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Preliminary Injunction Order in Actavis Casts a Skeptical Eye Toward the “Hard Switch”

Last week, we briefly reported on the injunction granted by the U.S. District Court for the Southern District of New York in the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC. On Monday, the court held a hearing on the injunction and released a copy of its decision (portions of which are redacted from public view). The injunction requires Actavis to continue distributing the immediate-release tablet version of its dementia drug, Namenda, while the lawsuit is litigated. The court’s decision in this case—the latest in a series of “product hopping” cases we have covered in recent months—is sure to have widespread implications for future cases, particularly those in which pharmaceutical companies have discontinued one formulation and introduced a new formulation before the entry of the generic version of the old formulation (known as a “hard” or “forced” switch).

As we previously explained, in this suit, the Attorney General alleges that Actavis attempted to thwart competition from generic drug makers by discontinuing an older version of this drug, Namenda IR, and forcing patients to switch to a newer version, Namenda XR. The Attorney General alleges that, by inducing patients to switch to Namenda XR, Actavis hoped to extend its patent protection on the drug and keep generic manufacturers from entering the market.

This case highlights the increasingly important distinction between “hard switches” and “soft switches” in product hopping cases. In a hard switch a manufacturer completely removes the drug from the market, whereas in a soft switch the manufacturer continues to sell the older version but aggressively promotes a newer version of the drug. District courts have suggested that hard switches may raise potential antitrust concerns, but have not been as suspicious of soft switches.

The injunction against Actavis reinforces some courts’ circumspection about hard switch tactics. In a 136-page opinion, Judge Sweet concluded that Actavis lacked any legitimate pro-competitive justification for the decision to discontinue Namenda IR, and did so only to inhibit the success of a generic substitute in the market. The court found that Actavis’s hard switch strategy was not competition on the merits, but rather was anticompetitive conduct designed to erect barriers against generic drug manufacturers who wished to enter the market. The court also found unpersuasive the explanations offered by the defendants’ experts, and concluded that there was no indication that the hard switch strategy resulted in savings or other benefits to Actavis aside from deterring competition by generic manufacturers.

Actavis has announced that it intends to seek an emergency appeal to the U.S. Court of Appeals for the Second Circuit. We are actively monitoring the case and will provide further updates when they become available.