Antitrust, Vol. 28, No. 1, Fall 2013. © 2013 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be
`copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
`
`Antitrust Scrutiny of
`Pharmaceutical
`“Product Hopping”
`
`B Y M . S E A N R O Y A L L , A S H L E Y E . J O H N S O N ,
`
`A N D J A S O N C . M C K E N N E Y
`
`PATENT AND ANTITRUST LAWS ALIKE
`
`are meant to encourage innovation, and for good
`reason. The U.S. Patent and Trademark Office
`estimates that innovation has accounted for fully
`three-quarters of post-World War II economic
`expansion in the United States.1 Nonetheless, innovation
`in the form of new products and product enhancements
`has at times been attacked under the antitrust laws, and it
`appears we have reached such a moment in the pharmaceu-
`tical industry.
`Branded and generic manufacturers compete on an annu-
`al basis for roughly $340 billion in U.S. sales and almost $1
`trillion globally.2 As one would hope and expect, this battle
`is waged in part through branded drug company efforts to
`develop and release new, improved (and often patent-pro-
`tected) versions of existing medications. But not all stake-
`holders agree that this is an inherently good thing. Branded
`drug companies have increasingly been accused of violating
`the Sherman Act by using new drug formulations as a tactic
`to blunt competition from generic rivals.
`Such claims have been framed in recent antitrust class
`action lawsuits and in private suits brought by generic com-
`petitors.3 Likewise, the Federal Trade Commission, joining
`various antitrust commentators, has expressed concern that
`the practice of releasing new and improved versions of pre-
`existing drugs—“product hopping” or “product switch-
`ing”—can, in certain circumstances, harm competition by
`complicating or delaying generic entry.4
`All such claims, to some extent, are predicated upon the
`regulatory framework governing Food and Drug Adminis -
`tration (FDA) approval of generic drugs in the United States,
`
`M. Sean Royall is a partner in Gibson Dunn & Crutcher LLP’s Dallas and
`Washington, DC offices and co-chairs the firm’s Antitrust and Trade Regu -
`lation Practice Group. Mr. Royall has represented branded drug manufac-
`turers in a variety of competition disputes and presently represents Sanofi-
`Aventis and Allergan in such matters. Ashley E. Johnson and Jason C.
`McKenney are associates in the firm’s Dallas office and have worked with
`Mr. Royall on various matters representing branded drug manufacturers.
`
`a framework established by the Hatch-Waxman Act and
`related regulations, which define a process by which gener-
`ic drug companies may seek expedited approval to manu-
`facture and sell counterparts to previously approved brand-
`ed medications.5 Most product-hopping antitrust claims in
`effect assert that the branded manufacturer has gamed or
`manipulated the FDA’s regulatory scheme by opportunisti-
`cally shifting resources to a new FDA-approved drug for-
`mulation, while, at the same time, withdrawing support for
`the prior formulation that faces imminent or nascent com-
`petition from generics. The contention is that this type of
`“product shift” or “product hop” can have the effect of
`destroying demand for the generic and thus impeding an
`effective generic product launch. The branded manufactur-
`er’s move to a new drug formulation, the theory goes, serves
`to reset the product market, putting the generic essentially
`back to square one in its efforts to deliver FDA-approved
`equivalents to the marketplace.
`A common contention in such cases is that the generic
`drug companies, which keep their costs low in part by not
`actively marketing their products, are largely at the mercy of
`their branded competitors, whose continued support for the
`branded version of the relevant drug is essentially a prereq-
`uisite for successful generic entry. Most theories of competi-
`tive harm in this area also depend to some extent on skepti-
`cism regarding the improved health benefits of new drug
`formulations—for instance, a change from a lower to a high-
`er dosage, from a capsule to a tablet, or from immediate
`release to extended release.
`This naturally leads to a complicated, and one might say
`troubling, balancing of the social welfare benefits of margin-
`ally improved pharmaceuticals, on the one hand, versus un -
`changed but somewhat less expensive ones on the other. The
`risks entailed by antitrust scrutiny of product innovation are
`well known and largely intuitive,6 but this has not deterred
`courts from entertaining Sherman Act challenges based in sig-
`nificant part on product-hopping allegations. Indeed, in one
`recent case Abbott Laboratories and its co-defendants, after
`losing a motion for summary judgment, paid $250 million in
`part to settle such claims,7 and Warner Chilcott is presently
`defending a similar case in which the plaintiffs are seeking tre-
`ble damages potentially reaching into the billions.8
`The very prospect of a branded drug maker being exposed
`to treble damages linked to the launch of an FDA-approved
`new product formulation would be enough to send chills
`down the spines of many pharmaceutical executives. But the
`present situation is worse still, considering that the courts
`have yet to reach any consensus regarding what standards
`should be applied in judging the merits of such claims.
`In one of the original cases alleging anticompetitive inno-
`vation, the Second Circuit in Berkey Photo held that the suc-
`cessful introduction of a new or improved product, even
`where it arguably undermines competition, should not give
`rise to an antitrust cause of action absent some element of
`“coercion.”9 However, the court did not define precisely
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`A R T I C L E S
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`what it meant by coercion, and confusion over this issue has
`persisted.10
`Some years later, the D.C. Circuit in Microsoft held that
`product innovations challenged under the antitrust laws
`should be subjected to a form of rule-of-reason balancing,
`with the asserted procompetitive benefits of the product
`improvement being balanced against the alleged anticom-
`petitive effects.11 These seemingly conflicting standards have
`never been fully reconciled, and the resulting confusion can
`be seen in the small handful of court decisions that have
`addressed pharmaceutical product-hopping claims.
`No matter where one stands on the broader issue of prod-
`uct hopping, most would agree that the risks of over-deter-
`rence in this area could be serious, and that caution is war-
`ranted.12 The benefits of generic drug competition are
`naturally quite significant, but the benefits of new and
`improved pharmaceutical product formulations are likewise
`important to our society and economy. The prospect of anti -
`trust courts or agencies weighing these benefits against each
`other is, to the authors, an uncomfortable proposition. And
`such concerns are only heightened by the fact that, at pres-
`ent, there remains significant uncertainty in the law, a situa-
`tion we hope will be corrected by future legal rulings.
`
`The Regulatory Backdrop
`The Drug Price Competition and Patent Term Restoration
`Act of 1984, commonly known as the Hatch-Waxman Act,13
`attempts to strike a balance between two potentially coun-
`tervailing public interests—inducing innovation by branded
`drug companies, and fostering the development of lower-cost
`generic versions of “innovative” or “pioneer” branded drugs.14
`Under FDA rules, a company seeking approval of a new
`pharmaceutical must file a New Drug Application (NDA),
`providing extensive data concerning the efficacy and safety of
`the product, which can be time-consuming and extremely
`expensive.15 Before Hatch-Waxman, an NDA was required
`for all new drugs, including generic versions of previously
`approved branded drugs. But Hatch-Waxman enabled gener-
`ic drug makers to obtain FDA approval through a more
`streamlined Abbreviated New Drug Application (ANDA)
`process that omits the need for clinical trials and other cost-
`ly work required by the standard NDA. Under the FDA’s
`ANDA process, generic drugs may be approved as long as
`they are shown to be “bioequivalent” to a previously approved
`branded drug.16
`Once a generic drug company receives ANDA approval,
`it may commence marketing its product. Most generic drugs,
`however, are not marketed in a traditional sense. Generic
`drug manufacturers customarily do not advertise their prod-
`ucts or employ sizable direct sales teams. The standard gener-
`ic business model, rather than depending on sales and mar-
`keting efforts, relies heavily on requirements imposed by
`state “substitution” laws mandating that pharmacists dis-
`pense an available FDA-approved generic drug, unless oth-
`erwise directed by the prescribing physician.17 Even without
`
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`sales and marketing support, lower priced generic drugs,
`once available, typically attract a significant share of sales
`away from their branded equivalents.18
`Congress recognized that the enactment of a regime facil-
`itating swifter entry for generic drugs could reduce the in -
`centives of branded drug makers to innovate, inasmuch as
`accelerated generic competition might prevent branded man-
`ufacturers from recouping their research, development, and
`marketing costs. To address this concern, the Hatch-Waxman
`Act, among other things, made it easier for branded manu-
`facturers to enforce patents against generic rivals. If the
`ANDA filer wishes to sell its generic product before the expi-
`ration of patents that the branded manufacturer has listed on
`the FDA’s “Orange Book,” the ANDA filer must provide a
`“Paragraph IV certification,” confirming that the ANDA
`product does not infringe or that the relevant patents are oth-
`erwise invalid.19 If the branded manufacturer promptly ini-
`tiates infringement litigation, this then triggers an automat-
`ic 30-month stay of final FDA approval for the generic
`drug.20 Another feature of Hatch-Waxman is that the first
`ANDA filer, once it obtains final FDA approval, is general-
`ly entitled to 180 days of market exclusivity before any later
`ANDA filer with FDA approval is permitted to launch its
`generic product.21
`By any measure, Hatch-Waxman has spawned an enor-
`mous amount of antitrust litigation and related agency
`enforcement activity. The most prevalent complaints to date
`have centered around claims that branded drug companies
`have improperly invoked Hatch-Waxman 30-month stays
`through “sham” patent litigation22 and claims that branded
`and generic rivals have essentially “conspired” through “pay-
`for-delay” patent settlements to forestall the onset of generic
`competition, dividing the alleged gains between them—an
`issue recently addressed by the Supreme Court in FTC v.
`Actavis.23 The law applicable to such patent-related antitrust
`claims has been developing for years, and the standards are
`now reasonably well settled. By contrast, product-hopping
`allegations—the latest antitrust outgrowth of Hatch-Waxman
`—are a relatively recent phenomenon, and the law remains
`very much in flux.
`
`Current State of the Law on Product Hopping
`To the authors’ knowledge, there have only been three phar-
`maceutical product-hopping cases to date that have result-
`ed in substantive court decisions. The first two of these
`cases—one involving the cholesterol drug TriCor24 and the
`other involving the heartburn medications Prilosec and
`Nexium25—dealt with mirror image facts and led to oppo-
`site conclusions, one denying a motion to dismiss and the
`other granting dismissal. From these two decisions alone,
`one might infer that the viability of product-hopping
`antitrust claims turns largely on the strength of the facts,
`including whether the branded manufacturer reinforced its
`switch to a new product formulation by withdrawing the
`prior formulation from the marketplace and thereby arguably
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`limiting consumer choice. But a third and more recent deci-
`sion, in a case involving the prescription acne medication
`Doryx,26 raises more fundamental questions about the mer-
`its of “novel”27 product-hopping allegations and signals a
`fairly significant degree of skepticism concerning whether a
`branded drug maker’s shift to a new product formulation
`should ever constitute an antitrust violation. As discussed
`below, these decisions taken as whole provide relatively little
`clarity and leave many questions unanswered.
`Teva. Abbott Labsoratories v. Teva Pharmaceuticals USA
`appears to have been the first case to squarely frame an anti -
`trust claim predicated on allegations of pharmaceutical prod-
`uct hopping, and it resulted in a somewhat detailed decision
`denying a motion to dismiss filed by the defendants, the prin-
`cipal defendant being Abbott Laboratories. The plaintiffs
`asserted that Abbott twice changed its formulation for TriCor
`(from a capsule to a tablet and later to a new tablet with
`lower dosage strengths), obtained NDA approval for the prod-
`uct changes, and completed two successive switches to new
`product formulations in a manner strategically timed, in both
`instances, to thwart imminent generic competition for the
`“obsolete” versions of the drug.28 In both instances, the plain-
`tiffs alleged that Abbott not only stopped selling the prior
`version of TriCor, but also took the further step of removing
`the prior formulation from the National Drug Data File
`(NDDF), a private database of FDA-approved drugs. This
`further step, plaintiffs alleged, literally prevented pharmacies
`from filling prescriptions for the superseded formulation or
`any generic equivalents, making generic substitution no longer
`possible.29
`Abbott and its co-defendants, in their motion to dismiss,
`maintained that even the plaintiffs had acknowledged that
`the new formulations reflected improvements, however
`minor, over the prior formulations, and that any product
`change that introduces an improvement must be per se law-
`ful under the antitrust laws.30 The defendants also argued that
`they had no duty to aid competitor. Hence the withdrawal of
`old TriCor formulations, even if highly disruptive to gener-
`ic rivals, cannot violate the Sherman Act.31
`The court in Teva rejected these and other defense argu-
`ments and in so doing set forth what it deemed to be the
`appropriate standard for assessing claims of this nature. The
`starting point for the court’s analysis was the Second Cir cuit’s
`decision in Berkey Photo, Inc. v. Eastman Kodak Co.32 As Teva
`explained, the outcome in Berkey Photo (which reversed a
`plaintiff’s jury verdict) turned on one major logical under-
`pinning—the observation that Kodak’s challenged new prod-
`uct offerings (the Pocket Instamatic camera and related film
`cartridges) had gained “acceptance in the market” purely as
`a consequence of “free choice” by consumers.33 Notably, in
`the view of the Teva court, it was clear from the facts in
`Berk ey Photo that Kodak, upon introducing its new products,
`“did not remove any other films from the market”34; and even
`more notably, the Second Circuit in deciding Berkey Photo
`suggested it might have reached a different outcome had
`
`Abbott Labsoratories v. Teva Pharmaceuticals USA
`
`appears to have been the first case to squarely frame
`
`an anti trust claim predicated on allegations of
`
`pharmaceutical product hopping,
`
`Kodak “ceased producing film in the [old] size, thereby com-
`pelling camera purchasers to buy [the new] camera.”35
`Teva fully embraced this dichotomy between “free choice”
`and “coercion,” and largely on this basis the court deter-
`mined that dismissal was inappropriate, given allegations
`that Abbott removed the prior drug formulations from the
`market and changed the NDDF codes. “[S]uch conduct,” the
`court stated, “results in consumer coercion” and “is poten-
`tially anticompetitive.”36
`It appears that Teva, in line with Berkey Photo, would give
`“judicial deference” to pharmaceutical product shifts that do
`nothing to disrupt “free consumer choice,”37 and in this
`sense the decision may signal an antitrust safe harbor of some
`sort.38 But the borders of any such safe harbor, which would
`turn on distinctions between coercion and free choice, are
`hardly well defined. Under Teva, would a branded drug com-
`pany have grounds for dismissal if the challenged formulation
`change was not accompanied by a change in NDDF codes?
`Would there at least be grounds for dismissal if the prior for-
`mulation of the product was not removed from the market?
`Could it be enough for a plaintiff to defeat dismissal if it
`alleged that the prior formulation, while still available, was no
`longer being actively marketed by the branded manufactur-
`er? Is there some other form of alleged “coercion,” besides
`withdrawing support for superseded product formulations
`that a plaintiff could argue interferes with “free choice” in this
`context? Teva provides no real answers to these questions,
`which is somewhat troubling, considering that it offers the
`most detailed judicial commentary to date on this subject.
`Teva also plunged headlong down a path that the Second
`Circuit in Berkey Photo was cautious to avoid—the path of
`balancing the merits of new product innovations against the
`arguable competitive obstacles such innovations may erect. As
`Teva states, “[T]he Second Circuit refused to weigh the ben-
`efits from Kodak’s introduction of a new camera model and
`film format against the alleged harm from the product intro-
`duction because that weighing had already occurred in the
`marketplace.”39 By contrast, the court in Teva concluded
`that an antitrust inquiry probing and comparing the “bene-
`fits” and “effects” of the defendants’ formulation changes
`would be appropriate, given plaintiffs’ assertion that con-
`sumers were deprived of an unfettered choice.40
`The court in fact was very explicit in concluding that
`claims of this nature—at least claims that fall outside what-
`ever “free choice” safe harbor may exist—should ultimately
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`A R T I C L E S
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`be decided based on the type of rule-of-reason balancing
`approach adopted by the D.C. Circuit’s decision in United
`States v. Microsoft Corp.41 Hence, Teva (in what may well
`constitute dicta) suggested that the plaintiff in a pharmaceu-
`tical product-hopping case should have an initial burden to
`“show anticompetitive harm from the formulation changes”
`and then “that harm” will “be weighed against any benefits
`presented by” the defendant.42
`Teva, of course, was a motion to dismiss decision and did
`not engage in any actual balancing. But to the extent Teva’s
`suggested approach was adopted by later cases, this too seems
`troubling. Are courts or juries truly in a position to sit in judg-
`ment on the merits, including potential therapeutic benefits,
`of one FDA-approved drug formulation versus another? And
`even to the extent courts have competence to delve into such
`questions, how, as a practical matter, does one balance the
`benefits of a new drug formulation against the arguable
`effects of reduced competition? As noted above, this could
`boil down to a choice between marginally improved phar-
`maceuticals and unchanged but somewhat less expensive ones,
`matters that arguably exceed the purview of traditional anti -
`trust principles.
`Walgreen. Walgreen Co. v. AstraZeneca Pharmaceuti cals,43
`decided two years after Teva, was also a ruling on a motion
`to dismiss. The case involved allegations that AstraZeneca
`shifted its resources and began aggressively promoting a
`newly approved prescription heartburn medication, Nexium,
`just as its longstanding heartburn drug, Prilosec, was near-
`ing the end of its patent protection and beginning to face
`generic competition. The plaintiffs alleged that when Astra -
`Zeneca began promoting and “detailing” Nexium to doctors,
`it ceased promoting and detailing Prilosec, but it did not
`withdraw Prilosec from the market; rather, Prilosec remained
`available as a prescription capsule, and, in a modified form,
`as an over-the-counter drug.44 Nevertheless, the plaintiffs
`contended that AstraZeneca’s efforts to “switch” the market
`from Prilosec, which faced generic competition, to “a virtu-
`ally identical” and “no more effective” patent-protected drug,
`Nexium, constituted a Sherman Act violation.45
`In granting AstraZeneca’s motion to dismiss, the court in
`Walgreen relied heavily on the reasoning in Teva and its
`emphasis on the “critical factor” of consumer choice.46 In
`the court’s view, this factor distinguished the two cases entire-
`ly. Whereas in Teva there were allegations that Abbott “sought
`to defeat competition from generic substitutes” by “deliber-
`ately limit[ing] . . . consumers’ choices,” 47 based on the facts
`as alleged in the complaint AstraZeneca had “added choices”
`by introducing a new drug to compete with its alternative
`drug, Prilosec, with generic substitutes to Prilosec, and with
`heartburn medications offered by other manufacturers.48 Even
`if, as the plaintiffs claimed, patent-protected Nexium was in
`no way superior to Prilosec, Walgreen stressed that nothing
`about antitrust law “requires a product new on the market—
`with or without a patent—to be superior to existing prod-
`ucts.”49 In the court’s words, “Those determinations are left
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`to the marketplace.”50 And as for the impact of this product
`switch on the generic competition, the court stated, “The fact
`that a new product siphoned off some of the sales from the
`old product and, in turn, depressed sales of the generic sub-
`stitutes for the old product, does not create an antitrust cause
`of action.”51
`Taken in combination, Teva and Walgreen suggest that
`the introduction of a new FDA-approved prescription drug
`formulation, and the contemporaneous shift in marketing
`support from a prior formulation to the new formulation,
`likely is not enough, taken alone, to support a monopoliza-
`tion complaint, even if the consequence of such a shift is that
`generic competitors achieve a smaller overall share of sales. To
`survive a motion to dismiss, there would need to be, in addi-
`tion, some basis for the plaintiff to credibly allege an actual
`reduction in consumer choice. In Walgreen, there were two
`reasons why this condition was not met. First, AstraZeneca
`did not remove Prilosec from the market; the drug continued
`to be sold, albeit primarily as an over-the-counter drug that
`was not heavily marketed. But secondly and importantly,
`there was no allegation that AstraZeneca’s actions eliminat-
`ed the consumer’s option to choose a generic alternative.
`Indeed, the court’s decision, citing to the complaint, suggests
`that generic manufacturers had collectively achieved a 30
`percent share of sales.52
`Teva and Walgreen therefore deal with somewhat polar
`extremes. In the former case, the asserted facts suggest that
`the defendants effectively eliminated both the prior NDA for-
`mulation of TriCor and any generic equivalents. In the latter
`case, there was no dispute that both the prior formulation
`and its generic equivalents remained readily available for pur-
`chase. Yet there are a number of alternative fact scenarios one
`could envision. For instance, the branded manufacturer, after
`launching a new formulation, may choose to cease actively
`marketing the prior formulation but not immediately remove
`it from the market, and generic entrants in response might
`choose to discontinue their efforts to enter. How courts might
`view this and other potential scenarios is not at all clear based
`on the combined holdings in Teva and Walgreen.
`Mylan. In another ongoing product-hopping antitrust
`suit, Mylan Pharmaceuticals, Inc. v. Warner Chilcott Public
`Limited Co., the district court recently denied a motion to
`dismiss.53 Interestingly the court’s order placed no reliance on
`either Teva or Walgreen, and seemed to signal views at odds
`with the approaches adopted by those prior decisions.
`The asserted facts in Mylan fall somewhere between the
`fact patterns presented in Teva and Walgreen. The complaint
`alleges that Warner Chilcott and its co-defendants engaged in
`a conscious strategy to prevent or delay generic competition
`for the company’s branded Doryx medication by executing
`at least three distinct product switches—first from a capsule
`to a tablet, then from 75mg and 100mg tablets to a single
`150mg dosage strength, and finally from a single-scored ver-
`sion of the 150mg tablet to a dual-scored version.54 “[T]hese
`switches,” the complaint alleges, provided “little or no ther-
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`The Mylan cour t’s dismissal decision, while perhaps
`
`sending a promising sign to those who oppose
`
`antitrust scrutiny of product hopping, does little
`
`to clarify the law.
`
`apeutic benefit to consumers,” but “devastated the market for
`the prior versions of Doryx,” which Warner Chilcott ceased
`promoting and eventually withdrew from the market, there-
`by “forc[ing] generic manufacturers such as Mylan to change
`their products in development” in an effort to align their
`generic offerings with the currently promoted version of the
`branded drug.55 Unlike Teva, however, there is no allegation
`in Mylan that Warner Chilcott changed NDDF codes in a
`manner that might preclude generic substitution. In fact,
`the complaint appears to acknowledge that Mylan success-
`fully developed and at least initially launched several gener-
`ic formulations.56
`In moving to dismiss, the defendants argued, among other
`things, that Mylan’s claims boiled down to a contention that
`branded drug companies have a duty to continue promoting
`outdated formulations to permit generic competitors to take
`advantage of automatic substitution laws. But, the defen-
`dants maintained, nothing in the antitrust laws suggests that
`such a duty either does or should exist.57 On the contrary, the
`defendants argued, antitrust law suggests that this type of
`“free riding” is “‘the antithesis of competition.’”58
`The defendants also used their motion to dismiss to make
`a pointed attack against Mylan and its generic business
`model. In the opening paragraphs of their motion, the defen-
`dants contend that Mylan is one of the world’s largest phar-
`maceutical companies, fully twice the size of Warner Chilcott,
`and that the company has ample resources to actively pro-
`mote its generic products without relying entirely on state
`substitution laws, if it so chose.59
`Had the court in Mylan followed the approach of Teva and
`Walgreen, it might have focused on Warner Chilcott’s alleged
`decisions to phase out prior formulations and the extent to
`which this deprived consumers of choices. But there is no
`mention of such concepts in the Mylan dismissal order. The
`court instead summarized the defendants’ principal grounds
`for dismissal, and commented that “[d]efendants’ con-
`tentions, if correct, appear compelling.”60 This included the
`defendants’ claims that “their product changes . . . did noth-
`ing to block generic firms from competing” but “merely pre-
`cluded generic firms from taking advantage of automatic
`substitution laws”; the defendants’ contention that if “gener-
`ic firms cannot advertise their products to compete success-
`fully with Doryx” this may simply “reveal a problem with the
`generics’ business models” or with the relevant “regulatory
`regimes”; and the defendants’ overarching claim that Mylan’s
`product-hopping theory, which the court characterized as
`
`“‘novel’ at best,” fails to state “an antitrust injury.”61 In clos-
`ing, the court’s order stated, “Although I am skeptical that
`the ‘product hopping’ alleged here constitutes anticompeti-
`tive conduct under the Sherman Act, I cannot definitively
`address that question without going beyond the pleadings.”62
`This was, to say the least, a marked departure from Walgreen
`and Teva.
`The Mylan court’s dismissal decision, while perhaps send-
`ing a promising sign to those who oppose antitrust scrutiny
`of product hopping, does little to clarify the law. Indeed, if
`anything, the dramatically different tone struck by the court’s
`decision in comparison to Teva and Walgreen underscores
`how far we are at present from anything approaching a judi-
`cial consensus.
`
`The FTC’s Stance on Product Hopping
`FTC interest in the product-hopping issue dates back to at
`least 2006. In that year, the FTC filed a preliminary injunc-
`tion motion in federal court seeking to bar Warner Chilcott
`from following through with an apparent plan to withdraw
`an existing tablet formulation of its birth control product
`Ovcon coinciding with the launch of a new chewable version
`of the same product.63 The issue arose in connection with an
`already pending suit in which the FTC’s complaint alleged
`that Warner Chilcott and generic manufacturer Barr Pharma -
`ceuticals had entered an agreement that would serve to delay
`generic competition for Ovcon. And the final order by which
`the litigation was settled included additional terms that in
`essence required Warner Chilcott to continue supporting the
`non-chewable tablet form of Ovcon, including requirements
`that Warner Chilcott not change the relevant NDDF codes
`or, for a period of three months, destroy inventory or buy
`back product already distributed to customers.64
`The product-hopping issue has also surfaced at times in
`statements by various FTC commissioners. In 2007, then-
`FTC Chairman Deborah Platt Majoras, in a carefully word-
`ed statement, flagged the issue as one the Commission was
`“following.”65 A year later, then-FTC Commissioner and
`former FTC Chairman Jon Leibowitz signaled a potentially
`greater degree of FTC concern, mentioning product hopping
`as one example of “strategies used in connection with launch-
`ing a new [pharmaceutical] product” that “seem to serve no
`purpose other than to undermine the ability of a generic to
`compete.”66 Leibowitz also suggested, consistent with the
`general subject of his remarks, that this could be an area
`where it might “make sense to apply” the FTC’s expanded
`Section 5 enforcement authority.67
`Most recently, in late 2012 the agency took the unusual
`step of filing a fairly lengthy amicus brief in connection with
`the district court’s consideration of Warner Chilcott’s motion
`to dismiss in the Mylan case.68 The stated purposes of the
`brief were to present “background and analysis” on the nature
`and importance of generic competition and to address “the
`appropriate antitrust framework” for evaluating claims that
`“a brand drug reformulation unlawfully delayed or inhibit-
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`A R T I C L E S
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`ed generic competition.”69 But the brief went further. For
`instance, quoting the views of a prominent antitrust com-
`mentator, the Commission stated, “‘Product-hopping seems
`clearly to be an effort to game the rather intricate FDA rules
`. . . . The patentee is making a product change with no tech-
`nological benefit solely in order to delay competition.’”70
`The FTC brief also took a stand on the merits, at least
`insofar as it voiced the opinion that Mylan’s complaint “stat-
`ed a plausible claim.”71 As for the appropriate legal standard,
`the FTC hewed closely to the framework adopted by the
`district court’s decision in Teva, which it cited liberally, and
`argued somewhat forcefully that an approach that might
`deem product reformulations “per se lawful” would “entitle
`brand pharmaceutical companies . . . to manipulate the FDA
`regulatory process and undermine state and federal laws that
`encourage generic competition.”72
`Interestingly, the court’s dismissal order in Mylan did not
`so much as mention the FTC’s amicus submission, nor did
`it appear to adopt any of the FTC’s views. On the contrary,
`the decision, if anything, points in the direction of per se
`legality, a position the FTC pointedly attacked. While the
`brief therefore may have had little effect on the outcome of
`that dispute, it does presumably communicate a great deal
`about internal FTC views on the product-hopping issue.
`
`Conclusion
`The Hatch-Waxman Act was designed to strike a delicate
`balance between the interests of generic and branded drug
`manufacturers, duly recognizing both the value of pharma-
`ceutical innovation and the benefits of low-cost generic com-
`petition. In the years since Hatch-Waxman was implement-
`ed, there has been a steady stream of antitrust disputes, many
`of them patent-related, tied in some way to the FDA’s gener-
`ic drug approval process, and this trend shows no signs of
`abating.
`For the most part, it does not appear that such patent-
`related antitrust claims pose any direct threat to the integri-
`ty of the Hatch-Waxman regulatory scheme or its underlying
`policy objectives. In this sense, product-hopping claims, the
`latest antitrust outgrowth of Hatch-Waxman, may be differ-
`e