Lawyers at Beasley Allen have been researching a developing area of law for a little more than a year that deals with the intersection of Antitrust law and Patent law. The cases have gained attention in the last two years because of the United States Supreme Court’s decision in F.T.C. v. Actavis, 133 S. Ct. 2223 (2013) that reversed an Eleventh Circuit dismissal of antitrust claims against pharmaceutical manufacturers.
The FDA regulates and approves drugs for marketing and sale for human use. When a generic drug manufacturer seeks FDA approval for a new generic version of an already approved brand drug, the generic manufacturer has to certify that the generic either will not infringe on any patents for the brand, or that those patents are invalid. This portion of the generic application for approval is called a paragraph IV certification. The FDA, however, has no authority or ability to determine if the generic drug manufacturer’s declarations regarding the patent are true or false.
It may seem obvious that a brand drug has a valid patent, but that is not always the case. For one thing, it is common practice in the drug manufacturing industry to obtain what are called “method of use” patents. In those instances, shortly before a new drug’s initial patent expires, a brand manufacturer will, for example, “discover” that their drug must be administered with food to achieve maximum effectiveness or will create a new coating for the exterior of the tablet. The brand manufacturer will then obtain a new patent on the very same drug addressing the food or coating. That secondary patent, for food use or the type of coating on the tablet, is usually the basis of a paragraph IV certification.
Inevitably, to protect its patent-based monopoly, the brand manufacturer objects to the paragraph IV certification and sues the generic company for patent infringement. The two manufacturers almost always settle. As part of that settlement, the generic manufacturer agrees not to enter the market for that drug for a certain time period in exchange for foregoing its challenge of the patent. That agreement, as an agreement not to compete and to extend a monopoly to the brand manufacturer, is in violation of federal and state antitrust laws. Without competition, the prices for the brand drug remain high – well above what the market would dictate absent the agreement between the two manufacturers. As a result, citizens, pharmacies, state Medicaid agencies, and insurance companies have all been paying grossly inflated prices for brand pharmaceuticals when they could and would have purchased generic drugs at much lower prices.
Lawyers in our firm’s Consumer Fraud/Commercial Litigation Section have been working with several states to develop a case to recover the damages suffered as a result of those fraudulently and illegally increased pharmaceutical prices. At this time, we have reached an agreement with one state and we are moving forward in other states. We will keep our readers informed as developments occur. In the meantime, if you have any questions, contact Rebecca Gilliland, a lawyer in our Consumer Fraud/Commercial Litigation Section, at 800-898-2034 or by email at Rebecca.Gilliland@beasleyallen.com.
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