Inside This Issue

Vol. 25, No. 21 Bayer, Generic Firms Win Oct. 29, 2008 In Antitrust Case INSIDE THIS ISSUE A federal appeals court has upheld a ruling that agreements between Bayer and four generics firms on the antibiotic Cipro did not violate the Sherman Antitrust Act or state antitrust regulations or laws. Ask the Expert: Michelle Seagull comments on Cipro In its decision, the U.S. Court of Appeals for the Federal Cir- antitrust case............Page 3 cuit agreed with the In re Ciprofloxacin Hydrochloride Antitrust Litigation decision made by the U.S. District Court for the Eastern FDA: Agency seeks to District of New York in favor of Bayer, Hoechst Marion Roussel withdraw ANDAs for (HMR), Rugby Laboratories, Watson Pharmaceuticals and Barr MiraLax...................Page 5 Laboratories. Clinical Trial: UK OKs The appeals court found the companies did not engage in anti- INS-20 trial..............Page 5 competitive practices when they signed agreements with Bayer not Lawsuits: Mylan gets two (See Antitrust, Page 2) tentative approvals, faces Novartis suit ............Page 6 Court Finds Against Sandoz In Biaxin XL Case Industry News: Par to re- structure business ....Page 7 A federal appeals court upheld a preliminary injunction barring Sandoz from selling a generic version of Abbott Laboratories’ ex- Mergers/Acquisitions: tended-release antibiotic Biaxin. Stakeholder downplays Ac- tavis sale rumors......Page 7 The split decision by the U.S. Court of Appeals for the Federal Circuit moves the patent dispute back to the U.S. District Court for FTC: Court agrees to halt the Northern District of Illinois for further proceedings on the case, websites’ sale of unap- which started when Abbott sued Sandoz in 2005 for infringing on its proved drugs............Page 7 ’718, ’616 and ’407 patents on Biaxin (clarithromycin). International: EU votes on The FDA approved Sandoz’s ANDA for Biaxin XL (extended re- new classifying, labeling lease) Aug. 25, 2005, and Abbott filed suit the following month. Ab- system......................Page 9 bott subsequently withdrew the ’407 patent from the complaint. San- doz introduced its generic version of the drug after Abbott filed suit. Drug Application: Mylan files ANDA for generic The court granted Abbott a preliminary injunction to stop San- Amrix.....................Page 12 doz from selling its product in the U.S. and ordered the company to (See Biaxin, Page 8) Page 2 GENERIC LINE Oct. 29, 2008 Antitrust, from Page 1 Bayer also agreed to allow Barr to sell a competing ciprofloxacin product beginning at to challenge the validity of the ’444 patent cover- least six months before the patent expired. ing Cipro (ciprofloxacin HCl). In fact, “settlements in patent cases, however, frequently pro- In 2000 and 2001, direct and indirect pur- vide that the alleged infringer will not challenge chasers of Cipro and advocacy groups filed suits the validity of the patent,” the court says. challenging these agreements, saying they “con- stituted an illegal market allocation in violation This ruling is the strongest yet in support of of the prohibition on contracts in restraint of using reverse payments as a way to settle Hatch- trade contained in sections 1 and 2 of the Sher- Waxman cases, Michael Keeley, a partner at Ax- man Act,” according to court documents. inn, Veltrop & Harkrider LLP who specializes in antitrust, told Generic Line. The Federal Circuit The cases were consolidated in the U.S. Dis- is, in effect, saying that reverse payment settle- trict Court for the Eastern District of New York, ments are almost always lawful so long as they which ruled in support of the defendants, saying are not a sham, he noted. their agreements did not violate the Sherman Act or state antitrust laws, a position with which the Bayer first won Cipro approval from the appeals court agreed. FDA in October 1987. Barr filed an ANDA for generic Cipro in October 1991, asserting that the The Federal Circuit’s opinion could have an ’444 patent was invalid and unenforceable. Bayer indirect effect on other cases given the court’s sued Barr in January 1992 in the U.S. District role in developing patent law, Keeley told Gener- Court for the Southern District of New York. In ic Line. He adds that of the four or five reverse 1996, Rugby, a subsidiary of HMR, agreed to payment cases that have come before circuit help fund Barr’s litigation against Bayer in ex- courts over the past few years, only the Sixth Cir- change for half the profits from future sales of cuit in its In re Cardizem CD Antitrust Litigation Barr’s generic Cipro. decision expressed significant skepticism about these agreements. Bayer entered into settlement discussions with HMR and Barr and, just before the compa- The Generic Pharmaceutical Association nies would have gone to trial, the generic firms (GPhA) says in a statement that the decision agreed not to challenge the validity of the patent demonstrates that patent challenge settlements are in separate agreements. The patent expired in De- a lawful and valuable tool for bringing affordable cember 2003 and enjoyed six months of pediatric medicines to market quickly. exclusivity thereafter. “Patent settlements have proven to be a Under an agreement between Bayer, Barr and valuable component in providing consumers with HMR, Barr said it would convert its Paragraph IV affordable medicines, as they have brought more certification to a Paragraph III and would not manu- affordable products to market sooner than other- facture a generic version of the drug. In exchange, wise would have been possible,” GPhA President Bayer said it would pay $49.1 million and either and CEO Kathleen Jaeger says. supply Barr with Cipro for resale or make quarterly payments — referred to as reverse payments — un- “The Appeals Court decision further sup- til Dec. 31, 2003, according to court documents. ports our industry’s position that the mechanisms for reviewing the appropriateness of settlements Payments from Bayer to Barr eventually are already adequate, and that any initiatives, totaled $398.1 million, and Barr shared these such as legislative action proposed in recent years payments equally with HMR, according to court documents. (See Antitrust, Page 4) Oct. 29, 2008 GENERIC LINE Page 3 ASK THE EXPERT Recently, the U.S. Court of Appeals for the on competition that it can be deemed per se un- Federal Circuit handed down a decision in the lawful without further analysis. Price fixing, for case In re Ciprofloxacin Hydrochloride Antitrust example, is per se unlawful. Litigation, finding that Bayer and Barr did not violate antitrust laws in a case involving Cipro (see The rule of reason, on the other hand, ap- story, page 1). Michelle Seagull, an associate plies to conduct that courts have less experience with Axinn, Veltrop & Harkrider LLP, discussed with or that does not present clearly anti-competi- some aspects of the case with Generic Line. tive harms. It requires an analysis of a restraint’s actual competitive effects. The initial burden in a What reasoning did the U.S. District Court rule of reason case is on the plaintiff to demon- for the Eastern District of New York use to reach strate that a restraint harms competition. If the its decision? plaintiff meets this burden then the burden shifts to the defendant to show that the restraint has Seagull: The district court held that the set- procompetitive benefits. If a restraint has anti- tlement between Bayer and Barr did not violate competitive and pro-competitive effects, the bur- the antitrust laws because it did not create a bot- den shifts back to the plaintiff to demonstrate that tleneck on challenges to Bayer’s patent, it did not the harms outweigh the benefits or that the bene- have an adverse effect on competition that went fits could be obtained through a less restrictive beyond the scope of Bayer’s patent and the settle- alternative. ment was not the result of fraud or sham litigation. As such, there was no anti-competitive harm In this case, the court concluded that the set- and, therefore, the court did not need to consider tlement agreement did not result in any anti- whether the settlement had countervailing pro- competitive effects because it did not restrict competitive benefits and, if so, whether those competition beyond the exclusionary zone of the benefits could be achieved through a less restric- patent itself. In other words, it was the patent that tive alternative. enabled Bayer to exclude generic competitors, not the settlement agreement. Thus, the court did Can you explain how the Federal Circuit ar- not need to assess whether the agreement had rived at its decision? pro-competitive benefits or whether those benefits could be achieved through a less restrictive Seagull: The Federal Circuit arrived at its alternative in order to hold that it did not violate decision by adopting the reasoning of the district the antitrust laws. court. It agreed that the rule of reason applied and that, absent fraud or sham litigation, any settle- Can you explain what sham litigation is? ment that did not expand beyond the facial scope of the patent would not violate the antitrust laws Seagull: Sham litigation refers to a plain- even in the event of a significant reverse payment. tiff’s use of the process of litigating to obtain a competitive advantage as opposed to the outcome What is the rule of reason and how did it ap- of the litigation. To constitute sham litigation, a ply in this case? lawsuit must be objectively baseless (i.e. no rea- sonable plaintiff could realistically expect to suc- Seagull: Section 1 of the Sherman Act pro- ceed on the merits). It also must be brought for hibits unreasonable restraints of trade.

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