Life Science Compliance Update

May 25, 2017

Citizen Petitions to Come Front and Center

Court-scales

In February, the Federal Trade Commission filed a complaint in federal district court charging Shire ViroPharma Inc. with violating the antitrust laws by abusing government processes to delay generic competition to its branded prescription drug, Vancocin HCl Capsules. The complaint alleges that because of ViroPharma’s actions, consumers and other purchasers paid hundreds of millions of dollars more for their medication.

FTC has been looking for similar case

Congress amended federal law in 2007 in the hopes of curbing underhanded petitions. It authorized the FDA to flatly reject petitions that clearly don’t raise legitimate issues, and told the FDA not to delay generics unless public health would be jeopardized.

But it’s not clear that the action worked as intended. In a report to Congress last year, the FDA said it “continues to be concerned that [the amendment] may not be discouraging the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific issues.”

As was reported, Wilson Sonsini Goodrich & Rosati PC partner Seth Silber, a former FTC lawyer, told Law360 that the ViroPharma case represents the culmination of the commission’s years long interest in challenging flimsy petitions.

“I think the FTC, probably from that time [of Congress’ amendment] to present, has been looking for a good case,” Silber said. “They obviously thought they had a good fact pattern.”

What is a citizen petition?

A citizen petition is a request for the FDA to take an action such as evaluating a drug’s safety or effectiveness. When used appropriately, it could raise awareness of legitimate concerns with a drug. But when used inappropriately, it could extend the brand firm’s monopoly by delaying FDA approval of generic drugs. This delay could result in literally millions of dollars a day being transferred from consumers to drug companies

FTC argument

The FTC alleges that to maintain its monopoly, ViroPharma waged a campaign of serial, repetitive, and unsupported filings with the US Food and Drug Administration and courts to delay the FDA’s approval of generic Vancocin Capsules, and exclude competition. According to the FTC, ViroPharma submitted 43 filings with the FDA and filed three lawsuits against the FDA between 2006 and 2012.

The number and frequency of ViroPharma’s petitioning at the FDA are many multiples beyond that by any drug company related to any other drug. ViroPharma knew that it was the FDA’s practice to refrain from approving any generic applications until it resolved any pending relevant citizen petition filings. ViroPharma intended for its serial filings to delay the approval of generics, and thus competition and lower prices.

Shire response

The company notes it acquired ViroPharma in January 2014, and divested Vancocin in August 2014. The Company played no role in ViroPharma’s challenged petitioning, which took place between 2006 and 2012. Shire believes the FTC’s challenge to ViroPharma is wholly without merit, and will vigorously defend these claims. ViroPharma’s actions were in furtherance of its fundamental right to petition the government, which is guaranteed and protected by the First Amendment, and raised legitimate issues with the U.S. Food and Drug Administration (“FDA”) involving complex scientific questions that had significant public health implications.

January 31, 2017

Mallinckrodt to Pay $100M to Settle Antitrust Violations

167103LOGO

Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., and its parent company, Mallinckrodt plc, have agreed to pay $100 million to settle Federal Trade Commission (FTC) charges that they violated antitrust laws when Questcor acquired the rights to a drug that threatened its monopoly in the United States market for adrenocorticotropic hormone (ACTH) drugs. The drug, Acthar, is used as a treatment for infantile spasms, as well as a drug of last resort for other serious medical conditions. A treatment with Acthar can cost more than $100,000.00.

The complaint alleges that, while benefitting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition stifled competition by preventing any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar.

The FTC alleges that in June 2013, Questcor acquired the U.S. rights to Synacthen from Novartis AG, outbidding several other companies that were seeking to acquire the rights to Synacthen. Those alternative bidders were interested in developing the drug and had plans to sell it at a significant discount to Acthar’s price, capturing a substantial amount of Questcor’s business. The FTC charges that Questcor’s acquisition of Synacthen stifled competition and eliminated the possibility that an alternative bidder would make the drug available in the U.S. market and compete with Acthar.

“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today – an 85,000 percent increase,” said FTC Chairwoman Edith Ramirez. “We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition. This is precisely the kind of conduct the antitrust laws prohibit.”

In addition to the $100 million monetary payment, the proposed stipulated court order requires that Questcor grant a license to develop Synacthen Depot to treat infantile spasms and nephrotic syndrome to a licensee approved by the Commission.

A monitor will ensure that Questcor complies with its obligation to grant the license within 120 days of the entry of the order; after that time, a trustee will be appointed to effectuate the license. The order also requires Questcor to provide periodic reports on its efforts, and provide the Commission with advance notice of any future acquisitions of U.S. rights to ACTH drugs.

Shkreli Resurfaces…

The FTC has been investigating Mallinckrodt's Questcor unit since a 2014 lawsuit filed by notorious ex-pharmaceutical executive Martin Shkreli, then CEO of drug maker Retrophin.

Retrophin's suit claimed Questcor violated federal antitrust laws by purchasing Synacthen from Novartis for $135 million after Retrophin bid $16 million for the drug. Retrophin claimed Questcor's purchase was illegal because it was allegedly done to shut down a drug that could compete with Achthar.

Retrophin settled its case against Questcor in 2015 after Questcor paid Retrophin $15.5 million.

Conclusion

The states of Alaska, Maryland, New York, Texas, and Washington joined in the FTC’s complaint. Under the settlement, the states will receive $10 million from the $100 million judgment and an additional $2 million as payment for attorney’s fees and costs.

In a statement issued Wednesday, Mallinckrodt said, "We are pleased to confirm that we have entered into a settlement agreement with the FTC staff to fully resolve this matter, subject to approval by the commission. We will comment further at the appropriate time."

October 15, 2015

Senator Klobuchar Calls on FTC To Investigate Pharma Companies for Antitrust Violations in Wake of Turing Case

  Klobacher

Last week, U.S. Senator Amy Klobuchar (D-MN) called on the Federal Trade Commission (FTC) to investigate pharmaceutical companies for possible antitrust violations. What spurred her interest? “Turing Pharmaceuticals recently increased the price of an infectious disease drug by 5,000 percent,” stated Klobuchar, and “there are reports that Turing and other pharmaceutical companies could be restricting drug distribution in violation of antitrust laws.”  

Background

While drug pricing has been a newsworthy topic over the last year, the past few weeks have been especially brutal for the pharmaceutical industry's reputation. On September 20, the New York Times wrote an article entitled "Drug Goes From $13.50 a Tablet to $750, Overnight." The drug Daraprim is used to treat toxoplasmosis, an infection caused by a parasite,  and was acquired  by Turing, a start-up run by a former hedge fund manager, noted the article. "Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars," the article stated. A media frenzy ensued, capped by Hillary Clinton's announcement to move forward on an official drug pricing policy.  

The company's chief executive, Martin Shkreli, defended his company's decision: "the drug was unprofitable at the former price, so any company selling it would be losing money. And at this price it's a reasonable profit. Not excessive at all," he stated in a CBS News interview. "This is a disease where there hasn't been one pharmaceutical company focused on it for 70 years. We're now a company that is dedicated to the treatment and cure of toxoplasmosis. And with these new profits we can spend all of that upside on these patients who sorely need a new drug, in my opinion," he added.

Shkreli has since pedaled back on the price after initially defending the company's decision and weathering an onslaught of criticism, but the widespread coverage and backlash has already been enough to cause serious discussion about drug cost measures among Democratic presidential candidates in this election cycle. In fact, Bernie Sanders wrote a letter to Shkreli calling him to provide more information on the price hike. (See Sanders' September 21 letter). 

Klobuchar Joins The Ring

Now, Senator Klobuchar has called on the FTC to investigate the issue. “There are reports that Turing and other pharmaceutical companies could be restricting drug distribution in a manner that violates the antitrust laws established in the Federal Trade Commission Act,” she states.   

“Some companies may be combining a substantial price increase for a prescription medication with a closed distribution system,” Klobuchar wrote to the FTC. “If the restricted distribution prevents or delays generic competition, it could subject consumers to unnecessarily high prescription drug prices. We urge you to investigate whether companies are using restricted distribution in a manner that violates the Federal Trade Commission Act. This issue is extremely important to consumers; access to affordable drugs and in particular generics is a necessary element of affordable health care.”

 

The full text of Senator Klobuchar’s letter to FTC Chairwoman Edith Ramirez is below:

 

Dear Chairwoman Ramirez:                                                                                 

 

            We are writing to you regarding a troubling practice that may be harming American consumers. For years, some companies have purchased older drugs and imposed substantial price increases. Some companies may be combining a substantial price increase for a prescription medication with a closed distribution system. If the restricted distribution prevents or delays generic competition, it could subject consumers to unnecessarily high prescription drug prices. We urge you to investigate whether companies are using restricted distribution in a manner that violates the Federal Trade Commission Act.

 

As a public policy matter, this practice is disturbing, but as you know, the antitrust laws do not apply to unilateral price increases, no matter how unfair. Turing Pharmaceuticals’ 5,000 percent price increase on Daraprim, from which they have retreated, is the most recent example of this disturbing trend.

 

Such price increases could convince another company to seek approval for a generic version, enter the market, and lower the price for the product. This is how the free market is supposed to work. To conduct the necessary tests to receive approval from the Food and Drug Administration, a generic company would need a limited amount of the branded product. According to press reports, Turing, and perhaps others, are restricting distribution of their product. If a company were to employ this strategy to deny competitors supply for use in a generic application, it would be doing more than simply raising prices. It could be excluding competition from the market to the detriment of consumers and violating the Federal Trade Commission Act.

 

This issue is extremely important to consumers; access to affordable drugs and in particular generics is a necessary element of affordable health care. We believe there is sufficient concern for the Federal Trade Commission to thoroughly investigate whether Turing or any other pharmaceutical company has used restricted distribution practices to insulate a price increase from competition. 

 

 

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