Antitrust

S H E A R M A N & S T E R L I N G L L P | 8 7 ENFORCEMENT EFFORTS & EARLY DECISIONS Early enforcement efforts and court decisions have drawn a distinction between a 'hard switch' and a 'soft switch,' finding that the 'hard switch' may create antitrust liability because it affirmatively removes the original branded product from the market, reduces the size and scope of the market left at generic entry, and forces patients to buy the new product (particularly when the original may have better outcomes or be safer). The 'soft switch,' on the other hand, is a branding-driven switch that, to a certain degree, relies on the relative value and innovation inherent in the new product. The two leading-edge cases drew this distinction quite clearly. In Abbott Laboratories, Abbott reformulated its flagship TriCor product from a capsule to a tablet, stopped selling the old capsules, bought back the existing capsule supply, and changed the National Drug Data File code for the capsules, blocking automatic substitution at the pharmacy for generic capsules. 1 In AstraZeneca, AstraZeneca launched Nexium before patents for Prilosec expired, stopped promoting Prilosec and turned promotional efforts to Nexium, but left Prilosec on the market and continued to produce and sell Prilosec. 2 The two district courts faced with these facts found that the 'hard switch' in Abbott survived a motion to dismiss but that the 'soft switch' in AstraZeneca should be dismissed. The fundamental difference appears to be in the interference with the market for anti-competitive ends. In Abbott, the court found the brand sought to manipulate the market and eliminate competition by removing the mechanism for generic competition, but in AstraZeneca, the brand's efforts to switch the market were to allow the market (including providers and patients) to choose and to compete on the merits against generic competitors. This line encourages investment in the brand and new innovation, and seeks to reduce minor, perfunctory reformulations that may only drive higher prices. In the 2015 Namenda decision, the Second Circuit was the first appeals court to decide on — and endorse (though tacitly and incompletely) — the Abbott/AstraZeneca factual distinction as a relevant antitrust distinction. Actavis, through its subsidiary Forest Laboratories, launched Namenda XR, an extended-release version of its blockbuster Alzheimer's drug Namenda IR, and prior to generic entry, Actavis withdrew Namenda IR from the market. 3 The court found that this 'hard switch' served to accelerate the move to Namenda XR and ensure there was no remaining market for Namenda IR when generics launched a few months later. In affirming the district court's granting of a preliminary injunction, the Second Circuit stated the withdrawal of the original product as a "hard switch crosses the line from persuasion to coercion and is anticompetitive." 4 ' H A R D S W I T C H ' M A Y C R E A T E A N T I T R U S T L I A B I L I T Y B E C A U S E I T A F F I R M A T I V E LY R E M O V E S T H E O R I G I N A L B R A N D E D P R O D U C T F R O M T H E M A R K E T, R E D U C E S T H E S I Z E A N D S C O P E O F T H E M A R K E T L E F T A T G E N E R I C E N T R Y, A N D F O R C E S PA T I E N T S T O B U Y T H E N E W P R O D U C T 1. Abbott Laboratories, Inc. v. Teva Pharmaceuticals USA, Inc., 432 F. Supp. 2d 408 (D. Del. 2006). 2. Walgreen Co. v. AstraZeneca Pharmaceuticals, 534 F. Supp. 2d 146 (D.D.C. 2008). 3. New York ex rel. Schneiderman v. Actavis PLC (Namenda), 787 F.3d 638 (2nd Cir. 2015). 4. Importantly, the procedural posture of the Namenda case was founded on a district court's grant of a preliminary injunction sought by the New York Attorney General to keep Namenda IR on the market during the initial launch of generic competitors so the market would continue to exist during generic launch and prevent the move to Namenda XR, which, according to the complaint, would harm patients by increasing costs, forcing a switch, and with only a marginal benefit through the new extended-release formulation. CONTINUED >

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