Unjustified Delays in Generic Drug Competition - Scott Hemphill – June 2014 OECD discussion on Generic pharmaceuticals and competition


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This presentation by Scott Hemphill was made during a roundtable discussion on generic pharmaceuticals and competition held at the 121th meeting of the OECD Competition Committee on 18 June 2014. Find out more at http://www.oecd.org/daf/competition/generic-pharmaceuticals-competition.htm

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Unjustified Delays in Generic Drug Competition - Scott Hemphill – June 2014 OECD discussion on Generic pharmaceuticals and competition

  1. 1. Unjustified Delays in Generic Drug Competition Scott Hemphill Columbia Law School OECD June 18, 2014
  2. 2. PREVIOUS WORK Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem, 81 New York University Law Review 1553 (2006) An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition, 109 Columbia Law Review 629 (2009) When Do Generics Challenge Drug Patents?, 8 Journal of Empirical Legal Studies 613 (2011) (with Sampat) Earning Exclusivity: Generic Drug Incentives and the Hatch-Waxman Act, 77 Antitrust Law Journal 947 (2011) (with Lemley) Evergreening, Patent Challenges, and Effective Market Life in Pharmaceuticals, 31 Journal of Health Economics 327 (2012) (with Sampat) Activating Actavis, Antitrust Magazine, Fall 2013, at 16 (with Edlin, Hovenkamp, and Shapiro) Drug Patents at the Supreme Court, 339 Science 1386 (2013) (with Sampat) Actavis and Error Costs (working paper 2014) (with Edlin, Hovenkamp, and Shapiro) 2
  3. 3. Source: Frank and Hartman (2009) DollarsperExtendedUnit Average price of fluoxetine before and after generic entry GENERIC DRUG MAKERS SEEK EARLY ENTRY, WHICH REDUCES PRICES
  4. 4. TODAY Collusion Unilateral conduct Secondary patents
  5. 5. competition Entry Patent expires Litigation ends competition Period of competition under litigation and settlement SETTLEMENT REFLECTS A COMPROMISE IN THE PREFERRED ENTRY DATE Litigation: Generic wins Litigation: Brand wins Settlement at expected outcome brand + generic Expected outcome
  6. 6. $ $$ Period of competition under litigation and settlement A REVERSE PAYMENT DISRUPTS THE INCENTIVE TO FIGHT FOR EARLY ENTRY Entry Settlement at Expected outcome Settlement with payment competition
  7. 7. DRUG MAKERS SHARE THIS UNDERSTANDING OF SETTLEMENT Source: Federal Trade Commission v. Actavis Inc., http://www.ftc.gov/os/caselist/0710060/130122watsonappendix2.pdf (unsealed). 7
  8. 8. Year of first settlement Active ingredient (brand name) 1997 Ciprofloxacin (Cipro) Potassium chloride (K-Dur) 2005 Metaxalone (Skelaxin) Modafinil (Provigil) Niacin (Niaspan) Lamotrigine (Lamictal) Venlafaxine (Effexor XR) 2006 Mixed amphetamine salts (Adderall XR) Testosterone (Androgel) 2007 Bupropion (Wellbutrin XL) 2008 Atorvastatin (Lipitor) Aspirin and dipyridamole (Aggrenox) Esomeprazole (Nexium) Minocycline (Solodyn) 2009 Norethindrone and ethinyl estradiol (Loestrin) 2010 Pioglitazone (Actos) Pioglitazone and metformin (Actoplus met) 2012 Lidocaine (Lidoderm) Reverse Payment Litigation in the United States AT LEAST 18 DRUGS HAVE ATTRACTED ANTITRUST LITIGATION Note: Pending cases as of June 2014; some cases have additional claims beyond reverse payments
  9. 9. TODAY Collusion Unilateral conduct Secondary patents
  10. 10. PRODUCT HOPPING Responses Develop/acquire line extension, e.g., new dosage form, formulation, or chemical variant, or alternative therapy in same class Line extension has stronger or longer-lived exclusivity Shift patients and doctors via promotion, pricing, or withdrawal of the old product Conduct Issues Is the new product better? Are purchasers free to choose the old product? Where withdrawal before generic entry forces a switch, are some existing patients harmed by the switch? Product design is privileged No cognizable loss of competition
  11. 11. MANIPULATION OF PATENT AND REGULATORY REGIMES Improper acquisition Improper assertion in litigation Improper listing in Orange Book Patents Regulation Citizen’s petition: raise doubts about approvability of a generic product REMS: regulatory procedures restricting availability of a dangerous or addictive drug, in order to deny samples to a generic
  12. 12. TODAY Collusion Unilateral conduct Secondary patents
  13. 13. BRANDED FIRMS SEEK MULTIPLE PATENTS PER DRUG Source: Hemphill & Sampat, Journal of Empirical Legal Studies (2011) Patents per drug by approval cohort 13
  14. 14. MANY OF THESE ARE SECONDARY PATENTS Example: Prozac (fluoxetine) ’081 1982 2001 1986 ’549 2004 Active ingredient Secondary Secondary patents have different patterns of litigation and settlement 14
  15. 15. SECONDARY PATENTS, IF LITIGATED, USUALLY RESULT IN GENERIC WINS 14% 62% 23% 29% 5% 25% 57% 33% 52% Secondary patents Active ingredient patents All patents Brand Win Generic Win Settlement Outcome of Litigation by Patent Type Source: Hemphill & Sampat, Science (2013); all U.S. drugs first available for challenge 2000–2008; litigation hand-coded at district court level from paragraphfour.com and other sources; pending cases omitted 15
  17. 17. Note: Adapted from Federal Trade Commission v. Watson Pharmaceuticals, http://www.ftc.gov/os/caselist/0710060/130122watsonappendix2.pdf 1200 400 200 100 1200 600 900 1000 1050 900 150 1050With payment: Consumers 0 600 300 150 150 STYLIZEDDRUG MAKERS SHARE THIS UNDERSTANDING OF SETTLEMENT
  18. 18. THE SUPREME COURT RESOLVED A CONFLICT AMONG LOWER COURTS EleventhSixth2003 Eleventh2005 Second2006 Federal2008 Second2010 Third Eleventh2012 Supreme Court: reverse payments can violate antitrust law YES NO Notes: Does not include 2001 D.C. Circuit opinion, which favored liability in dicta; 2010 Second Circuit opinion adhered to earlier precedent, while favoring antitrust liability; drugs at issue include Cardizem (6th Cir. 2003), Hytrin (11th Cir. 2003), K-Dur (11th Cir. 2005, 3rd Cir. 2012), Tamoxifen (2d Cir. 2006), Cipro (Fed. Cir. 2008, 2d Cir. 2010), and Androgel (11th Cir. 2012) Views of Antitrust Liability by Court of Appeals 2013 Second