[Ip-health] Why the Actavis Product Switching Case may Transform Pharma

Tahir Amin tahir at i-mak.org
Fri Jan 16 13:49:35 PST 2015


Ed Silverman

Should a drug maker be allowed to discontinue sales of an old pill in order
to switch patients to a newer version that has a much longer patent life
and, therefore, can ring registers for years?

This question is at the heart of a very closely watched case involving
Actavis that experts say has the potential to alter the play book for the
pharmaceutical industry. At issue is the extent to which a drug maker can
execute what is called a ‘forced switch’ without running afoul of antitrust

“This case is huge,” says Erik Gordon, a professor at the University of
Michigan Ross School of Business. If a recent court ruling is upheld, “this
could signal the eventual end of the innovative pharmaceutical industry as
we know it. Drug makers will have to rethink how they invest and do

At the heart of the matter is a debate over reformulating a medicine and
obtaining a patent to extend the product life cycle. And the case has
highlighted competing notions over whether this tactic can actually create
an unfair monopoly or is the correct use of intellectual property to
protect profits.

It all began last year, when Forest Laboratories, which his now owned by
Actavis, disclosed plans
to halt sales of its twice-a-day Namenda IR tablet for Alzheimer’s. The
patent expires in October and generic rivals can appear by July. The patent
on a newer, once-daily Namenda XR, however, runs until 2025.

Actavis argues that Namenda XR is a better deal for patients – not only is
it more convenient, but the contents of the capsule can be sprinkled on
applesauce for patients who have difficulty swallowing. The drug is also
sold at a slight discount, on a wholesale basis, to the older Namenda IR.

But Eric Schneiderman, the New York Attorney General, doesn’t see it this
way. He argues the maneuver is “unethical and illegal,” because patients
would be forced to switch to Namenda XR well before lower-cost generics are
available for the older version. And so, he filed an antitrust lawsuit

Last month, a federal district court judge agreed with his view and issued
a preliminary injunction
preventing Actavis from discontinuing sales of Namenda IR. The drug maker
is furious and, in a filing <http://freepdfhosting.com/f039f6b3f3.pdf> with
a federal appeals court, says the judge “commandeered its factory to aid
future competitors.”

The appeals court has scheduled a hearing for next month. Meanwhile, the
litigation is prompting substantial speculation about the latitude with
which drug makers may be able to cite new and improved versions of older
medicines as the basis for switching patients.

“It’s about time that people understood how the patent system is used to
provide cover for marketing strategies,” says Tahir Amin, intellectual
property director at the Initiative for Medicines, Access & Knowledge, a
non-profit. “They’re using a tweak to old science as the basis for gaining
a monopoly.”

Which view is likely to prevail is uncertain. The law governing forced
switching is in a state of flux – there have been relatively few court
cases and none has proceeded as far as this one. All of which is o say that
it is probably too early to predict what the courts will ultimately decide
as the issue plays out.

“What we really want to know is whether the new product is such a
significant improvement that migrating patients is justified, and we don’t
want to condemn a company for doing it,” says Herbert Hovenkamp, a
University of Iowa law professor and anti-trust expert. “But if
improvements are minor, then it can begin to suspiciously look like a
mechanism for simply migrating patients.”

“We’re in this mid-ground,” he adds. “The case could establish a principle
one way or the other. One thing is certain – billions of dollars are at
stake, because wealth is being transferred. The effect of a little tweak
means that a lot of money would be going from drug producers to consumers.
And that is significant.”

Tahir Amin
Co-Founder and Director of Intellectual Property
Initiative for Medicines, Access & Knowledge (I-MAK)
*Website:* www.i-mak.org
*Email:* tahir at i-mak.org
*Skype: *tahirmamin
*Tel:* +1 917 455 6601/+1 646 884 7418/+44 771 853 9472

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