, may include certain restricted distribution, procurement, and dispensing systems.)

By way of background, the FDC Act requires that an ANDA contain, among other things, information showing that the proposed generic drug product is bioequivalent to the Reference Listed Drug (“RLD”).  Often, but not always, bioequivalence is demonstrated through in vivo testing in which the test and reference products are compared.  This necessarily requires an ANDA sponsor to obtain RLD product for testing (and reserve sample) purposes.  Usually the RLD product can be procured using normal distribution channels; however, the availability of an RLD under a restricted distribution system or REMS may be significantly limited and may not be available to an ANDA sponsor.  Such is the case with THALOMID, which has a restricted distribution program known as the S.T.E.P.S.® program (i.e., System for Thalidomide Education and Prescribing Safety). 

Lannett and Celgene began duking it out in court back in January 2008 when Lannett filed a Complaint and a Motion for Preliminary Injunction in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 08-0233) seeking relief requiring Celgene to provide Lannett with samples of THALOMID for bioequivalence testing purposes.  The Complaint was filed after FDA sent Lannett a letter providing bioequivalence recommendations (but before FDA approved Lannett’s proposed pilot bioequivalence study) and stating, in part, that:

To ensure that the intention of Congress is enacting the Generic Drug Approval Provisions in Section 505(j) is not frustrated by the terms of the S.T.E.P.S.® program, FDA has notified Celgene that the agency intends to exercise its enforcement discretion to permit Celgene to provide another drug manufacturer (or its agent) 500 units of Thalomid (including 200 units for the purpose of conducting bioequivalence (including dissolution) testing and 300 units for a limited number of retained samples) when Celgene has received confirmation in writing from the sponsor, its agent, or FDA that the sponsor of the study either has an IND in effect for the study or has otherwise provided the agency with sufficient assurance that the bioequivalence study will be conducted in such a manner as to ensure the safety of the subjects.

Celgene did not provide the RLD sample to Lannett, and instead requested that Lannett provide Celgene with certain “voluminous documents and information.”  The court dismissed the Complaint in March 2008 on ripeness grounds “because Lannett had not received a response from the FDA to Lannett’s proposed bioequivalence study.” 

FDA provided that response – a favorable review – on August 11, 2008, and Lannett promptly filed a new Complaint and a Motion for Preliminary Injunction alleging that Celgene’s refusal to provide Lannett with RLD sample for bioequivalence testing purposes violates Section 2 of the Sherman Act.  Celgene filed a Motion to Dismiss requesting that the court dismiss the case for Lannett’s failure to state a claim, or in the alternative, that the court stay the case pending FDA’s decisions on two citizen petitions: (1) Celgene’s September 2007 petition (Docket No. FDA-2007-P-0113) concerning THALOMID labeling carve-out issues; and (2) Dr. Reddy’s Laboratories, Inc’s June 2009 petition (Docket No. FDA-2009-P-0266) citing THALOMID and requesting that FDA “establish procedures to facilitate the availability of generic versions of drug products subject to a [REMS] and enforce the FDC Act to prevent companies from using REMS to block or delay generic competition.”  FDA has not yet substantively responded to either citizen petition.  (There is also a related December 2009 citizen petition – Docket No. FDA-2009-P-0602 – that Kaiser Permanente submitted to FDA that raises, among other things, the issue of manufacturers using REMS with restricted distribution elements to limit access of a drug to certain health care providers.  FDA has not yet substantively responded to that petition either.) 

Although the legal wrangling between Lannett and Celgene over a settlement of the case has delayed a final decision (the Court denied Lannett’s Motion for Preliminary Injunction on March 16, 2010), the overarching issue in the case is still of significant interest to folks . . . and not only to the generic drug industry.  As we previously reported, Celgene revealed in a 2010 SEC filing that:

In the fourth quarter of 2009, we received a civil inquiry and demand from the [Federal Trade Commission (“FTC”)].  The FTC requested documents and other information relating to requests by generic companies to purchase our patented REVLIMID® and THALOMID® brand drugs in order to evaluate whether there is reason to believe that we have engaged in unfair methods of competition.

We have not heard much about that inquiry as of late, nor have we heard anything from FDA on the issues raised in Dr. Reddy’s June 2009 citizen petition.  Among other things, the Dr. Reddy’s petition notes some interesting legislative history with respect to a provision included in FDAAA (creating FDC Act § 505-1(f)(8)), which states that “[n]o holder of an approved covered application shall use any element to assure safe use required by [FDA] under [FDC Act § 505-1(f)] to block or delay approval of an application under section 505(b)(2) or (j) or to prevent application of such element under [FDC Act § 505-1(i)(1)(B)] to a drug that is the subject of an [ANDA].”  Celgene’s response to Dr. Reddy’s petition addresses that history.