United States: A New Suit Alleges "Product Hopping" Theory

Last Updated: September 29 2014
Article by Jonathan H. Hatch and Thomas W. Pippert

Previously, we discussed a recent lawsuit that alleged "product hopping" by a brand pharmaceutical manufacturer as part of a broader pay-for-delay claim. On Monday, the New York Attorney General filed a suit in the U.S. District Court for the Southern District of New York regarding Forest Laboratories' Alzheimer's drug Namenda, in which alleged product hopping plays the central role.

As we noted last week, the few district courts that have addressed product hopping allegations appear to distinguish between situations where a brand manufacturer removes the prior version of the drug from the market (a "forced switch"/"hard switch" of prescribers and patients to the new version of the drug) and where the manufacturer continues to sell the prior version and aggressively promotes the new version (a "soft switch"), suggesting that only the former situation may raise potential antitrust concerns. The Attorney General's complaint regarding Namenda alleges that the defendants decided last Fall on the need for a "forced switch" in which they will discontinue production of their prior version of Namenda sometime in 2014. Defendants allegedly began their product hopping with a "soft switch" strategy in June 2013 when they launched their extended release version of Namenda and tried to convince prescribers to switch their patients to the new version before anticipated generic entry (and automatic substitution of generics for the prior version) in July 2015. But with the "soft switch" strategy projected to convert only 30% of defendants' patient base by the date of generic entry, defendants allegedly needed to take a new approach as the clock ticked towards July 2015 and began to publicize their intent to discontinue the prior version. The exact date for discontinuance is unclear (allegedly due to manufacturing capacity challenges for the new version), so the Attorney General has coupled his antitrust claims with fraud claims for defendants' allegedly "deceptively exaggerating the timing and scope of their plan to discontinue Namenda IR."

In addition to seeking monetary relief, the Attorney General asks for an injunction barring defendants from discontinuing the sales of its prior version of Namenda until generic versions become available that may be automatically substituted for the prior version.

Given the lack of appellate precedent we noted in our last post, it is difficult to predict how the court will address these issues, especially given that the alleged discontinuance of the product has not yet occurred and appears to be subject to uncertainty. But any ruling should provide some guidance on the consequences for a manufacturer that moves from a "soft switch" to a "hard switch" without adequate justifications (such as a sufficient percentage of switches occurring during the "soft switch" to show the market's adoption of the new formulation or cost savings).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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