U.S. DOJ Settles Generic Drug Price Fixing Cases -- Over $400 million

The U.S. Department of Justice has settled several lawsuits concerning essentially of illegal price fixing between companies offering generic drugs.  This is a continuation of the problems facing drug pricing and the generic market.  Government production of generics may be the future.  The U.S. Department of Justice press release states, in part:

Three generic pharmaceutical manufacturers, Taro Pharmaceuticals USA, Inc., Sandoz Inc. and Apotex Corporation, have agreed to pay a total of $447.2 million to resolve alleged violations of the False Claims Act arising from conspiracies to fix the price of various generic drugs. These conspiracies allegedly resulted in higher drug prices for federal health care programs and beneficiaries according to the Justice Department.

The government alleges that between 2013 and 2015, all three companies paid and received compensation prohibited by the Anti-Kickback Statute through arrangements on price, supply and allocation of customers with other pharmaceutical manufacturers for certain generic drugs manufactured by the companies.

Taro Pharmaceuticals USA, Inc., headquartered in New York, has agreed to pay $213.2 million. The Taro drugs allegedly implicated in this scheme address a wide variety of health conditions, and include etodolac, a nonsteroidal anti-inflammatory drug used to treat pain and arthritis, and nystatin-triamcinolone cream and ointment, a combination of an antifungal medicine and steroid used to treat certain kinds of skin infections.

Sandoz Inc., headquartered in New Jersey, has agreed to pay $185 million. The Sandoz drugs at issue include benazepril HCTZ, used to treat hypertension, and clobetasol, a corticosteroid used to treat skin conditions.

Apotex Corporation, headquartered in Florida, has agreed to pay $49 million in connection with its sale of pravastatin, a drug used to treat high cholesterol and triglyceride levels.

“Illegal collaboration on the price or supply of drugs increases costs both to federal health care programs and beneficiaries,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “The department will use every tool at its disposal to prevent such conduct and to protect these taxpayer-funded programs.” 

“These civil settlements are another achievement in my office’s efforts to hold generic drug companies accountable for the consequences arising from price-fixing schemes, including the harm to federal health care programs,” said Acting U.S. Attorney Jennifer Arbittier Williams for the Eastern District of Pennsylvania. “We will continue to aggressively pursue these violations of the Anti-Kickback Statute and the False Claims Act and obtain significant recoveries.”

“Conspiring to raise prices on generic medications is illegal and could prevent patients from being able to afford their needed prescription drugs. Americans have the right to purchase generic drugs set by fair and open competition, not collusion,” said Special Agent in Charge Maureen R. Dixon of the Philadelphia Regional Office of the Inspector General, Department of Health and Human Services (HHS-OIG). “HHS-OIG along with our law enforcement partners will continue to investigate allegations of companies engaging in actions that put the public and the Medicare program at risk.”   

In connection with its settlement agreement, each company also entered a five-year corporate integrity agreement (CIA) with OIG. The CIAs include unique internal monitoring and price transparency provisions. They also require the companies to implement compliance measures including risk assessment programs, executive recoupment provisions and compliance-related certifications from company executives and board members.  . . .

The Anti-Kickback Statute prohibits companies from receiving or making payments in return for arranging the sale or purchase of items such as drugs for which payment may be made by a federal health care program. These provisions are designed to ensure that the supply and price of health care items are not compromised by improper financial incentives. These settlements reflect the important role of the False Claims Act to ensure that the United States is fully compensated when it is the victim of kickbacks paid to further anticompetitive conduct.       

All three companies previously entered into deferred prosecution agreements with the Antitrust Division to resolve related criminal charges. Taro paid a criminal penalty of $205.6 million and admitted to conspiring with two other generic drug companies to fix prices on certain generic drugs. Sandoz paid a criminal penalty of $195 million and admitted to conspiring with four other generic drug companies to fix prices on certain generic drugs. Apotex paid a criminal penalty of $24.1 million and admitted to conspiring to increase and maintain the price on pravastatin. The civil settlement payments announced today are in addition to the criminal penalties paid by the companies.   

The press release is available, here. 

U.S. FDA Sends Letter to Push USPTO Concerning Drug Patents and Access

The U.S. Federal Food and Drug Administration (FDA) recently sent a letter to the U.S. Patent and Trademark Office concerning the FDA’s concerns regarding pharmaceutical patents and their impact on innovation and access. Some of the concerns include the use of continuations to build patent thickets to raise litigation costs as well as resulting in possible delays of generic entry; evergreening practices; and product-hopping.  Notably, the FDA is generally interested in increasing communication and collaboration to address those issues, including offering expertise, collecting additional information regarding IPRs and other post-grant procedures as well as inquiring whether examiners need more time to review patent applications. While the Trump Administration also had concerns regarding drug pricing, President Biden’s recent Executive Order concerning competition is the impetus for this letter’s push for increased collaboration. 

Biden Administration Executive Order on Competition: Some IP Portions

On July 9, 2021, the Biden Administration released an “Executive Order on Promoting Competition in the American Economy” that literally will touch almost every part of the U.S. economy.  The Executive Order can be found, here.  Concerning SEPs the Executive Order states:

To avoid the potential for anticompetitive extension of market power beyond the scope of granted patents, and to protect standard-setting processes from abuse, the Attorney General and the Secretary of Commerce are encouraged to consider whether to revise their position on the intersection of the intellectual property and antitrust laws, including by considering whether to revise the Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued jointly by the Department of Justice, the United States Patent and Trademark Office, and the National Institute of Standards and Technology on December 19, 2019.

The Order further directs the FTC Chair to consider rulemaking in the following areas:

          (i)    unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy;
          (ii)   unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment;
          (iii)  unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars;
          (iv)   unfair competition in major Internet marketplaces;
. . . and
          (vii)  any other unfair industry-specific practices that substantially inhibit competition.

The Order directs the Secretary of Agriculture to prepare a report concerning IP laws and seeds and other inputs:

to help ensure that the intellectual property system, while incentivizing innovation, does not also unnecessarily reduce competition in seed and other input markets beyond that reasonably contemplated by the Patent Act (see 35 U.S.C. 100 et seq. and 7 U.S.C. 2321 et seq.), in consultation with the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, submit a report to the Chair of the White House Competition Council, enumerating and describing any relevant concerns of the Department of Agriculture and strategies for addressing those concerns across intellectual property, antitrust, and other relevant laws.

The Order directs the Secretary for Health and Human Services to address drug access and pricing:

          (iv)    not later than 45 days after the date of this order, submit a report to the Assistant to the President for Domestic Policy and Director of the Domestic Policy Council and to the Chair of the White House Competition Council, with a plan to continue the effort to combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging;
          (v)     to lower the prices of and improve access to prescription drugs and biologics, continue to promote generic drug and biosimilar competition, as contemplated by the Drug Competition Action Plan of 2017 and Biosimilar Action Plan of 2018 of the Food and Drug Administration (FDA), including by:
               (A)  continuing to clarify and improve the approval framework for generic drugs and biosimilars to make generic drug and biosimilar approval more transparent, efficient, and predictable, including improving and clarifying the standards for interchangeability of biological products;
               (B)  as authorized by the Advancing Education on Biosimilars Act of 2021 (Public Law 117-8, 135 Stat. 254, 42 U.S.C. 263-1), supporting biosimilar product adoption by providing effective educational materials and communications to improve understanding of biosimilar and interchangeable products among healthcare providers, patients, and caregivers;
               (C)  to facilitate the development and approval of biosimilar and interchangeable products, continuing to update the FDA’s biologics regulations to clarify existing requirements and procedures related to the review and submission of Biologics License Applications by advancing the “Biologics Regulation Modernization” rulemaking (RIN 0910-AI14); and
               (D)  with the Chair of the FTC, identifying and addressing any efforts to impede generic drug and biosimilar competition, including but not limited to false, misleading, or otherwise deceptive statements about generic drug and biosimilar products and their safety or effectiveness;
          (vi)    to help ensure that the patent system, while incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law, not later than 45 days after the date of this order, through the Commissioner of Food and Drugs, write a letter to the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office enumerating and describing any relevant concerns of the FDA; 
          (vii)   to support the market entry of lower-cost generic drugs and biosimilars, continue the implementation of the law widely known as the CREATES Act of 2019 (Public Law 116-94, 133 Stat. 3130), by:
               (A)  promptly issuing Covered Product Authorizations (CPAs) to assist product developers with obtaining brand-drug samples; and
               (B)  issuing guidance to provide additional information for industry about CPAs; and
          (viii)  through the Administrator of the Centers for Medicare and Medicaid Services, prepare for Medicare and Medicaid coverage of interchangeable biological products, and for payment models to support increased utilization of generic drugs and biosimilars.

The Order directs the Secretary of Commerce to reconsider proposed regulations concerning technology transfer:

   (r)  The Secretary of Commerce shall:
          (i)    acting through the Director of the National Institute of Standards and Technology (NIST), consider initiating a rulemaking to require agencies to report to NIST, on an annual basis, their contractors’ utilization activities, as reported to the agencies under 35 U.S.C. 202(c)(5);
          (ii)   acting through the Director of NIST, consistent with the policies set forth in section 1 of this order, consider not finalizing any provisions on march-in rights and product pricing in the proposed rule “Rights to Federally Funded Inventions and Licensing of Government Owned Inventions,” 86 Fed. Reg. 35 (Jan. 4, 2021); 

                (iii)  not later than 1 year after the date of this order, in consultation with the Attorney General and the Chair of the Federal Trade Commission, conduct a study, including by conducting an open and transparent stakeholder consultation process, of the mobile application ecosystem, and submit a report to the Chair of the White House Competition Council, regarding findings and recommendations for improving competition, reducing barriers to entry, and maximizing user benefit with respect to the ecosystem.

Novartis, the Good Samaritan

As discussed in a previous post, the Covid-19 pandemic is an excellent opportunity for the pharmaceutical industry to demonstrate its commitment to serving the world through philanthropy.  Novartis recently stated that it will “donate up to 130 million doses” of a generic drug which may be a good treatment for coronavirus.  The Press Release further outlines Novartis’ other efforts to combat Covid-19.  Notably, Gilead Sciences received a significant amount of criticism for its attempt to get a potential treatment for Covid-19 orphan status under U.S. law—which it has since withdrawn.  Professor Lisa Larrimore Ouellette has an excellent analysis of the situation, here.  The Novartis Press Release states, in part:

Basel, March 20, 2020 - Novartis announced today its commitment to donate up to 130 million doses of generic hydroxychloroquine to support the global COVID-19 pandemic response. Hydroxychloroquine and a related drug, chloroquine, are currently under evaluation in clinical trials for the treatment of COVID-19. Novartis is supporting ongoing clinical trial efforts, and will evaluate needs for additional clinical trials.

When supported for use in COVID-19 infected patients by regulatory authorities, Novartis intends to donate up to 130 million 200 mg doses by the end of May, including its current stock of 50 million 200 mg doses. The company is also exploring further scaling of capacity to increase supply and is committed to working with manufacturers around the world to meet global demand.

Novartis Sandoz division currently only holds a registration for hydroxychloroquine in the U.S., and will pursue appropriate regulatory authorizations from the U.S. FDA and the European Medicines Agency. Novartis will work with stakeholders including the World Health Organization to determine the best distribution of the medicine to ensure broad access to patients most in need of this medicine globally. The company aims to ensure that patients currently depending on this medicine are not impacted by the donation.

The commitment announced today builds on the previously announced commitments of a USD 20 million Novartis COVID-19 Response Fund, drug discovery collaboration efforts, support of clinical trials for existing Novartis medicines, and the Sandoz commitment to maintain stable prices on a basket of essential medicines that may help in the treatment of COVID-19.

Novartis intends to work closely with other manufacturers to scale up production of hydroxychloroquine as necessary to support global supply, and encourages industry, governments and international institutions to ensure adequate global supply of medications to treat COVID-19 patients.

Disincentivizing the Use of IPRs and PGRs Against Pharmaceutical and Biologic Patents

Senator Orrin Hatch has introduced legislation designed to curb the use of IPRs and PGRs against pharmaceutical and biologic patents by essentially denying the benefits to generic/biosimilar companies of the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act.  Allowing the usage of IPRs against pharmaceutical and biologic patents was a serious oversight in enacting the America Invents Act.  Senator Hatch’s Office has released the following information concerning the new Hatch-Waxman Integrity Act of 2018 (which includes a section by section analysis):

In 2012, Congress enacted the America Invents Act to fix a problem unrelated to drug/biologic innovation and drug/biologic affordability; it created the inter partes review (“IPR”) and post-grant review (“PGR”) processes to combat the growing problem of patent trolls.

Even though Congress did not intend to upset its drug/biologic-specific Hatch-Waxman and BPCIA procedures with the enactment of the IPR and PGR processes, generic drug and biosimilars manufacturers have increasingly used the IPR process to circumvent the Hatch-Waxman Act and BPCIA patent challenge processes while nonetheless taking advantage of their abbreviated processes for drug entry.1  Moreover, hedge funds with no interest in manufacturing or marketing drugs have filed IPR challenges against drug patents with the goal of profiting from stock market declines triggered by the IPR filings—a type of market manipulation.

The Hatch-Waxman Integrity Act of 2018 would close the loophole unintentionally created by the America Invents Act. To restore the careful balance of the Hatch-Waxman Act and the BPCIA, and to prevent the IPR or PGR processes from undercutting them, the FD&C Act and the PHS Act would be amended to prevent using IPR (or PGR) challenges to circumvent the specific patent challenge processes for drugs and biologics painstakingly created by Congress. In addition, the federal securities rules would be clarified to indicate that filing IPR patent challenges and profiting from resulting stock price changes is a form of prohibited market manipulation.

The Press Release is available, here.  The text of the proposed legislation is available, here.  [Hat Tip to Professor Dennis Crouch’s Patently Obvious Blog]