FTC SUES FOR UNLAWFULLY BLOCKING SALE OF LOWER-COST GENERIC VERSIONS OF BRANDED-DRUG

On February 13, 2008, the Federal Trade Commission filed a complaint in federal district court against Pennsylvania-based pharmaceutical company Cephalon. The complaint charged that Cephalon engaged in a course of anticompetitive conduct that is preventing competition to its branded drug – Provigil. In 2007, U.S. sales of Provigil totaled more than $800 million and accounted for over 46% of Cephalon’s total sales. Based on such figures, the FTC alleged, it was obvious why Cephalon considered the prospect of generic drug competition to be a serious threat to its profitability.

Provigil is a drug approved to treat excessive sleepiness in patients with sleep apnea, narcolepsy, and shift-work sleep disorder. The complaint alleged that Cephalon paid four companies, all who submitted applications in late 2005 with the FDA for approval of their own generic versions of Provigil, to withhold introducing their product into the market until April 2012. This arrangement, the FTC claimed, effectively erected a barrier of entry in the Provigil market because unless and until all the four “first filers” either relinquished their marketing exclusivity or 180 days after one of them entered the market, no other generic company could compete with Provigil. In addition, the complaint alleged the agreement between Cephalon and the four companies included an understanding that the companies would settle any current patent litigation (known as an “exclusion payment settlement”). These agreements, according to the FTC, contained payments to the four generic-brand companies totaling more than $200 million.

The agreements, the FTC claimed, denied patients access to lower-cost, generic versions of Provigil and forced consumers and other purchasers to pay hundreds of millions of dollars a year more for Provigil.

This suit is an example of the FTC’s focus on ensuring generic drug alternatives in the market. Additionally, the FTC closely monitors any efforts to manipulate the Hatch-Waxman Act to affect anti-competitive and anti-consumer choice outcomes. FTC Commissioner Jon Leibowitz addressed these very concerns in front of the House Energy and Commerce Committee regarding the Hatch-Waxman Act in May 2007. (Click Here to read Commissioner Leibowtiz’s comments).

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com