Product hopping 2.0: getting the FDA to yank your original license beats stacking patents.

AuthorNoah, Lars


Approved by the Food and Drug Administration (FDA) in 1995, extended-release oxycodone (OxyContin[R]) became a blockbuster drug for its manufacturer Purdue Pharma. Fifteen years later, the company secured approval of an abuse-resistant formulation of this product (OxyContin OP[R]). From the perspective of legitimate users of this opioid analgesic, OxyContin OP offers absolutely no advantages over the classic recipe; from a public health perspective, however, the new formulation appears to reduce serious risks to illegitimate users. In 2013, just as its contested patents on OxyContin expired, Purdue managed to persuade the FDA to withdraw its license for the original formulation, which prevented the introduction of generic copies of the older version that otherwise would have undercut sales of OxyContin OP.

Pharmaceutical manufacturers routinely introduce new and improved versions of successful drugs as their patents on older products wind down and generic rivals prepare to enter the market, which antitrust scholars have denominated as "product hopping." Part I elaborates on this phenomenon. The recent experience with the reformulation of OxyContin, as detailed in Part Il, represents an extreme variant of such arguably anticompetitive behavior. By virtue of the FDA's withdrawal of the license for OxyContin, patients who derive no benefit from the abuse-resistant features will not enjoy the option of using cheaper generic versions of the older product, instead having to pay a premium for the new formulation over the next decade or so. The agency's decision may well make sense in this context, but, to the extent that it signals a more general willingness to act favorably upon withdrawal requests by license holders whenever they introduce modified versions of their products, the FDA may have given brand-name drug manufacturers a powerful new mechanism for further delaying generic entry.


    "Product hopping" refers to line extensions and affiliated strategies used by brand-name drug manufacturers to retain market share once generic competition becomes a threat. (1) This practice poses antitrust concerns insofar as it effectively allows companies to extend their monopolies even after their original patents have expired. (2) Drug product hopping can happen in several ways. For instance, manufacturers may introduce--and seek additional patent protections for--sustained release formulations that require less frequent dosing or a slightly modified form of the active ingredient with purportedly greater safety or effectiveness. (3) So-called "patent stacking" or "evergreening" happens with some frequency in the pharmaceutical industry, (4) though courts often invalidate these efforts to extend intellectual property protections. (5)

    Entirely apart from patents, however, market exclusivity periods granted by licensing agencies such as the FDA represent important incentives for innovative activity. (6) New chemical entities generally receive a five-year period of market exclusivity after securing agency approval for a new drug application (NDA), (7) which protects the brand-name manufacturer from generic competition during that time even if it exceeds the remaining terms of any patents. (8) If the NDA sponsor has to undertake additional investigations in order to secure supplemental approval for changes in a previously licensed drug's formulation or labeling, then it may receive three additional years of protection but only with regard to the modified features of the drug product. (9)

    Because the extra three years of market exclusivity for modifications in the formulation or labeling of a brand-name drug would not prevent approval of an abbreviated new drug application (ANDA) referencing the original product, (10) sponsors may take additional steps to guard against the prospect that generic competition will undercut their purportedly new and improved products. For instance, after securing supplemental approval for a new use of a previously licensed drug (with the new use protected by three years of market exclusivity and possibly also a method patent), a brand-name manufacturer might remove the originally approved indication(s) from the drug's labeling in an effort to prevent FDA approval of ANDAs for those original use(s). In light of this opportunity for anticompetitive manipulation, the agency explained that such a maneuver would prevent generic approval only if the NDA sponsor removed the original use(s) for reasons of safety or effectiveness. (11)

    In the event of a reformulation, switching the original drug to over-the-counter (OTC) status may have a similar effect. The FDA may allow a brand-name company to revise the labeling for an older formulation to permit its use without the need for a prescription. AstraZeneca did this shortly after introducing Nexium[R] (esomeprazole magnesium) for gastroesophageal reflux disease just as its blockbuster drug Prilosec[R] (omeprazole) faced generic competition. (12) If switching the older drug brings with it three years of market exclusivity, this would prevent generic competition on the now over-the-counter (OTC) product with its revised labeling. (13) Even without any extended exclusivity for the OTC version, generic competitors could only compete in the nonprescription marketplace, (14) thereby giving the reformulated prescription product what amounts to an extended monopoly.

    The actions of Abbott Laboratories with regard to TriCor[R] (fenofibrate) have become something of a cause celebre among antitrust commentators. (15) Abbott had discontinued all sales of the original (capsule) formulation of this drug for lowering cholesterol and trigylcerides in an effort to switch prescribers to their newer (slightly lower dose tablet) formulation. (16) In the resulting antitrust litigation, the federal district court denied Abbott's motion to dismiss after making much of the fact that the company had gone to great lengths to remove all traces of TriCor capsules from the marketplace as soon as its tablet form became available. (17) Two years later, in contrast, a different district court dismissed antitrust claims filed against AstraZeneca, emphasizing that the company had not entirely ceased marketing Prilosec when it introduced Nexium. (18)

    Unilateral withdrawal of an older brand-name product--coupled with its removal from the FDA's list known as the Orange Book--would complicate but not prevent the approval of generic versions. (19) This represents a subtle but important point utterly lost on some commentators. (20) To be sure, Abbott's promotional efforts would have shifted physician prescribing patterns in favor of the new formulation, (21) and this switch would have foreclosed the possibility of generic substitution at the point of dispensing by pharmacists. Physicians remained entirely free, however, to prescribe the original formulation then available only from generic manufacturers, (22) and perhaps they would have done so because of restrictions in the formularies of their patients' drug benefit plans. (23) As revealed in the next Part, Purdue managed to eliminate even that last avenue of potential competition when it reformulated OxyContin, and the company managed to do so in a way that would largely escape antitrust scrutiny. (24)


    Over the last two decades, the opioid analgesic OxyContin has followed a decidedly convoluted path, hardly typical of other blockbuster drugs. The latest interesting twist in this still unfolding story happened in 2013 when the FDA decided that generic competitors could not yet enter the marketplace. The particulars may interest only those steeped in this somewhat arcane regulatory field, but this case study touches on important broader themes related to public health and patient welfare. (25) It also illustrates a novel twist on the product hopping phenomenon in the pharmaceutical industry.

    Approved by the FDA in 1995, OxyContin quickly (and somewhat unexpectedly) became the most widely prescribed narcotic painkiller in the United States; by its fifth anniversary on the market, the drug generated more than $1 billion annually for its manufacturer Purdue Pharma. (26) Although regulated by the FDA as a "new drug" (and by the Drug Enforcement Administration as a Schedule II controlled substance), it represented little more than a new formulation of long-used (and abused) oxycodone hydrochloride, a synthetic form of morphine effective in relieving severe or chronic pain such as that experienced by cancer patients. Older painkillers such as Percocet[R] and Percodan[R] also contain oxycodone, but OxyContin used a slow-release mechanism designed to offer sustained relief over a twelve-hour period to patients with chronic moderate to severe pain. In contrast, the older drug products in this class (including the related hydrocodone drugs such as Vicodin[R] and Lortab[R]) may offer uneven relief over just a four-hour period. (27)

    The extended-release formulation also seemed to make OxyContin less prone to abuse because it would not provide a quick euphoric effect upon initial ingestion. As a result, Purdue widely promoted its drug as presenting a lower risk of addiction and diversion. (28) The company apparently failed, however, to anticipate the creativity of drug abusers. To defeat the slow- release feature, these individuals chewed, crushed, dissolved, or scraped the coating off of the tablets, leaving stronger dosages of oxycodone than found in individual Percocet or Percodan tablets. (29) They then ingested, snorted, or injected the substance. Reports suggest that thousands of people have died after overdosing in this fashion, (30) and data from the Centers for Disease...

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