The FTC’s “Pay-for-Delay” Lawsuit Against Endo: Is There a Hole in the Commission’s Generic LIDODERM 180-Day Exclusivity Analysis?

By Kurt R. Karst –      

Last month, the Federal Trade Commission (“FTC”) announced the filing of a Complaint For Injunctive and Other Equitable Relief in the U.S. District Court for the Eastern District of Pennsylvania alleging that Endo Pharmaceuticals Inc. (“Endo”) and other drug manufacturers, including generic drug manufacturers Watson Laboratories, Inc. (“Watson”) and Impax Laboratories, Inc. (“Impax”), violated U.S. antitrust laws by using so-called “pay-for-delay” settlement agreements “to block consumers’ access to lower-cost generic versions” of two drugs: OPANA ER (oxymorphone) Extended-release Tablets (approved under NDA 021610), and LIDODERM (lidocaine patch 5%) (approved under NDA 020612).

The Complaint has garnered a lot of attention because it is the first challenge by the FTC of a so-called “No-AG” (No Authorized Generic) agreement since the U.S. Supreme Court’s June 17, 2013 decision in FTC v. Actavis, Inc., 133 S. Ct. 2233 (2013), which addressed the standards that courts should apply in drug patent settlement cases.  But the Complaint is also interesting to us for another reason: the FTC’s comments concerning 180-day exclusivity for Generic LIDODERM.  Various FTC comments in the Complaint (e.g., as the first Paragraph IV filer, Watson “therefore became eligible for first-filer exclusivity, which could prevent the FDA from approving any other generic versions of Lidoderm until 180 days after Watson’s generic launch”) – seem to indicate that only a launch of drug product approved under an ANDA can trigger 180-day exclusivity.  

According to the FTC, the following aspects of the Lidoderm Agreement are suspect and violate antitrust laws:

In May 2012, Endo and its partner Teikoku agreed to pay Watson (now Allergan) to abandon its patent challenge and forgo entry with its lower-cost generic version of Lidoderm for more than a year until September 2013. This payment also included two components.  First, Endo agreed to refrain from marketing an authorized generic version of Lidoderm during the first 7.5 months of Watson’s  generic sales.  Second, Endo agreed to provide Watson with branded Lidoderm patches valued at $96 to $240 million “at no cost, ” which Watson could then sell through its distribution subsidiary for pure profit. . . .

[T]he No-AG Payment ensured that Watson would not face generic lidoderm patch competition for at least 180-days – and up to 7.5 months – after its launch . . . .

As part of the Lidoderm Agreement, Endo and Teikoku agreed to provide $12 million worth of branded product monthly from January through August 2013 to Watson through its wholly-owned subsidiary.  [(Emphasis added.)]

Keep the emphasized text in mind as we move forward . . .

In November 2009, Watson submitted the first ANDA to FDA (ANDA 200675) challenging a patent listed in the Orange Book for LIDODERM – U.S. Patent No. 5,827,529 (“the ‘529 patent”), which expired on March 30, 2014 – thereby qualifying Watson as a first applicant eligible for a period of 180-day exclusivity. Post-2003 (MMA), eligibility for 180-day exclusivity can be forfeited under various statutory provisions, and it is also triggered through commercial marketing.  Specifically, the statute (FDC Act § 505(j)(5)(B)(iv)(I)) states that subject to a forfeiture determination, “if the application contains a certification described in paragraph (2)(A)(vii)(IV) and is for a drug for which a first applicant has submitted an application containing such a certification, the application shall be made effective on the date that is 180 days after the date of the first commercial marketing of the drug (including the commercial marketing of the listed drug) by any first applicant. ” FDC Act § 505(j)(5)(B)(iv)(I) (emphasis added).

As we noted in a post last year, the parenthetical above has been the topic of some FDA discussion. In 2012, FDA applied the Agency’s pre-MMA interpretation of the statute with respect to Teva’s claim to 180-day exclusivity for a generic version of Cephalon’s PROVIGIL (modafinil) Tablets, 100 mg and 200 mg.  Teva acquired Cephalon on October 14, 2011, and on March 20, 2012, Cephalon announced the launch of an authorized generic version of PROVIGIL by Teva.  FDA determined that Teva’s commercial marketing of the PROVIGIL authorized generic triggered Teva’s 180-day exclusivity such that it would expire 180-days later on September 26, 2012.  But FDA could have determined that 180-day exclusivity had been triggered months before March 20, 2012, on October 14, 2011 when Teva acquired Cephalon.  It was at that time that “Teva immediately began marketing PROVIGIL under Cephalon’s NDA.”  FDA laid out this option in a footnote to an April 4, 2012 Letter Decision:

We have considered finding that Teva’s marketing of PROVIGIL upon its acquisition of Cephalon triggered its 180-day exclusivity, and believe that there is a strong argument for finding so. We have refrained from adopting that interpretation in this case, however, because that exclusivity, if it were triggered by Teva’s acquisition of Cephalon, would expire on April 11, 2012 and, given the multiple uncertainties in this case, Teva had no notice that FDA considered it to be running.  Because of the potential for collusion between NDA holders and captive first generics, and the subversion of the statutory scheme that could result, the agency may in the future provide guidance on the effect of such a relationship between NDA holder and first applicant upon any claim for 180-day exclusivity.

FDA has not further discussed this option publicly since April 2012.

FDA approved ANDA 200675 on August 23, 2012, and noted Watson’s first applicant status and eligibility for 180-day exclusivity, but the Agency decided to punt on making a firm decision as to whether or not Watson forfeited eligibility for 180-day exclusivity:

With respect to 180-day generic drug exclusivity, we note that Watson was the first ANDA applicant for Lidocaine Patch, 5%, to submit a substantially complete ANDA with a paragraph IV certification. Therefore, with this approval, Watson may be eligible for 180 days of generic drug exclusivity for Lidocaine Patch, 5%.  This exclusivity, which is provided for under section 505(j)(5)(B)(iv) of the Act, would begin to run from the date of the commercial marketing identified in section 505(j)(5)(B)(iv).  The agency notes that Watson failed to obtain tentative approval of this ANDA within 30 months after the date on which the ANDA was filed. See section 505(j)(5)(D)(i)(IV) (forfeiture of exclusivity for failure to obtain tentative approval).  The agency is not, however, making a formal determination at this time of Watson’s eligibility for 180-day generic drug exclusivity.  It will do so only if another paragraph IV applicant becomes eligible for full approval (a) within 180 days after Watson begins commercial marketing of Lidocaine Patch, 5%, or (b) at any time prior to the expiration of the ‘529 patent if Watson has not begun commercial marketing. Please submit correspondence to this ANDA informing the agency of the date commercial marketing begins.

FDA never had to make a decision on whether or not Watson forfeited eligibility for 180-day exclusivity pursuant to FDC Act § 505(j)(5)(B)(iv), because the next ANDA approved for generic LIDODERM – ANDA 202346 – was not approved until August 7, 2015. That’s nearly two years after the September 15, 2013 “Start Marketing Date” listed in the National Drug Code Directory for drug product marketed under ANDA 200675. So any 180-day exclusivity, if it was not forfeited for failure to obtain timely tentative ANDA approval, would have expired 180 days after September 15, 2013 (in March 2014). 

But could 180-day exclusivity for generic LIDODERM have expired earlier, well before September 2013?  Perhaps so under the rational FDA laid out in the above-quoted footnote concerning generic PROVIGIL 180-day exclusivity.

Under the Lidoderm Agreement, Watson’s “distribution subsidiary” obtained (and presumably commercially marketed) LIDODERM obtained from Endo beginning on January 1, 2013.  As a subsidiary of Watson, the sponsor of ANDA 200675, the marketing of LIDODERM by the “distribution subsidiary” arguably triggered Watson’s 180-day exclusivity such that it arguably expired on or about July 1, 2013. We’ll leave it to the antitrust experts to determine what (if any) relevance such an alternative exclusivity analysis might have in the litigation.