FTC Finds Impax-Endo “No Approved Generic” Agreement to be Anticompetitive Pay-For-Delay Scheme

On March 28, 2019, the Federal Trade Commission (“FTC”) issued an Opinion and Final Order against Impax Laboratories LLC (“Impax”), ruling that an agreement between Impax and Endo Pharmaceuticals Inc. (“Endo”) to delay market entry of Impax’s generic version of Endo’s branded opioid pain reliever constituted an illegal “pay-for-delay” agreement. This Order reversed an Initial Decision by an FTC Administrative Law Judge (“ALJ”) in May 2018, finding that the procompetitive benefits of the agreement outweighed the anticompetitive harm, and thus did not violate Section 5 of the Federal Trade Commission Act, which prohibits “unfair methods of competition.” The drug involved in the suit is Opana ER, an extended-release opioid pain reliever. In the agreement, Endo paid Impax over $100 million to abandon its patent challenge and delay market entry of its generic Opana ER for 2 ½ years. Endo also agreed not to launch its own authorized generic version of Opana ER (“No AG” agreement) during Impax’s 180 day-exclusivity period.

This case involves very complex provisions of the Hatch-Waxman Act, which was passed in 1984 and was intended to increase the number of generic drugs on the market. The Act, a negotiated agreement between the brand and generic pharmaceutical industries, created an Abbreviated New Drug Application (“ANDA”) pathway for FDA approval of generic drugs, in which generic manufacturers could rely on the safety and efficacy data contained in the brand manufacturer’s already approved New Drug Application (“NDA”). The ANDA then would only have to provide data demonstrating that the generic drug was “bioequivalent” to the approved brand drug. In some instances, an ANDA applicant is additionally granted a 180-day marketing exclusivity period in which the FDA cannot approve a subsequent ANDA application. Thus, during this marketing exclusivity period, that ANDA applicant’s drug would be the only generic on the market. In exchange for allowing ANDA applicants to rely on their highly valuable safety and efficacy data, the brand manufacturers were provided with several protections, including a lengthy data exclusivity period, during which the FDA cannot approve ANDA applications, thus delaying generic market entry until this period expires.

In the time since Hatch-Waxman passed, there have been numerous settlement agreements between brand and generic manufacturers, in which the timing of generic market entry has been altered beyond what is dictated by Hatch-Waxman. These so-called “pay-for-delay” schemes, in their most simplistic forms, involve the brand simply paying the generic not to enter the market.  However, in the 2013 FTC v. Actavis case, the US Supreme Court held that such an agreement was anti-competitive, noting that “[p]ayment for staying out of the market keeps prices at patentee-set levels and divides the benefit between the patentee and the challenger, while the consumer loses.” The Court, however, declined to hold that “reverse payment settlements are presumptively unlawful” as “[t]here may be justifications for reverse payment that are not the result of having sought or brought about anticompetitive practices.” Since Actavis, brand and generic companies have been litigating the contours of that holding.

In the Initial Decision in this case, the ALJ focused on the actual risk that anticompetitive harm would ensue, noting that the harm that could result from the agreement was “largely theoretical” as it was “unlikely” that Impax would have been able to launch a generic Opana ER prior to the end of the agreed upon 2 ½ year delay period. Thus, the ALJ concluded that the procompetitive benefits of the Endo-Impax decision outweighed the anticompetitive benefits, and, therefore, the agreement was not anticompetitive in violation of the Federal Trade Commission Act.

However, on appeal, the Commission reversed the ALJ’s decision, noting that the Court in Actavis, specifically held that “seek[ing] to prevent the risk of competition … constitutes … relevant anticompetitive harm.” The Commission then found there was sufficient evidence of a plausible risk that “that Impax could have entered the market prior to the agreed-upon entry date” had Endo not provided “inducement to Impax to … not launch a generic Opana ER.” Thus, the FTC held that the Impax-Endo agreement can be considered a form of reverse payment to delay the entry of generic competition, and that such agreement “destroyed the risk of competition,” and enriched Impax and Endo “at the expense of consumers.” Finally, the FTC entered a cease and desist order against Impax, enjoying Impax from entering into future settlements that include reverse payments in exchange for an agreement not to compete.