FTC Chimes In On Restricted Distribution and Generic Competition; Files Amicus Brief in TRACLEER Case

By Kurt R. Karst –      

We thought it would only be a matter of time until the Federal Trade Commission (“FTC”) decided to voice its views in a lawsuit filed last September by Actelion Pharmaceuticals Ltd. and Actelion Clinical Research, Inc. (collectively “Actelion”) 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 with its brand-name drug products TRACLEER (bosentan) Tablets and ZAVESCA (miglustat) Capsules for purposes of bioequivalence testing and ANDA submission.  That  time has come, and just on the heels of the Counterclaim Plaintiffs’ (Apotex Corp., Roxane Laboratories, Inc., and Actavis Elizabeth LLC) opposition to Actelion’s Motion for Judgment on the Pleadings and to Dismiss Antitrust Counterclaims (see our previous post here). 

As we’ve previously noted, the case is the first preemptive lawsuit filed by a brand-name company whose drug products are covered by restricted distribution programs – either under a Risk Evaluation and Mitigation Strategies (“REMS”) program with Elements To Assure Safe Use created by the 2007 FDA Amendments Act, such as with TRACLEER, or under a restricted distribution program adopted and implemented by the brand-name manufacturer, such as with ZAVESCA.  The Counterclaim Plaintiffs allege that Actelion abused its monopoly power in violation of Sections 1 and 2 of the Sherman Act and the New Jersey Antitrust Act for refusing to deal with them and provide product sample for ANDA submission purposes.  Actelion has maintained all along that it is the company’s “right to choose with whom it does business,” that it is a “fundamental right of a business to choose for itself with whom to deal and to whom to supply its products,” and that precedent is on its side.

On March 12th, the FTC announced that it filed an amicus brief in the case.  It requests that the court “carefully consider the unique regulatory framework governing the pharmaceutical industry and the potential ramifications for consumers of prescription drugs when considering Actelion’s Motion for Judgment on the Pleadings and to Dismiss Antitrust Counterclaims.  The allegations in the case, says the FTC, “highlight a troubling phenomenon: the possibility that procedures intended to ensure the safe distribution of certain prescription drugs may be exploited by brand drug companies to thwart generic competition.”  This possibility was previously raised in a June 2009 citizen petition (Docket No. FDA-2009-P-0266) 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 substantively responded to the petition.  It was also raised in a lawsuit (see our previous post here) that was ultimately dismissed after a settlement was reached.  If the court adopt’s Actelion’s legal position, write the FTC, it “threatens to undermine the careful balance created by the Hatch-Waxman Act,” “potentially preserve[s] a brand firm’s monopoly indefinitely, and “could prove costly for consumers of prescription drugs.”

Moving on to Actelion’s legal arguments, the FTC says that refusing to sell to generic rivals may, in fact, constitute exclusionary conduct in violation of Section 2 of the Sherman Act, and that restricted distribution agreements are not immune from antitrust scrutiny and may violate Section 1 of the Sherman Act.  Although the FTC does not say whether it thinks there was a violation of the antitrust laws in this case, it does say that the Counterclaim Plaintiffs should have their day in court. Citing the two general principles of antitrust law that Actelion relies on in its motion – “first, that a private firm is ordinarily free to choose with whom it does business; and second, that vertical agreements, such as those between a manufacturer and its distributors, rarely pose any competitive concern” – the FTC says that they are not absolute principles:

Under certain circumstances, potentially including those alleged in the counterclaims here, a monopolist’s refusal to sell to its rivals may violate Section 2 of the Sherman Act, and vertical agreements may violate Section 1. . . .  While the evidence may not ultimately support any of the Sherman Act claims in this case, the FTC respectfully submits that they are not barred as a matter of law.

Now that the FTC has chimed in, the case will likely take on an even higher profile.  Other amicus briefs may already be in the works.

UPDATE:

• The Generic Pharmaceutical Association has also filed an amicus brief in the case.  The brief does not weigh in on the antitrust issues raised in the case, but rather, focuses on the intent of the Hatch-Waxman Amendments.