Allergan, Senju, & Kyorin To Pay $9 Million to Settle Product Hopping Suit

On February 16, 2018, Allergan Inc. (“Allergan”), Senju Pharmaceutical Co. Ltd., and Kyorin Pharmaceutical Co. Ltd. (collectively, “Defendants”) announced a proposed settlement in which they will pay Hartig Drug Co. Inc. (“Plaintiff”) $9 million to end a class action over alleged “product hopping” related to eye care products, Zymar and Zymaxid. Product hopping is a term used to describe the practice of pharmaceutical companies making modest drug reformulations that offer little or no therapeutic advantages in an effort to obstruct generic competitors and preserve monopoly profits on a patented drug. In 2012, the Federal Trade Commission filed an amicus brief stating that product hopping undermines state and federal laws that encourage generic competition and explained that the conduct can be the basis for an antitrust lawsuit.[1]

Plaintiff originally filed the lawsuit in 2014, alleging that Defendants engaged in various unlawful, anti-competitive practices such as filing sham lawsuits, committing patent fraud, and product hopping to prevent the sale of generic formulations of their drugs used to treat conjunctivitis-a condition commonly referred to as “pink eye.” Allegedly, Defendants broke antitrust laws by selling Zymaxid, which is a slightly different version of their patented drug, Zymar, as part of a scheme to prevent generic competitors from entering the market.

Plaintiff argued that it had standing to sue because direct purchaser, Amerisource Bergen Drug Corp. (“Amerisource”), assigned the rights to antitrust actions to it under an agreement between the two companies. U.S. District Judge Sue L. Robinson, however, ruled in August 2015 that the assignment was blocked by an anti-assignment clause in Amerisource’s distribution contract with Allergan. Judge Robinson, therefore, dismissed the case for lack of standing. Plaintiff appealed the decision to the Third Circuit. In September 2017, a Third Circuit panel ruled that the case was wrongly dismissed, finding that Plaintiff’s assertions that it paid more for the drugs as a result of Allergan’s actions were enough to grant it standing, and that it is a separate question as to whether the pharmacy has antitrust standing or is barred by the direct purchaser rule recognized by the U.S. Supreme Court in Illinois Brick v. Illinois.

A similar lawsuit brought against Defendants by Apotex Inc. has resulted in three proposed settlements, one with each Defendant, the total value of which is $9 million. Those settlements were reached through the mediation process.

The legal team at SFMS has significant experience litigating class action matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier ([email protected]) or Chiharu Sekino ([email protected]). We can also be reached toll-free at (866) 540-5505.

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Vogt, RJ. “Allergan, Others Cough Up $9M In Product-Hopping Suit.” Law 360. Last modified on February 16, 2018.