Allergan Subsidiary Forest Settles for $750 Million in Namenda Class Action Pay for Delay Suit
On October 28, 2019, Allergan announced that its subsidiaries, several units of Forest Laboratories, have reached an agreement to settle a class action antitrust lawsuit related to the sales of its Alzheimer’s drug Namenda. In the settlement, Forest has agreed to a $750 million payment to the direct purchaser class, but makes no admission of wrongdoing. The suit was brought by a group of direct purchasers of Namenda and was scheduled to go on trial in October.
The US Food and Drug Administration (“FDA”) approved Forest’s Namenda New Drug Application (“NDA”) in 2003 to treat moderate to severe dementia related to Alzheimer’s disease. This initial formulation of Namenda was an immediate release (“IR”) format and was dosed twice per day. In June 2013, Forest launched a once daily extended release (“XR”) version of Namenda, and then, in February 2014, discontinued the twice daily IR version. A generic version of Namenda IR didn’t launch until July 2015. The practical effect of removing Namenda IR from the market prior to generic launch is that existing patients would have to switch to the more expensive Namenda XR, a process referred to as a “hard switch.”
In 2014, the then New York Attorney General Eric Schneiderman commenced an investigation into the Namenda IR to XR hard switch. Schneiderman ultimately filed an antitrust complaint in the Southern District of New York alleging that the tactic was a violation of antitrust laws. In 2015, Allergan and Forest entered into a settlement agreement with the state of New York to settle the claims. The agreement 05included a payment of $171,946, but it did not include an admission of wrongdoing.
Also in 2015, direct purchasers of Namenda brought a class action suit against Forest alleging that it blocked generic competition to Namenda IR through anticompetitive behavior. Specifically, the plaintiffs argued that Forest entered into pay-for-delay agreements with generic manufacturers to delay market entry of generics until the Namenda XR hard switch had taken place. As noted above, Forest has now agreed to pay $750 million to settle the case.
This case raises the apparently novel issue of whether a patentee violates antitrust laws if they engage in hard switch conduct. In May 2015, an appeals court in the NY State case held that “[c]ertainly, neither product withdrawal nor product improvement alone is anticompetitive…. But … when a monopolist combines product withdrawal with some other conduct, the overall effect of which is to coerce consumers rather than persuade them on the merits, … and to impede competition, … its actions are anticompetitive under the Sherman Act.” The court also noted that the Namenda IR to XR hard switch “would likely impede generic competition by precluding generic substitution through state drug substitution laws.”
Delaying generic market entry has been the focus of much antitrust scrutiny of late, and that may be what motivated this settlement. Abbvie is in the process of acquiring Allergan, and the US Department of Justice (“DOJ”) is currently reviewing the anticompetitive aspects of this proposed merger. Abbvie has already agreed to the divestiture of brazikumab, an Allergan product, to resolve some of the DOJ’s antitrust concerns. This Nameda settlement may simply be a way to remove another potential antitrust objection to the merger.