In a 135-page opinion issued Thursday, but made public for the first time Friday in redacted form, Judge Sweet granted the New York Attorney General’s motion to enjoin drug maker Activis from dropping a twice-a-day Alzheimer’s drug called Namenda IR, whose patent protection is about to expire, in favor of a once-a-day version called Namenda XR. The switch was allegedly motivated to prevent triggering state laws requiring pharmacists to substitute generics that are “AB-rated” to the brand name drug — i.e., have the same active ingredient, “form, dosage, strength, and safety and efficacy profile.” These laws can cause a sharp decline in revenue when a patent expires (referred to as the “patent cliff”). As Judge Sweet explained, companies may try to avoid the “patent cliff” through a practice called “product hopping”:
This AB-rated requirement, while intended to ensure therapeutic equivalence to the branded drug, provides an opportunity for branded manufacturers to game the system through a practice termed “product hopping.” Tr. 453:19-454:12 (Berndt). For a drug that is about to go-off the “patent cliff,” the drug manufacturer develops a “follow-on” version of the drug with a later patent expiration, and encourages patients and their physicians to switch to the new version. See Berndt Decl. (PX64) ¶ 41. As found above, the generic of the original version of the drug will not be “AB-rated” to the follow-on branded drug. Thus, if physicians write prescriptions for the follow-on version instead of the original, the generic entry is not dispensed even if, in practice, the cost savings offered by the generic may outweigh any advantage offered by the new version of the branded drug. Sometimes, these follow-on drugs may be better than the original version. Tr. 456:19-457:12 Berndt). In other instances, the new drugs offer little to no therapeutic advantage over the prior formulation, and the reformulation is merely an attempt to manipulate the regulatory system and interfere with effective price competition between branded and generic drugs at the pharmacy.
Judge Sweet found the practice anticompetitive in this instance and issued the preliminary injunction. He is holding a hearing today at noon to determine whether to stay the ruling pending appeal