FTC Supports Mylan’s Bid for Rehearing in Doryx Case

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By Dana A. Elfin

Oct. 20 — The FTC is urging a federal appeals court to rehear Mylan Pharmaceuticals Inc.'s case alleging other drugmakers tried to monopolize the market for the branded antibiotic Doryx Mylan Pharm., Inc. v. Warner Chilcott Pub. Ltd., 3d Cir., No. 15-2236, brief filed 10/19/16 .

The FTC’s friend-of-the-court brief, filed in the U.S. Court of Appeals for the Third Circuit Oct. 19, is the first time the FTC has filed a brief backing rehearing in a private party antitrust case. Antitrust attorneys and professors say the commission’s entry into the case significantly increases the odds that the appeals court will agree to take another look, even though rehearing requests aren’t granted very often. .

“It’s a big deal,” David Balto, an antitrust lawyer in private practice, and former policy director at the Federal Trade Commission, told Bloomberg BNA. “The Third Circuit cares a lot about what the government has to say,” he said Oct. 20.

“This is like Mickey Mantle coming to bat,” he said. “It significantly increases the odds that they’ll grant rehearing en banc.” En banc refers to the full membership of the court.

Balto filed a consumer groups’ friend-of-the-court brief in the case supporting Mylan at the district court level.

FTC Concerned About Product Hopping

The Mylan case involves product hopping, a practice in which branded pharmaceutical companies extend a branded drug’s patent protection by patenting minor modifications to the drug, then move the market to the reformulated version of the drug. The FTC wants the Third Circuit to reconsider its September panel decision, finding Mylan’s product-hopping claim against Mayne Pharma and Warner Chilcott (now part of Allergan) didn’t allege an antitrust violation.

Antitrust lawyers say the FTC’s first-of-its kind brief indicates the commission’s high level of concern about the practice of product hopping.

“The FTC’s filing shows how seriously it takes this behavior and how concerning the panel decision was,” Michael A. Carrier, an antitrust professor at Rutgers Law School, told Bloomberg BNA Oct. 20. “Together with settlements and price hikes, the product switches in this case show that the pharmaceutical industry’s conduct continues to raise concern.”

Carrier filed a brief for the American Antitrust Institute (AAI) in support of rehearing in the Mylan case. AAI is a nonprofit organization that aims to protect competition.

Thwarting Generic Substitution Laws

The FTC is concerned branded drug companies can use product hopping to do an end-run around state generic substitution laws, the agency said in its brief. Generic substitution laws permit or require pharmacists to substitute a typically cheaper generic drug for the more expensive brand-name drug when they fill prescriptions.

“Efforts to obstruct the operation of generic substitution laws can raise significant competitive concerns,” FTC argues, and limit consumer access to less expensive generics.

The panel’s holding that a brand company can’t face antitrust liability for thwarting automatic generic substitution as long as other, costlier potential means of generic distribution exist “ignores the commercial reality of the pharmaceutical marketplace and lacks grounding in antitrust law,” the FTC brief says.

Ruling Used As Liability Defense

According to the commission, rehearing is also necessary to correct misstatements of law in the panel opinion. At least one branded drugmaker has already cited the panel’s decision to defend against alleged anticompetitive conduct, the FTC says.

"[S]everal aspects of the decision’s analysis are not consistent with established antitrust precedent, including decisions of this Circuit, and could be relied on by litigants to make it harder to prove future product hopping cases, to consumers’ detriment,” the FTC says.

The FTC also says the panel’s decision is at odds with another recent Third Circuit decision. The Third Circuit issued the conflicting opinion, in a hospital merger case, issued immediately following the decision in the Mylan Doryx case Penn State v. Hershey Medical Center , 2016 BL 317602, 3d Cir., No. 16-2035, 9/27/16 .

Third Circuit Rulings Are Inconsistent

The inconsistency of those two back-to-back decisions also improves the chances the Third Circuit will give Mylan its shot at reconsideration, Balto said.

Carrier said he’s hopeful about the chances for rehearing. “I certainly am hoping that the FTC brief and my brief convince the Third Circuit to take a look at this questionable decision,” he said.

In the brief he filed for AAI, Carrier argues the court made significant errors in determining monopoly power and exclusionary conduct.

FTC Ignores Factual Record

Not all antitrust lawyers are so sure about the likelihood of the Third Circuit granting rehearing in the case.

John W. Treece, an antitrust lawyer at Sidley Austin LLP in Chicago, takes a dimmer view. “The FTC’s brief increases the chance that the Third Circuit will rehear the case, but I still don’t think the odds are very good,” he told Bloomberg BNA Oct. 20.

“The FTC’s brief has two main problems,” Treece said. “First,” he said, “this brief ignores the detailed factual record in the district court that showed that managed care introduces significant price sensitivity in the drug purchase decision.”

“Second, the FTC wants the Court to ‘clarify’ that it didn’t intend to limit the kinds of evidence that can be used to analyze monopoly power, but I doubt that anyone except the FTC thinks the Third Circuit opinion does that,” he said. "[T]here’s nothing to clarify.”

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

For More Information

The FTC’s brief is available at http://src.bna.com/jwJ.The AAI’s friend-of-the-court brief is available at http://src.bna.com/jwg.

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