FTC Suit Alleges Endo (ENDP) Entered into Pay-for-Delay Patent Settlements with Impax (IPXL) and Watson to Delay Generic Versions of Branded Drugs Opana ER and Lidoderm
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The Federal Trade Commission filed a complaint in federal district court alleging that Endo Pharmaceuticals Inc. (Nasdaq: ENDP) and several other drug companies violated antitrust laws by using pay-for-delay settlements to block consumers’ access to lower-cost generic versions of Opana ER and Lidoderm.
Following more than a decade of FTC challenges to pay-for-delay settlements, today’s enforcement action is the first FTC case challenging an agreement not to market an authorized generic – often called a “no-AG commitment” – as a form of reverse payment.
“Settlements between drug firms that include ‘no-AG commitments’ harm consumers twice – first by delaying the entry of generic drugs and then by preventing additional generic competition in the market following generic entry,” said FTC Chairwoman Edith Ramirez. “This lawsuit reflects the FTC’s commitment to stopping pay-for-delay agreements that inflate the prices of prescription drugs and harm competition, regardless of the form they take.”
The FTC’s complaint (a public version of which will be available and linked to this news release as soon as possible) alleges that Endo paid the first generic companies that filed for FDA approval – Impax Laboratories, Inc. and Watson Laboratories, Inc. – to eliminate the risk of competition for Opana ER and Lidoderm, in violation of the Federal Trade Commission Act.
Opana ER is an extended-release opioid used to relieve moderate to severe pain. Lidoderm is a topical patch used to relieve pain associated with post-herpetic neuralgia, a complication of shingles.
Under federal law, the first generic applicant to challenge a branded pharmaceutical’s patent, referred to as the first filer, may be entitled to 180 days of exclusivity as against any other generic applicant upon final FDA approval. But a branded drug manufacturer is permitted to market an authorized generic version of its own brand product at any time, including during the 180 days after the first generic competitor enters the market. As the FTC has previously argued in amicus briefs, a no-AG commitment can be extremely valuable to the first-filer generic, because it ensures that this company will capture all generic sales and be able to charge higher prices during the exclusivity period.
The FTC is seeking a court judgment declaring that the defendants’ conduct violates the antitrust laws, ordering the companies to disgorge their ill-gotten gains, and permanently barring them from engaging in similar anticompetitive behavior in the future.
The complaint charges that:
- In 2010, Endo and Impax illegally agreed that until January 2013, Endo would not compete by marketing an authorized generic version of Endo’s Opana ER. In exchange, Endo paid Impax more than $112 million, including $10 million under a development and co-promotion agreement signed during the same time period. Endo used this period of delay to transition patients to a new formulation of Opana ER, thereby maintaining its monopoly power even after Impax’s generic entry. In 2010, Opana ER sales in the United States exceeded $250 million.
- In May 2012, Endo and its partners, Teikoku Seiyaku Co. Ltd. and Teikoku Pharma USA, Inc., illegally agreed with Watson Laboratories, Inc. that until September 2013, Watson would not compete with Endo and Teikoku by marketing a generic version of Endo’s Lidoderm patch. In exchange, Endo paid Watson hundreds of millions of dollars, including $96 million of free branded Lidoderm product that Endo and Teikoku gave to Watson. As a result, Endo illegally maintained its monopoly over Lidoderm. In 2012, Lidoderm sales in the United States approached $1 billion.
- Endo and Watson illegally agreed that, for 7½ months after September 2013 (including the 180-day first-filer exclusivity period for which Watson was eligible), Endo would not compete by marketing an authorized generic version of Lidoderm. This agreement left Watson as the only generic version of Lidoderm on the market, substantially reducing competition and increasing prices for generic lidocaine patches. As a result, Watson made hundreds of millions of dollars more in generic Lidoderm sales.
The complaint also names Allergan plc, the parent company of Watson, and Endo International plc, the parent company of Endo Pharmaceuticals Inc.
With the complaint, the Commission also filed a stipulated order for permanent injunction against Teikoku Seiyaku Co., Ltd. and Teikoku Pharma USA, Inc., settling charges for those two defendants. Under the stipulated order, the Teikoku entities are prohibited for 20 years from engaging in certain types of reverse-payment agreements, including settlements containing no-AG commitments like those alleged in the complaint. The agreed-upon order preserves Teikoku’s ability to enter other types of settlement agreements in which the value transferred is unlikely to present antitrust concerns, such as those providing payment for saved future litigation expenses.
The Commission vote to file the complaint was 3-1, with Commissioner Maureen K. Ohlhausen voting no and issuing a dissenting statement in connection with this vote. The Commission vote to accept the Teikoku settlement was 4-0. The complaint was filed under seal in the U.S. District Court for the Eastern District of Pennsylvania on March 30, 2016.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
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