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Allergan Broke Antitrust Laws with Endo Deal, FTC Says

March 31, 2016
The case represents the first challenging an agreement by a branded drugmaker not to market an “authorized generic," which is the branded drug sold without the label.

Allergan Plc broke antitrust laws by agreeing with drugmaker Endo International Plc to delay the launch of a generic pain-reliever, the U.S. said in its latest challenge to deals it claims shield pharmaceutical companies from competition.

The Federal Trade Commission said Endo reached an illegal pact in which Allergan’s Watson Laboratories delayed a generic version of Endo’s Lidoderm patch, which helps treat pain from shingles. The FTC also challenged a similar agreement with Impax Laboratories Inc. to postpone a copycat of Endo’s Opana ER, an opiate painkiller. The deals forced consumers to pay hundreds of millions of dollars more a year for the drugs, the FTC said in a statement Thursday.

"Endo knew that generic competition would decimate its sales of the corresponding branded product and that any delay in generic competition would be highly profitable," the commission said in the complaint. "Faced with these threats to its lucrative drug franchises, Endo bought off its potential generic competitors."

‘Sick Game’

The lawsuit comes amid public outcry and Congressional scrutiny over prescription-drug price increases that are putting medicines out of reach for many patients. At a U.S. Senate hearing this month, Senator Claire McCaskill of Missouri, a Democrat, called jacking up drug prices a "sick game."

Allergan shares fell 1.4% to $271.02 at 2:31 p.m. in New York. Endo declined 2.2% to $27.83 after dropping as much as 8.7%. Endo said in a statement it was disappointed about the lawsuit and that its agreements supported competition and benefited consumers.

"We believe the FTC’s case is without merit and Endo intends to vigorously defend itself in the litigation," the Dublin-based company said.

For more than a decade, the FTC has been challenging so-called pay-for-delay agreements between pharmaceutical companies that keep generic drugs off the market Last year, the agency stepped up its enforcement when it reached a settlement with Teva Pharmaceutical Industries Ltd. that required the company to pay $1.2 billion in ill-gotten gains to drug buyers such as pharmacies and insurers. The FTC also wants the companies in the Allergan case to give up profits from the agreements.

A More Aggressive FTC

The new lawsuit signifies a more aggressive move by the agency to challenge pay-for-delay settlements, said Michael Carrier, a law professor at Rutgers University. The case represents the first case challenging an agreement by a branded drugmaker not to market an “authorized generic," which is the branded drug sold without the label.

Faced with these threats to its lucrative drug franchises, Endo bought off its potential generic competitors."

— Federal Trade Commission complaint

"It shows that there is increasing momentum to treat ‘payment’ in pay-for-delay deals as broader than just cash," Carrier said.

Generic-drug companies that are the first to challenge patents of branded drugs are rewarded with a 180-day period in which they are the only approved copycat drugs on the market. That’s when they get the bulk of their profits because the medicines have only a slight discount from the price of the brand-name medicine. That doesn’t stop the makers of the branded drug from simply removing the label and selling their medicines as an authorized generic in an effort to retain some market share after the generic is introduced. With two generics on the market, prices will drop for the wholesalers.

Withheld Generic

The FTC said Endo in 2010 agreed to pay Impax to not enter the market with a generic version of Opana ER for two and a half years and agreed that it would refrain from offering an authorized generic version during Impax’s 180-day period. It also paid Impax for a co-promotion deal that made "no business or economic sense" for Endo. Endo has paid Impax more than $112 million, the FTC said.

In 2012, Endo agreed to pay Allergan’s Watson unit to forgo entry with a generic version of Lidoderm for more than a year. As in the Impax agreement, Endo agreed to refrain from marketing an authorized generic, this time for seven and a half months. The value of Endo’s payment to Watson was blacked out in the complaint.

Watson changed its name to Actavis in 2012, which merged with Allergan last year. Now Allergan is in the process of being bought by Pfizer Inc.

Spokespeople for Allergan and Impax didn’t respond to requests seeking comment.

The case is FTC v. Endo Pharmaceuticals Inc., 16-01440, U.S. District Court for the Eastern District of Pennsylvania (Philadelphia).

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