When Potential to Compete Is As Good As Preparation
Judge Casper’s recent denial of summary judgment in the Asacol litigation expanded the universe of evidence that could be used to defeat a motion for summary judgment in cases alleging anti-competitive exclusionary conduct in the pharmaceutical market. In Asacol, evidence evincing a generic company’s potential and incentive to compete rather than its actual preparation were sufficient to defeat a motion for summary judgment attacking the lack of evidence of a ready, willing, and able generic entrant.
Plaintiffs, a class of End Payors, alleged that Warner Chilcott engaged in exclusionary conduct by removing its ulcerative colitis drug Asacol 400mg (mesalamine) from the market just as it was introducing a new product, Delzicol. Plaintiffs argued that defendants’ removal impeded access to generic versions of Asacol 400mg because the generic substitution process that occurs when an AB rated generic drug enters the market is thwarted when the brand drug (aka the Reference Listed Drug (“RLD”)) is removed from the market because there is no longer a RLD to which the generic can be AB-rated. Removing the RLD enables brand companies to effectively shift prescriptions from a product facing generic competition (i.e., the RLD) to a product that isn’t facing generic competition. This strategy to avoid generic competition is known as product hopping
Among its defenses, Warner Chilcott argued that plaintiffs had no evidence that any generic company was prepared to launch generic Asacol 400mg. Warner Chilcott argued that it was the generic companies’ inability to gain FDA approval – not the removal of Asacol 400mg from the market – that explained the lack of any generic in the market. And, in fact, at the time Defendants pulled Asacol 400mg from the market, no generic company had a pending application with the FDA (known as Abbreviated New Drug Applications or ANDAs) to sell generic Asacol 400mg. Because plaintiffs had no proof that any specific generic company was ready, willing and able to launch generic Asacol 400mg when Asacol 400mg was pulled from the market, Warner Chilcott argued that any connection between its conduct and any injury to plaintiffs was speculative and thus plaintiffs lacked standing to sue.
Plaintiffs argued that the withdrawal of Asacol 400mg destroyed the market and, with it, generic companies’ incentive to pursue ANDAs for the drug. Plaintiffs argued that they need only use probable and inferential proof to establish that the conduct caused injury. Such proof included Warner Chilcott’s forecasting documents showing expected generic competition and industry expectations that a generic product would be launched. Plaintiffs also relied on the testimony of their business expert on the generic drug industry who opined that given mesalamine’s widespread use for over thirty years, industry surveys showing that 80% of brand drugs similar to Asacol 400mg face generic competition within a year of patent expiration, and that more than twenty companies had the capability and incentive to pursue generic Asacol 400mg, one or more generic competitors would have entered the market shortly after the patents expired and before Warner Chilcott withdrew it. Plaintiffs also relied on their economic expert who studied industry patterns of generic entry following brand drug patent expiration to conclude that more likely than not one or more generic firms would have entered the market.
The Court’s Ruling
Citing the D.C. Circuit’s Microsoft decision, the Court ruled that plaintiffs did not need to identify any specific generic company that was ready, willing, and able to launch but instead could simply provide evidence that generic companies were a “nascent threat” at the time Warner Chilcott pulled its product from the market. Quoting the Supreme Court’s Bigelow decision, the Court rejected the evidentiary standard Warner Chilcott advocated of direct and positive proof by stating that “juries are allowed to act on probable and inferential as well as (upon) direct and positive proof.” The Court found that plaintiffs had such inferential and probable proof in the form of Warner Chilcott’s documents identifying that it was likely to face generic entry, that generic manufacturers had significant incentives to be the first company to launch generic Asacol 400mg, generic companies had the capability to develop generic Asacol 400mg, and “the historical experience in the pharmaceutical industry indicates that it was highly likely that a generic version of Asacol 400mg would emerge.”
The Court rejected Warner Chilcott’s arguments that plaintiffs had to use actual ANDA filings to prove that a generic would enter the market. Instead, plaintiffs’ industry expert provided a reliable foundation for his opinion that Warner Chilcott defendants would have faced generic competition by relying on: (1) industry norms, (2) his experience, (3) nature of the product, (4) the number of companies that would be interested in a product of this size, (5) historical data regarding generic entry for products that treat the same condition as Asacol 400mg, (6) developments in the international market for mesalamine, (7) the capabilities of generic companies, (8) the incentives for generics to enter the market, (9) the abilities of generic manufacturers to obtain FDA approval and (10) public statements by the generic manufacturers.
What the Decision Means To Pharmaceutical Antitrust Practitioners
In cases alleging that defendants conduct product excluded or delayed generic competition, plaintiffs can cite to the Asacol decision to argue that even generic companies without ANDA’s on file could have been delayed by defendants’ conduct, particularly if the defendant has withdrawn the relevant product. The decision will likely expand the discovery obligations of third party generic companies who are often subpoenaed to provide documents related to their willingness, preparation, and incentive to launch generic pharmaceuticals. Many generic companies resist such discovery, pointing to the fact that they had not obtained ANDA approval at the time of the anticompetitive conduct, and contending that therefore their documents are not relevant to establishing causation. However, the Asacol decision suggests that failure to have approval, or, possibly even the failure to have even filed an ANDA, is not a bar to having to provide discovery. After Asacol, evidence of the generic company simply filing an ANDA, or considering the filing of an ANDA is relevant, and could be used to demonstrate potential harm to competition.
About Faruqi & Faruqi, LLP
Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Delaware, Georgia, and Pennsylvania.
Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, direct purchasers, consumers and employees.
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About Neill W. Clark
Neill W. Clark is an attorney at Faruqi & Faruqi, LLP with over 19 years of antitrust experience. He was co-counsel for the Direct Purchaser Plaintiffs in the Asacol Litigation.
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Disclaimer: The foregoing in no way constitutes legal advice from any attorney or from Faruqi & Faruqi, LLP. The opinions expressed herein are the opinions of attorney Neill W. Clark and in no way reflect the opinions of Faruqi & Faruqi, LLP.