Antitrust -- 2016

Mylan Pharm. Inc. v. Warner Chilcott Pub. Ltd. Co.   (3rd Circuit)

IP protections for incremental pharmaceutical innovations

In 1985, Mayne Pharmaceuticals introduced a capsule form of a delayed-release antibiotic. Over time, Mayne developed new and improved versions as a tablet in response to competitive market forces and difficulties with the capsule form. Mayne patented these incremental, innovative forms. As Mayne continued to develop new formulations, The plaintiff, Warner Chilcott, attempted to produce generic versions, hoping to benefit from state laws that allow or, in some cases, require pharmacies to substitute a branded drug with its bioequivalent generic counterpart.

Despite the profits that plaintiff was able to reap by producing generics, it brought this antitrust lawsuit alleging “product hopping” that ostensibly provided no significant improvements but prevented filling prescriptions automatically with generics. The theory advanced by the plaintiff would impose a duty upon Mayne to market older drug formulations—in order to help plaintiff take advantage of state generic-substitution laws—unless Mayne can demonstrate that its older drug formulations are “sufficiently” innovative. If accepted, this theory would create a rule that is unadministrable in practice, counter to basic principles of antitrust law, and a hindrance to innovation.

The NAM filed an amicus brief supporting Mayne and arguing that a robust intellectual property (IP) regime is critical to creative activity. Manufacturers must constantly make business judgments regarding whether, and to what extent, they should invest capital in the development of new and improved products. The investments necessary to innovate and to develop IP often are substantial, and holders of capital will make the necessary investments only if they are able to recover the costs. Our IP system is intended to promote innovation, and thus affords protections for IP that provide the financial incentive for manufacturers to undertake the research and development costs necessary to foster innovation.

On Sept. 28, 2016, the court ruledin favor of the defendant. It defined the product market to include not just the drug at issue, but also other similar drugs used to treat acne, and ruled that an 18% market share in that market was insufficient to support a monopolization claim. It also ruled that the plaintiff failed to produce evidence of anticompetitive conduct that would allow a claim for product hopping. The plaintiff was not foreclosed from the market, and it received 180 days of exclusive rights to market a generic version of the drug. Moreover, the defendant provided strong evidence that its product changes were made for safety reasons and to respond to competitive pressures from others.

This is a significant victory for innovation and the companies that innovate. The decision warned against turning courts into "tribunals over innovation sufficiency."

Related Documents:
NAM amicus brief  (December 21, 2015)


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