Michael A. Carrier

Strategies that delay or prevent the timely availability of affordable generic drugs in the United States

High cancer drug prices are influenced by the availability of generic cancer drugs in a timely manner. Several strategies have been used to delay the availability of affordable generic drugs into the United States and world markets. These include reverse payment or pay-for-delay patent settlements, authorized generics, product hopping, lobbying against cross-border drug importation, buying out the competition, and others. In this forum, we detail these strategies and how they can be prevented.

Using Antitrust Law to Challenge Turing's Daraprim Price Increase

As CEO of Turing Pharmaceuticals, Martin Shkreli made worldwide headlines by obtaining marketing rights to pyrimethamine (Daraprim) and quickly increasing the price 5000 percent, from

Resolving the Patent-Antitrust Paradox Through Tripartite Innovation

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Solving the Product-Hopping Conundrum through Safe Harbors and a No-Economic-Sense Test☆

750 per pill. In addition to increasing price, Turing initiated another less widely appreciated move — it changed the distribution scheme for the drug. Before its acquisition by Turing, pyrimethamine was widely available. But in the months before the price hike, apparently as a condition of the sale to Turing, pyrimethamine was switched to a controlled distribution system called Daraprim Direct, in which prescriptions or supplies could be obtained only from a single source, Walgreen’s Specialty Pharmacy. The Daraprim Direct system made it impossible for anyone other than registered clients to obtain the drug. This could include other manufacturers wishing to obtain samples for use in bioequivalence studies supporting a generic application. The restricted distribution scheme thus could allow Turing to prevent generic versions of the drug from reaching the market.This Essay addresses the question of whether Turings behavior violates the antitrust laws. Part I describes the typical distribution systems in the pharmaceutical industry. Part II examines monopoly power and considers whether Daraprim possessed such power. Part III considers the second element of monopolization claims, exclusionary conduct, and explores whether Turing engaged in such behavior. Part IV then reaches beyond pyrimethamine to offer additional examples of similar conduct. Given that the Federal Trade Commission and N.Y. Attorney General are currently conducting antitrust investigations of this behavior, this Essay offers a framework for analysis.

Antitrust, Market Exclusivity, and Transparency in the Pharmaceutical Industry

The issues presented by the intersection of the patent system and the antitrust laws have never been as pressing as they are today. The number of issued patents is skyrocketing. Companies are more frequently entering into arrangements with competitors not only to recover their investment from creating patented products but also to avoid the patent landmines that line the path of innovation. They form patent pools for laser eye surgery, MPEG-2 video compression technology, and DVD formatting; enter into alliances, mergers, and settlements in the biopharmaceutical industry; refuse to license their patented products in various industries; and cross-license their patents in the semiconductor industry. But the need for collaborative and exclusionary conduct under the patent system is matched by the heightened suspicion of the antitrust laws. Antitrust looks at these patent-based activities and sees lessened competition, increased price, and reduced output. And it pays scant attention to the benefits of the activity in promoting innovation or the justification for the activity based on the patent system. This Article resolves the patent-antitrust paradox in three steps. First, it offers innovation as the common denominator of the patent and antitrust laws. Second, it proposes a new explanation that firms can offer in defense of the challenged activity: that it is reasonably necessary to attain tripartite innovation. Tripartite innovation denotes the three temporal stages of innovation: the creation of the product, the recovery of the investment incurred in creating the product, and the circumvention of patent bottlenecks that block the path of innovation. Third, it carves out a greater role for the justification in all aspects of antitrust activity, including mergers, joint ventures, patent pools, licensing, and refusals to license. The approach offered by this Article thus prescribes a more prominent and lasting role in antitrust analysis for the patent system and for the multiple components of innovation.

Drug Patent Settlements Around the World

Abstract Brand-name pharmaceutical companies have engaged in a variety of business conduct that has increased price. One of these activities involves “product hopping,” or brand switches from one version of a drug to another. The antitrust analysis of product hopping implicates antitrust law, patent law, the Hatch–Waxman Act, and state drug product selection laws, as well as uniquely complicated markets characterized by buyers different from decision makers. As a result, courts have offered inconsistent approaches to product hopping. In this chapter, we offer a framework that courts and government enforcers can employ to analyze product hopping. The framework is the first to incorporate the characteristics of the pharmaceutical industry. It defines a “product hop” to include instances in which the manufacturer (1) reformulates the product to make the generic nonsubstitutable and (2) encourages doctors to write prescriptions for the reformulated rather than the original product. When the conduct meets both requirements, our framework offers two stages of analysis. First, we propose two safe harbors to ensure that the vast majority of reformulations will not face antitrust review. Second, the framework examines whether the hop passes the “no-economic-sense” test, determining if the behavior would make economic sense if the hop did not have the effect of impairing generic competition. Showing just how far the courts have veered from justified economic analysis, the test would recommend a different analysis than that used in each of the five product-hopping cases that have been litigated to date, and a different outcome in two of them.

Product Hopping: A New Framework

High prescription drug prices, which have garnered attention across the political spectrum, often make access to essential medicines quite difficult for patients. Although lowering prescription drug prices is a bipartisan objective, the role of antitrust law in restoring competition and restraining price increases is not well understood by policy makers or the public. In this Viewpoint, we explore 3 recent legal antitrust cases in which aggrieved competitors sued rival manufacturers, alleging that the anticompetitive practices of exclusive dealing and bundling prevented their products from gaining a foothold in the pharmaceutical marketplace. Exclusive dealing refers to arrangements by which a purchaser agrees to buy all its requirements from 1 manufacturer. These arrangements may include financial incentives, such as rebates, conditioned on exclusivity. Although rebates may result in short-term savings to thirdparty payers, they may also drive competitors out of the market by offering prices no rival can match. Bundling involves discounts a manufacturer offers to purchasers buying several products in its portfolio and can result in prices that competitors are not able to match. In the first case, Sanofi-Aventis filed a lawsuit in April 2017 alleging that its competitor, Mylan, created multiple barriers (including exclusive dealing arrangements) to prevent Sanofi’s epinephrine autoinjector (Auvi-Q) from obtaining market share.1 The complaint alleged that Mylan provided “new and unprecedented rebates” to insurance companies, pharmacy benefit managers, and Medicaid on the condition that they exclude Auvi-Q from its formularies and coverage. Sanofi asserted that because of Mylan’s anticompetitive behavior, Auvi-Q peaked at only 13% of the total epinephrine autoinjector market. Sanofi also pointed to a nearly 300% increase in Mylan’s EpiPen wholesale acquisition cost from 2013 to 2016 (from

How Not to Apply the Rule of Reason: The O’Bannon Case

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Limiting Copyright Through Property

609), with these increases often passed on to the patient. In a second lawsuit, filed in September 2017, Pfizer sued Johnson & Johnson and Janssen Biotech for anticompetitive conduct related to its tumor necrosis factor blocker infliximab (Remicade), which has US sales of about

The D.C. Circuit’s Excessively High Causation Standard in Rambus

5 billion per year.2 Pfizer introduced its follow-on biologic (biosimilar) infliximabdyyb (Inflectra) in 2016 only to be challenged with what Johnson & Johnson publicly described as its “biosimilar readiness plan.” Pfizer alleged that Johnson & Johnson offered exclusionary contracts, bundled discounts, and coercive rebates to insurers aimed at preventing Inflectra from gaining market share and thwarting future biosimilars from entering the market. Pfizer asserted that 90% of accounts using infliximab did not purchase any Inflectra, which limited the product’s overall market share to less than 4%. Johnson & Johnson responded to Inflectra’s market launch by increasing the list price of Remicade by nearly 9%. In a third case, filed in October 2017, Shire sued Allergan alleging that Allergan impeded marketing of Shire’s dry eye disease product, lifitegrast (Xiidra).3 Shire accused Allergan, the maker of the competitor product cyclosporine (Restasis), which has been on the market for 15 years, of entering into anticompetitive arrangements (primarily bundled discounts) with Medicare Part D prescription drug plans that essentially excluded Xiidra from that market. In its complaint, Shire emphasized the societal harms of such exclusions, asserting that Xiidra is superior to Restasis based on greater comparative efficacy for a broader population of patients. The lawsuit alleges that Allergan’s bundled discounts, which included the glaucoma drugs bimatoprost (Lumigan), brimonidine (Alphagan P), and brimonidine/timolol (Combigan), were so aggressive that the Medicare Part D plans would purchase the package even if Xiidra were provided for free. Shire also pointed to Xiidra’s success in the commercial insurance market (in which it has 35% of the market) as support for anticompetitive conduct resulting in Restasis controlling 90% of the Medicare Part D market. Each of these cases in the pharmaceutical industry targets restrictive contracts that can increase the cost of drugs while reducing access to potentially better rival medications. When companies without market power engage in exclusive dealing and bundling, these actions tend not to violate antitrust law because purchasers would have other choices and the conduct could help small sellers obtain a stronger position in the market. However, antitrust concerns may arise when companies with substantial market power engage in these practices. To determine liability for exclusive dealing, courts will consider a quantitative estimate of the extent to which the alleged conduct blocked the market, the duration of the contract, the prevalence of such conduct in the industry, the existence of entry barriers, and whether there are distribution alternatives. For bundled contracts, the Third Circuit (where the 3 cases were filed) has focused on exclusionary effects and analyzed whether the defendant’s market share expanded while competitors were harmed.4 In contrast, the Ninth Circuit focused on the discount in another case, finding liability if the defendant’s price is less than the plaintiff’s cost of manufacture.5 All 3 complaints, which are to be interpreted under Third Circuit precedent, offer allegations that could demonstrate exclusive dealing and bundling. For example, the VIEWPOINT