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Three Important Antitrust Updates - June 30, 2011


Email Alert

June 30, 2011

By Toby Singer

GSK Unable to Shake Off Antitrust Claims in Flonase Suit

The U.S. District Court for the Eastern District of Pennsylvania denied GlaxoSmithKline PLC's (GSK) motion for summary judgment in its case against direct and indirect purchasers of its drug Flonase and Roxane Laboratories Inc. (Roxane). The court found that there were still genuine issues of material fact that were to be resolved by the jury before determining whether or not GSK's citizen petitions and lawsuit against Roxane constituted a sham litigation to prevent Roxane's generic entry.

GSK's Flonase is a steroid nasal spray containing fluticasone propionate (FP). The U.S. Food and Drug Administration (FDA) approved the drug in October 1994 for the indication of seasonal allergic rhinitis, perennial allergic rhinitis, and perennial non-allergic rhinitis. Allergic rhinitis is an inflammation of the nasal mucous membrane that occurs seasonally. By 2004, GSK recognized the existence of generic manufacturers who were looking to make a generic version of Flonase. During this timeframe, FDA was establishing industry guidelines for how to determine bioequivalence for nasal sprays. Bioequivalence compares the rate and extent to which an active ingredient is absorbed and is available in the body between the branded drug, in this case Flonase, to the generic drug. FDA had issued Draft Guidance for Industry: Bioavailability and Bioequivalence Studies for Nasal Aerosols and Nasal Sprays for Local Action in 1999 (1999 Draft Guidance) on this issue, but by 2003, FDA had not issued final industry guidance on this topic. Instead, based on the comments FDA has received on the 1999 Draft Guidance, it revised the 1999 Draft Guidance and issued Draft Guidance for Industry: Bioavailability and Bioequivalence Studies for Nasal Aerosols and Nasal Sprays for Local Action (2003 Draft Guidance). Roxane filed an Abbreviated New Drug Application (ANDA) for Flonase in 2002, indicating that its drug was bioequivalent to Flonase.

While FDA was accepting comments on the 2003 Draft Guidance, GSK filed a citizen petition (CP) to FDA, requesting that five scientific standards be required before FDA finds that a generic drug is bioequivalent to the branded drug. The CP prevented FDA from approving Roxane’s ANDA because, at that time, FDA would not approve any ANDAs while a relevant CP was pending. FDA ended that restriction in 2007. In addition, GSK also requested that FDA not approve any ANDAs before finalizing the industry guidelines. FDA rejected these requests. In 2004, GSK filed another CP with two other requests related to bioequivalence requirements for nasal sprays. FDA rejected these new requests; on the same day it approved Roxane’s ANDA. The following day, GSK filed for a temporary restraining order (TRO) against Roxane, alleging that Roxane was infringing on GSK's patent. The TRO was granted; but the court denied GSK's subsequent motion for a preliminary injunction.

The plaintiffs brought the instant suit against GSK alleging that GSK’s CPs and lawsuit were efforts to prevent generic entry into the market. GSK filed a motion for summary judgment arguing that its actions were immune from antitrust scrutiny under the Noerr-Pennington doctrine, which protects persons from exercising their First Amendment right to petition the government for redress even if the exercise of the right results in an action that is anticompetitive. However, parties are not immune from antitrust scrutinty under Noerr-Pennington where the purpose of the exercise is to stifle competition and thus is considered to be a "sham."

The court denied GSK's motion, finding that there was a genuine issue of fact that must be determined by the jury. The court found that GSK could not prove that its CPs and lawsuit were objectively baseless. Although GSK provided a rationale for each of its requests, the plaintiffs were able to provide a plausible argument for why GSK’s requests were baseless. For instance, GSK recommended that FDA should require certain tests and data before approving an ANDA for a nasal spray. The plaintiffs were able to demonstrate that the data and tests requested were redundant and unnecessary to show bioequivalence. In addition, the plaintiffs could show that GSK's request for FDA to wait to approve any ANDA before finalizing the industry guidelines was unfounded, since FDA is not under any formal obligation to do so. As for GSK’s lawsuit, the court held that the district court's TRO did not indicate that GSK's claims were not baseless. Instead, the court distinguished between the district court's finding that there was "some likelihood of success on the merits"”compared to a "realistic chance of success on the merits" and determined that the TRO standard, which requires some success on the merits, is not sufficient to determine that GSK's claims were not objectively baseless.

Court of Appeals Reaffirms Dismissal of Foley Catheter Suit

On June 8, 2011, the U.S. Court of Appeals for the Eighth Circuit upheld its previous decision affirming the dismissal of Southeast Missouri Hospital and Saint Francis Medical Center's (collectively plaintiffs) claims against C.R. Bard Inc. (Bard). The court found that the claims were barred under the precedent established in Concord Boat Corp. v. Brunswick Corp. that permitted share-based discounts.

The plaintiffs brought antitrust claims against Bard, a manufacturer and seller of various types of urological catheters, on behalf of themselves and all direct purchasers of Bard urological catheters in the United States whose purchases were governed by contracts between Bard and various Group Purchasing Organizations (GPOs) and Integrated Delivery Networks (IDNs). GPOs and IPNs negotiate prices on behalf of member hospitals and contract with manufacturers in an effort to obtain pricing discounts. The plaintiffs claimed that Bard has a monopoly in the urological catheter market, and that it has maintained its monopoly through exclusionary contracts with GPOs and IDNs that have foreclosed competition and resulted in overcharges for hospital purchasers. The U.S. District Court for the Eastern District of Missouri certified the class in September.

In the district court, the parties moved for summary judgment. The district court ruled for Bard after finding that there was no antitrust violation because the plaintiffs failed to show the existence of antitrust injury. Plaintiffs appealed, and the court affirmed the decision; however, it was later vacated, and the court granted the plaintiffs' petition for a rehearing. Thus, the court of appeals reviewed the district court's finding of summary judgment de novo.

The court reaffirimed the decision, holding that the plaintiffs’ challenge was precluded under Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000). In Concord, the plaintiffs were required to buy a certain percentage of products from the defendant to obtain very attractive discounts. The plaintiffs argued that the agreements were de facto exclusive arrangements, because “the discount prices are so attractive that hospitals cannot afford to forgo them.” The court found for the defendant, finding that because the contracts were not exclusive and the plaintiff still had the freedom to buy from other competitors. In the immediate case, the court found that the “[s]hare-based discount gave hospitals discounts for committing to purchase specified percentages of their catheter needs from Bard.” However, the plaintiffs were never required to purchase their catheters only from Bard, and thus the court held that the contract was not anticompetitive.

Also key to this decision was the plaintiffs’ inability to demonstrate the existence of a submarket. Bard prefers to have sole-course contracts with GPOs in which Bard supplies all of the catheters on a GPOs price list to member hospitals. Bard also provides tier pricing; the discounts are larger when the hospital buys a certain percentage of supplies from Bard. The plaintiffs tried to argue that the Foley catheters sold under GPO contracts are a different market than intermittent catheters sold under GPO contracts. One of the key differences between the contracts is that GPO contracts have a claw-back provision that allow Bard to reclaim higher discounts that were given under the presumption that the hospital was going to purchase a certain percentage of goods. The court found that under Brown Shoe, the plaintiffs were unable to make a distinction between the two markets. Moreover, the court found that the plaintiffs waived the argument that a Foley catheter submarket existed by not properly pleading it at the district court level.

Massachusetts Attorney General Permits Fallon to Join Atrius With Contingencies

The Massachusetts Attorney General (AG) investigated the planned affiliation of Fallon Clinic Inc. (Fallon) with Atrius Health Inc. (Atrius). The AG permitted the consummation of the deal after Fallon and Atrius agreed to supply the AG with certain contractual information prior to any agreement between Atrius and health insurance companies. This procedure will allow the AG to ascertain if the affiliation will result in price increases to health insurance companies and patients.

Atrius is a nonprofit corporation that provides healthcare services. Prior to its affiliation with Fallon, Atrius was the sole parent corporation of five member medical groups consisting of Dedham Medical Assocaites Inc., Granite Medical Group Inc., Harvard Vangaurd Medical Associates Inc., Southboro Medical Group Inc., and South Shore Medical Center Inc. Atrius represents these members and contracts with third-party payors for the provision of healthcare services. These third-party payors include Blue Cross Blue Shield of Massachusetts Inc., Fallon Community Health Plan Inc., Harvard Pilgrim Health Care Inc., and Tufts Associated Health Plans Inc. (collectively Payors). Atrius currently has 700,000 enrollees. Through its affiliation with Fallon, Atrius will grow to a size of more than 1,000 doctors, 7,200 employees, and one million patients.

In order to obtain approval from the AG, Atrius had to agree to provide all future agreements with Payors to the AG for review over the next ten years or two contract cycles, whichever is shorter. More specifically, the AG must receive certain principal terms of the agreements including the term of the agreement, products, payment terms, financial terms, and other relevant details that are necessary for the AG to ensure that the affiliation will not result in an increase in healthcare costs. In addition, Atrius must supply the AG an analysis of the terms including the expected revenues and a comparison of those revenues to those revenues previously obtained. This information must be supplied to the AG at least thirty days prior to the consummation of the contract with the Payors. Atrius also must supply similar information about negotiations with Payors that reach an impasse. Providing this documentation does not preclude the AG from requesting additional information about the agreements nor does it prevent the AG from investigating the matter or any other matter relating to the parties. If the AG believes that the rates agreement is anticompetitive, the AG can bring action against Atrius.

This matter reflects one of the few times that the antitrust authorities have taken action in a physician group affiliation. This is consistent with an increased emphasis on healthcare, even in smaller matters that might not have come to the attention of the federal antitrust agencies.

*We would like to thank Toby Singer, Esquire (Jones Day, Washington, DC) for providing these email alerts.


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