FTC Suit Proceeds Against Drug Maker for Agreeing Not to Market Generic

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

The federal district court in Washington, D.C. has refused to dismiss as moot an FTC enforcement action against generic drug maker Barr Pharmaceuticals, Inc. for entering into an agreement not to compete with drug maker Warner Chilcott.

The FTC alleges that Warner Chilcott entered into an agreement with Barr under which the latter agreed not to compete in the U.S. with a generic version of a Warner Chilcott contraceptive. Barr allegedly was paid $20 million for agreeing not to proceed with the planned launch of the generic equivalent.

In its complaint, the agency sought to enjoin Barr and Warner Chilcott from operating under that exclusive license and from engaging in similar and related conduct in the future. Warner Chilcott later settled the charges.

Barr unsuccessfully argued that the that a series of events following the filing of the complaint rendered the FTC’s case moot: (1) Warner Chilcott waived all exclusivity provisions in the agreement with Barr when it launched a chewable version of the contraceptive; (2) Barr launched a generic version of the contraceptive; and (3) Warner Chilcott entered into the settlement agreement with the FTC.

According to Barr, the sole basis for the FTC’s action was the exclusivity provisions of the agreement. Thus, Warner Chilcott’s waiver of the exclusivity provisions through the introduction of the chewable version of the drug and efforts to convert customers to the chewable version rendered the suit moot.

However, the complaint challenged conduct beyond the particular exclusivity provisions of the agreement and sought relief beyond an injunction against the maintenance of those provisions, the court found. Moreover, Barr failed to carry its “heavy burden” of demonstrating that the “conduct at issue”—broadly defined—could not be reasonably expected to recur.

While Warner Chilcott settled with the FTC, Barr remained free to enter into the very type of agreement that the FTC sought to prevent through a permanent injunction, according to the court. The court did not reach “the entirely separate question of whether, as this case progresses, the FTC will be able to demonstrate an entitlement to injunctive relief aimed at conduct ‘similar and related’ to the exclusivity provisions of the [drug makers’] agreement.

The decision is Federal Trade Commission v. Warner Chilcott Holdings Co. III Ltd., (2007-1 Trade Cases ¶75,565) U. S. District Court, District of Columbia, No. 05-2179, filed January 22, 2007.