United States: FTC Seeks Permanent Injunction Against Agreement to Delay Generic Entry

The FTC filed a complaint in federal district court on November 7, seeking to permanently enjoin enforcement of an agreement between Warner Chilcott and Barr Pharmaceuticals that allegedly harmed competition by delaying entry of Barr's generic oral contraceptive.

Warner Chilcott sells Ovcon 35, an oral contraceptive, for which patent protection has expired. In January 2003, Barr announced its intention to market generic Ovcon by the end of that year. According to the FTC's complaint, Barr planned to price its generic product approximately 30% lower than Warner Chilcott's price for branded Ovcon. Barr anticipated that its generic product would capture approximately 50% of Ovcon's new prescriptions by the end of the first year.

In September 2003, Warner Chilcott and Barr executed a letter of intent under which Barr agreed not to sell its generic Ovcon in the United States for five years, in exchange for a $20 million payment from Warner Chilcott. Barr also agreed to supply Warner Chilcott with Ovcon if requested. A final agreement was executed in March 2004, at which time Warner Chilcott paid Barr $1 million. Under the terms of the final agreement, Warner Chilcott could elect to pay the remaining $19 million within 45 days after the Food and Drug Administration (FDA) approved Barr's generic product. The final agreement styled this arrangement an option for an exclusive license for Barr's generic Ovcon. The FDA approved Barr's generic product in April 2004, and Warner Chilcott exercised its exclusive license option in May.

The FTC alleges that absent the agreement, Barr would have started selling generic Ovcon shortly after receiving FDA approval in April 2004. According to the complaint, the agreement thus deprives U.S. consumers of the choice of purchasing a lower-priced generic product instead of a higher-priced branded Ovcon and is anti-competitive. The FTC seeks a permanent injunction preventing Barr and Warner Chilcott from continuing their agreement.

This case is the latest in a series of FTC challenges to patent settlement agreements that allegedly restrict competition. The FTC's case against Schering-Plough and two other drug manufacturers, brought in administrative litigation, currently is pending certiorari before the Supreme Court.

The press release and complaint are available at these links.

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