Actelion Seeks Judgment on the Pleadings in Lawsuit Over Restricted Distribution and Biostudy Product Availability

January 23, 2013

By Kurt R. Karst –      

Last week, Actelion Pharmaceuticals Ltd. and Actelion Clinical Research, Inc. (collectively “Actelion”) filed what might be the company’s last motion in its preemptive lawsuit filed last September in the U.S. District Court for the District of New Jersey seeking declaratory relief that Actelion is under no affirmative duty or obligation to supply prospective ANDA applicants – in this case Apotex Corp. (“Apotex”), Roxane Laboratories, Inc. (“Roxane”), and intervenor-defendant/counterplaintiff Actavis Elizabeth LLC (“Actavis”) – with its brand name drug products for purposes of bioequivalence testing and ANDA submission.  Actelion’s Motion for Judgment on the Pleadings and to Dismiss Counterclaims says that the pleadings in the case demonstrate that there are no material facts in dispute, and that the facts doom the generic defendants’/counterplaintiffs’ antitrust counterclaims, and clearly support Actelion’s right to declaratory relief. 

As we previously reported (here and here), Actelion filed the lawsuit after Roxane and Apotex threatened to sue the company and notify the Federal Trade Commission (“FTC”) because of Actelion’s decision to refuse to provide sample of TRACLEER (bosentan) Tablets for generic drug submission purposes.  TRACLEER is approved with a Risk Evaluation and Mitigation Strategies (“REMS”) program with Elements To Assure Safe Use (“ETASU”) because of the potential of the drug to cause serious side effects.  The ETASU REMS limits distribution of the drug through pharmacies, practitioners, and health care settings that are specially certified and that are “bound by contract to follow a strict protocol to monitor and protect patient health,” acording to Actelion.  Roxane, in the company’s Counterclaim Complaint, added a second drug to the mix: Actelion’s ZAVESCA (miglustat) Capsules, which is not subject to an ETASU REMS, but rather, is subject to a “restricted distribution” program adopted and implemented by Actelion.  Actavis later joined the case.

Actelion has maintained all along that it is the company’s “right to choose with whom it does business.”  And this “fundamental right of a business to choose for itself with whom to deal and to whom to supply its products” is at the heart of the case.  This theme plays out on each page of Actelion’s latest brief.

Citing ample Supreme Court precedent, Actelion argues that:

The antitrust laws, upon which the generic competitors base their claims, do not obligate Actelion to sell its products (even samples) to firms with which it chooses not to deal or to assist potential rivals in entering the marketplace.  As the Supreme Court explained in Verizon Communications, Inc. v. Law Offices a/Curtis V. Trinko, LLP, the antitrust laws do not give rivals “carte blanche to insist that a[n alleged] monopolist alter its way of doing business whenever some other approach might yield greater competition.”  540 U.S. 398, 415-16 (2004).

This principle applies with particular force here, where there is no history of dealing between the parties, the drug products at issue are patented, there are other paths to the marketplace available to the potential generic competitors, and the drugs pose significant health and safety risks requiring distribution restrictions as a condition of FDA approval.

Although there are perhaps two exceptions to the rule that a unilateral refusal to deal by an alleged monopolist does not give rise to antitrust liability (i.e., the “right to choose with whom to do business”) – (1) where a refusal to do business is contrary to a prior course of dealing, or (2) where a refusal relates to an “essential facility” – neither exception applies in this case, argues Actelion.  First, Actelion has never supplied the generic defendants with TRACLEER or ZAVESCA, both of which are protected by patents, and therefore, has no prior course of dealing with them.  Second, even if the “essential facilities doctrine” has some validity, because, as as Actelion points out, Trinko placed in doubt the viability of the doctrine as an independent exception to the refusal to deal rule, it is inapplicable here:

The doctrine arose in cases in which the defendant controlled access to some infrastructure or input that was necessary to compete in a different market with a different service or product.  Where the doctrine has been applied, it has been to prevent a firm with monopoly power from extending that power “from one stage of production to another, and from one market into another.”

The circumstances here are altogether different.  There is no claim that Actelion controls access to a different market or that Actelion is attempting to extend market power “from one market into another.”  Rather, the generic rivals here claim that they require Actelion’s products for the sole purpose of developing replicas to compete with Actelion in the very same markets in which the Actelion products themselves compete. [(Internal citations omitted; emphasis in original)]

Moreover, says Actelion, there are alternatives to the ANDA approval route that companies can use:

For example, the potential generic competitors here can develop drug products with the exact same formulation as Tracleer and, subject to intellectual property rights, file an NDA for FDA approval.  Alternatively, depending on the formulations, they could also take advantage of an FDA shortcut-an application under Section 505(b)(2) of the [FDC  Act] that would allow them to make use ofthe FDA’s previous finding of safety and efficacy.  In addition, they could design a new formulation, using bosentan or another active ingredient, and file an NDA for that product. [(Internal citations omitted)]

Having dealt with the question of whether there is a general duty for the company to supply product to a potential generic competitor, Actelion moves on to note that Congress has twice rejected – first in consideration of the 2007 FDA Amendments Act and again in 2012 during consideration of the FDA Safety and Innovation Act – legislation to require or permit a brand-name drug manufacturer subject to an ETASU REMS to sell its product to competitors.  “In both instances, Congress made a deliberate judgment not to change the law by creating a duty to deal” (emphasis in original), says Actelion, and that deliberate judgment “demonstrates that there is no special exception to the general right to choose with whom to deal merely because a drug product is subject to restricted distribution in a REMS.” (See our previous post here.) 

Each of the generic defendants argued in its respective Counterclaim Complaint that its ability to satisfy FDA-required restrictions on on the distribution and use of TRACLEER and ZAVESCA means that Actelion should sell them product sample for ANDA submission purposes.  But the question is not whether Action should provide biostudy sample, says Actelion, but whether the company must do so:

Although Actelion’s ability to sell samples of Tracleer and Zavesca to the generics is constrained by the FDA-required distribution restrictions, Actelion’s right to choose not to do business with potential rivals exists independently of those restrictions.  Consequently, even if the generics could comply with such restrictions – or if they did not exist – Actelion is still under no legal duty to sell them samples. . . . 

Actelion is also under no conceivable obligation to take on faith the generics’ assertions that they can comply with the FDA-required restrictions and to sell to them on that basis.  Nor is Actelion under any legal obligation to engage in the substantial effort that would be required to confirm the generics’ ability to comply.  Similarly, Actelion should not be required to take on the burden of monitoring their continued compliance, as would be necessary to avoid the substantial risks to Actelion from generic non-compliance.  Consequently, the generics’ allegations that they would be able to comply with the applicable distribution restrictions does not alter the conclusion that, as a matter of law, Actelion is under no duty to deal with them.

No matter how the New Jersey District Court rules in this case, it seems to be destined for an appeal.  The stakes on both the brand and generic sides are high.