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Actavis Loses Monopoly on Alzheimer’s Drug

(CN) - Actavis cannot maintain its billion-dollar monopoly on an Alzheimer's drug by forcing Alzheimer's patients to switch to a freshly patented version before a generic can enter the market, a 2nd Circuit ruling unsealed Thursday shows.

Actavis owns Forest Laboratories, the maker of the Alzheimer's drug Namenda IR, a twice-daily memantine treatment for moderate-to-severe Alzheimer's disease.

Introduced in 2010, Namenda IR has become Forest's bestselling drug, with $1.5 billion in annual sales in 2012 and 2013. It is the only drug of its class on the market.

Once Namenda IR's patents reach the end of their exclusivity period in July 2015, drugmakers can bring generic versions of the product to the market. Normally, a brand drug will lose 80 to 90 percent of the market within six months following the end of patent exclusivity, a trend called the "patent cliff."

To escape the "patent cliff" and fend off competition from generic makers, Actavis introduced a once-daily version of the drug, Namenda XR, and decided to withdraw virtually all Namenda IR from the market, forcing current patients to switch to XR before the generic became available.

Once patients switched to XR, Actavis believed they would be less likely to switch back to a generic version of IR, and it would maintain a high market share until XR's exclusivity period runs out in 2029.

New York state brought a federal lawsuit against Actavis, saying this "forced-switch scheme," also known as "product hopping," violates antitrust law.

Actavis appealed to the 2nd Circuit after a federal judge enjoined Actavis' plan to withdraw Namenda IR from the market before July 2015.

Internal Actavis documents obtained in the litigation showed that the company predicted 80 to 100 percent of IR patients would switch to XR prior to the entry of a generic drug, leaving "few to no prescriptions" left to support a generic version of the drug.

In affirming the injunction, the Manhattan-based federal appeals court noted that Alzheimer's disease makes its victims highly vulnerable to changes in routine, which would be an additional barrier to making a switch in medication, even if the generic is cheaper.

The court unsealed a redacted copy Thursday of the May 22 ruling it issued under seal.

"New York has demonstrated a substantial likelihood of success on the merits of its monopolization and attempted monopolization claims under § 2 of the Sherman Act, and has made a strong showing that defendants' conduct would cause irreparable harm to competition in the memantine-drug market and to consumers," Judge John M. Walker Jr. wrote for a three-judge panel.

Actavis had argued that withdrawing a product is not anticompetitive when the new product is superior to the old one.

But Walker said the actions are anticometitive "when a monopolist combines product withdrawal with some other conduct, the overall effect of which to coerce consumers rather than persuade them on the merits, and to impede competition." (Emphasis in original.)

In this case, the combination of withdrawing Namenda IR, while introducing Namenda XR and heavily marketing the new product to patients and doctors, "forced Alzheimer's patients who depend on memantine therapy to switch to XR," the option states.

By removing IR from the market, Actavis deprived consumers of the opportunity to choose which product is superior, in a plan clearly designed to eliminate generic competition, the court found.

Actavis' own calculations showed what would happen over the next 10 years, if patients switched to Namenda XR before generic IR entered the market; such actions would force consumers to pay almost $300 million more, while costing third-party payors almost $1.4 billion more and forcing Medicare to pay a minimum of $6 billion more for memantine therapy, according to the ruling

This threat is plainly sufficient to support injunctive relief, the court concluded.

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