New York Ex Rel. Schneiderman v. Actavis PLC
787 F.3d 638
| 2d Cir. | 2015Background
- Namenda (memantine) existed in two formulations: twice-daily immediate-release (IR) (patent exclusivity until July 11, 2015) and once-daily extended-release (XR) (patent protection until 2029). Both have the same active ingredient and therapeutic effect; they differ in dosage form and dosing schedule.
- Generic manufacturers had tentative FDA approval to market generic IR beginning July 11, 2015; generics bioequivalent to IR would not be AB-rated to XR and thus not substitutable for XR under most state substitution laws.
- Actavis/Forest launched XR, promoted it heavily, discounted price/rebates to encourage switching ("soft switch"), then announced withdrawal of IR ("hard switch") to force patients onto XR before generic IR entry.
- New York sued under Sherman Act §§ 1 & 2 and state law, seeking, inter alia, a preliminary injunction to prevent Defendants from restricting access to Namenda IR prior to generic entry; district court granted a preliminary injunction after a five-day evidentiary hearing.
- The district court found Defendants intended to impede generic competition, that forced switching would prevent pharmacy substitution and create high transaction costs for patients to revert to IR, causing likely anticompetitive and consumer economic harm; the Second Circuit affirmed the preliminary injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether heightened preliminary-injunction standard applies | Injunction would effectively grant substantially all relief pretrial because it prevents the planned hard switch | Standard for injunction was ordinary; heightened standard inappropriate | Heightened standard applies because injunction would make trial largely moot, but New York satisfied that heightened standard |
| Whether introducing XR and withdrawing IR (product hop/hard switch) violates §2 monopolization/attempted monopolization | The hard switch coerces patients, prevents generic substitution under state laws, creates a dangerous probability of maintaining monopoly beyond IR patents | Product withdrawal or product improvement is lawful; patent rights and procompetitive benefits (innovation, better product, legitimate business strategy) protect conduct | Combination of withdrawal and coercive switching intended to impede generic competition is anticompetitive under §2; New York showed substantial likelihood of success |
| Whether patent rights immunize Defendants from antitrust liability | Patents do not authorize schemes that use one patent to unlawfully extend monopoly beyond its scope | Defendants asserted exercise of Patent Act rights immune them from antitrust scrutiny | Patents do not provide blanket immunity; using XR to extend monopoly beyond patent limits can violate antitrust law (court follows Actavis) |
| Whether New York showed irreparable harm and public interest supporting injunction | Withdrawing IR would likely cause lasting harm to competition and consumers (higher costs, reduced substitution, and low likelihood of reverse switching); monetary damages insufficient | Any monetary harm is quantifiable; no irreparable injury | Court held New York made a strong showing of irreparable harm and that the injunction serves the public interest |
Key Cases Cited
- F.T.C. v. Actavis, Inc., 133 S. Ct. 2223 (2013) (patent rights and antitrust policy both inform scope of permissible conduct; patents do not grant immunity from antitrust scrutiny)
- United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (framework for analyzing product changes by monopolists under rule-of-reason; focus on anticompetitive effect and justifications)
- Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979) (product redesign combined with withdrawal can be anticompetitive when it coerces consumers and impedes competition)
- United States v. Dentsply Int'l, Inc., 399 F.3d 181 (3d Cir. 2005) (test for foreclosure: not total exclusion but whether practices bar a substantial number of rivals or severely restrict market)
- Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) (monopoly power alone is not unlawful; anticompetitive conduct is required for §2 liability)