We've previously discussed antitrust claims related to "product hopping"—allegations that pharmaceutical manufacturers have reformulated or otherwise altered their products to prevent automatic generic substitution. Earlier this week, the district court for the Eastern District of Pennsylvania in In re Suboxone Antitrust Litigation denied a motion to dismiss similar allegations regarding the drug Suboxone, which is used to treat opioid dependence. As previously discussed, district courts ruling on product hopping claims appear to have drawn a distinction between "hard switches" (where a manufacturer stops selling the prior formulation) and "soft switches" (where the manufacturer continues to sell the earlier product), allowing claims in the former situation but not the latter. The court's ruling in Suboxone presents further support for this distinction, but leaves unclear whether a manufacturer's decision to cease selling the prior formulation alone is sufficient to state a claim, or if some sort of additional conduct in restraint of trade is required.
Until 2009, Reckitt had exclusive rights to sell Suboxone tablets. In 2010, Reckitt obtained FDA approval to sell a new formulation of Suboxone—a sublingual film—for which it obtained patent protection. According to plaintiffs' allegations, after the film was approved, Reckitt raised the price of the tablets and also announced that it would be removing the tablets from the market due to safety concerns (though according to plaintiffs it did not cease sales for several months, until such time as generic versions of the tablets actually received FDA approval). Plaintiffs further allege that Reckitt's sales associates told doctors that the tablet formulation was unsafe despite the fact that they allegedly knew the safety concerns were unsupported by the evidence. (Plaintiffs also presented additional theories of liability, which we do not discuss in this post.)
In evaluating plaintiff's allegations about the introduction of the new formulation, the court found that the facts as alleged "fall somewhere between" the allegations in Walgreen Co. v. AstraZeneca Pharmaceuticals L.P., 534 F. Supp. 2d 146 (D.D.C. 2008) (a soft switch case in which plaintiffs' claims were dismissed) and the allegations Abbott Laboratories v. Teva Pharmaceuticals USA, Inc., 432 F. Supp. 2d 408 (D. Del. 2006) (a hard switch case where plaintiffs' claims were allowed to proceed). The district court noted that although Reckitt had ceased selling the tablets after generic introduction, there were no allegations that it had taken steps to remove remaining stocks of the original formulation from pharmacies, or have it declared obsolete, as had been alleged in Abbott. The court further held that "[a]lthough the issue of product-hopping is relatively novel, what is clear from the case law is that simply introducing a new product on the market, whether it is a superior product or not, does not, by itself, constitute exclusionary conduct." Instead, the court held that a plaintiff in a product hopping case must show that "the defendant combined the introduction of a new product with some other wrongful conduct, such that the comprehensive effect is likely to stymie competition," keeping in mind the "unique characteristics of the pharmaceutical market."
In its papers, Reckitt had argued that under Third Circuit precedent, one company's disparagement of another's product could not give rise to antitrust liability absent some form of coercion. The Suboxone court found, however, that plaintiffs' allegations about Reckitt's purportedly false marketing campaign coupled with its threats to remove its tablets from the market "could plausibly coerce patients and doctors to switch from tablet to film." The court further noted that in the pharmaceutical industry "a disconnect exists between the person paying for the prescription and the person selecting the appropriate treatment," which serves to "derail[]" ordinary market forces. The court therefore concluded that absent an opportunity for generic substitution, a generic manufacturer could not efficiently compete in the market. The court also held that complete foreclosure of consumer choice was not necessary to support potential antitrust liability, at least at the motion to dismiss stage, and that Reckitt's withdrawal of its tablets from the market was sufficient allegation of restricting consumers' options to allow plaintiffs' claims to proceed.
Absent eventual appellate guidance, it remains unclear whether the hard/soft switch distinction apparently adopted by district courts will stand. Nor is it clear if all hard switches are created equal; the district court's opinion found that Reckitt's removal of its tablets sufficiently alleged a restraint, but it is not clear if this alone would have supported liability absent the other allegedly coercive conduct. Whether this theory can survive summary judgment also, of course, remains to be seen. Further rulings in this case and others may provide additional guidance as to how future product hopping allegations will be evaluated.
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