Antitrust class actions over pay for delay generic drug agreements are increasing

Posted on: February 11th, 2014 by Steve Larson

medicine, lekarstwoDrug distributor American Sales Co. on January 2, 2014, hit Boehringer Ingelheim Pharmaceuticals and Teva Pharmaceuticals USA Inc. with a proposed class action over an alleged $120 million pay-for-delay deal, the latest in a spate of suits over agreements to keep generic medicines off the market.  American Sales, which says it paid more than it should have for stroke medicine Aggrenox, is at least the second company to sue Boehringer and Teva over the reverse-payment arrangement, joining wholesaler Miami-Luken Inc., which filed suit in November.

According to the complaint, the deal emerged from patent litigation between Boehringer and Barr Pharmaceuticals Inc., which was later purchased by Teva. With Boehringer’s patent for Aggrenox “seriously threatened” by Barr, the company agreed to hand over as much as $120 million over the course of seven years in exchange for a generic version of the product being delayed until 2015, the complaint says.

As part of the deal, Barr reportedly agreed to help with promotional efforts by enlisting a subsidiary to market Aggrenox to obstetricians and gynecologists, but that arrangement was essentially a sham, because such specialists would have little use for a stroke medicine, American Sales alleges.

“The initial and continuing payments made by Boehringer to Barr under the co-promotion agreement were well in excess of fair value for those services, particularly considering that … Boehringer had little or no reasonable expectation of benefit from the targeted promotion of Aggrenox, a drug for stroke patients, to obstetricians and gynecologists,” the complaint said.

When the companies announced the settlement in 2008, Aggrenox had annual sales of about $330 million, and according to the complaint, yearly revenue eventually exceeded $400 million.

Reverse payments benefit brand-name drugmakers by shooing away cheaper competition, and the generics makers win by scoring more cash than they could have expected to net from introduction of a low-cost medicine. Each side also avoids the cost and uncertainty of litigation.

Litigation over the deals has become common in recent years, and got a massive boost in June when the U.S. Supreme Court agreed that the arrangements can be illegal in some instances.

The case is American Sales Co. LLC v. Boehringer Ingelheim Pharma GMBH & Co. KG et al., case number 3:14-cv-00003, in the U.S. District Court for the District of Connecticut.