Product-hopping prohibited – Actavis’s most recent brush with US antitrust


Interim mandatory relief to compel a company to continue doing something it wanted to stop doing is one of the more draconian remedies in the legal arsenal. Yet the last few years have seen enough such cases in the competition law context to suggest that it is a real weapon for claimants and a real risk for dominant companies. Examples in the UK alone include Barclays Bank, which was compelled to keep providing banking services and O2 which was required earlier this month to maintain SIM card services to a downstream user of those services, pending a full trial.

The pharma sector in the UK has also seen its fair share of cases in which such relief was sought. The majority of those have been refused (notably in Chemistree v. Abbvie, upheld by the Court of Appeal – see here for our post on the first instance decision), although in one case (Intecare v. Aventis, 2009, not reported) a short-term obligation to continue to supply pending full hearing of the interim relief request was enforced.

In the US, Actavis has also found itself on the receiving end of an obligation to continue to supply, pending a full court investigation of whether it had breached s. 2 of the Sherman Act (the US equivalent of Article 102 TFEU). Earlier this month, the Court of Appeals for the 2nd Circuit rejected a request to reconsider relief confirmed by the same court in May.

The issue arose from the decision taken by Actavis, the manufacturer of Alzheimer’s treatment Namenda, to switch patients from an immediate release (IR) version of the product onto a sustained release version (Namenda XR). Switching patients to the new XR product entailed a change to dosage regimens, from two tablets a day down to one. According to the case report, Actavis planned to (largely) withdraw the IR product in advance of patent expiry and thus to migrate patients, in the period immediately before patent expiry, into the new XR product – which enjoyed patent protection until 2029.

This is a type of life cycle management strategy which the competition authorities sometimes refer to as ‘product-hopping’. It is not the first such case – in the EU, one of the abuses identified by the Commission in its AstraZeneca decision (later upheld by the CJEU) involved the withdrawal of a capsule form of a dominant product, in favour of a new tablet formulation. The facts in this case are somewhat closer to the UK Reckitt Benckiser decision, another abuse of dominance case, than to AstraZeneca. Unlike in AstraZeneca, there was no regulatory impediment preventing generic Namenda IR products from coming to market. Rather, there was a practical difficulty – once the IR product was withdrawn, there would be minimal prescriptions for the twice-daily product and thus (according to the interim assessment) very little generic substitution. The court determined, on an interim basis, that there were no substitutes for Namenda IR other than the XR version and that patients were very unlikely to go back to IR once they had been moved onto XR – a practice known as “reverse-commuting”. This might be thought to be an acknowledgement of the real benefits offered by the new product, but the issue was addressed purely as one of practicality (requirement of a new prescription, acclimatising vulnerable patients to the new dosage regimen, etc).

The court acknowledged that neither the introduction of a new, arguably superior, product nor the withdrawal of an old product is anti-competitive in itself. Concerns arose because both strategies were carried out in combination, with a “coercive” effect upon customers/prescribers, who had no option other than to switch to the new product. In the particular context of the pharma sector, and given the impact of Actavis’s IP protection, the Court decided not to allow Actavis to implement its “hard switch”. Instead, the relief granted means that it has been left to the market to choose whether to favour the improved release profile of the XR version, or to take advantage of the cost-savings generated by the generic products. The grant of mandatory interim relief is often the end of the story, but perhaps Actavis will decide to take up the fight for its “right to product-hop” at a full trial.