On Friday afternoon, the Court of Appeals for the Second Circuit affirmed an injunction against Actavis, the pharmaceutical company that manufactures Namenda®. Namenda is prescribed to those with mid to late stage Alzheimer’s to slow the progression of the disease. The injunction effectively forces Actavis to continue manufacturing its original formulation until its patent expires in July.

History of the Lawsuit

Last summer, Actavis announced that it was stopping production of the original Namenda in the fall of 2014, and would only make its new, extended release version, Namenda XR. It launched a campaign urging patients and physicians to immediately switch their prescriptions to Namenda XR. By switching users to the newer formulation, Actavis hoped to extend its patent protection and the high drug prices that accompany that protection, for another 10 years. Namenda is one of the most successful drugs made by Actavis, generating $1.5 billion in sales last year.

The New York Attorney General sued Actavis for violations of anti-trust law in September, and in December, a federal court issued an injunction against Actavis, requiring it to continue to manufacture the original Namenda pending the resolution of the lawsuit. Actavis appealed, and the ruling on Friday is the result of the appeal.

Congressional Intent

As reported in earlier blog entries, Congress set up a framework to encourage pharmaceutical research and development by awarding 20-year patents to new FDA approved drugs. During this period of patent protection, the manufacturer has a monopoly and can set the drug’s price at whatever level it wishes. Congress balanced that incentive by allowing generic manufacturers to produce bio-equivalent versions after 20 years. Most states have bolstered the competitive ability of generic manufacturers by requiring pharmacists to substitute a generic version for a brand name drug once patent protection expires.

“Hard” and “Soft” Switches

The pharmaceutical industry has done an end run around this Congressional framework by developing “follow on” drugs – drugs that have the same active ingredients as the original drugs, but which differ only in dosage or method of delivery. The FDA has approved these follow on products as new drugs, giving them new patent protection.

Once the follow on drug is approved, the pharmaceutical company launches a campaign encouraging patients to switch to the new, patent protected drug before generic versions of the original formula become available.   The original version remains available during this time, but is not marketed. This practice is known as a soft switch.

If the pharmaceutical company stops making the original version prior to its patent expiration, those taking the drug have no choice but to switch to the follow-on drug if they are to continue the therapy. This practice is known as a “hard switch”, and this is what Actavis tried to do. The Attorney General sued Actavis, claiming that the practice was a violation of the anti-trust laws.

Implications

The appeals court affirmed the ruling, but did not publish its opinion, giving the parties an opportunity to request redaction of proprietary information. Until the opinion is released, no one knows how far this decision will reach. It appears to deal a severe blow to the practice of hard switches, and it may go further and call into question the FDA practice of giving patent protection to drugs that are not new therapies.

For Alzheimer’s patients, this ruling means that they will have access to Namenda at far lower prices in July, a benefit to patients, insurance companies and the Medicare program.