GlaxoSmithKline's "authorized" generic Paxil agreement with Par does not raise any antitrust concerns, Chicago federal court Judge Richard Posner ruled Oct. 29.

"There is nothing suspicious about the circumstances of the settlement" between GSK and Par/Pentech, which allowed the authorized generic launch, Posner declared. The judge dismissed antitrust claims filed against GSK, Par and Pentech by Asahi, the Japanese bulk supplier for Pentech's ANDA.

"Had Pentech litigated Glaxo's patent infringement suit to judgment and lost, it would have no right to compete until patent '723 expires in 2007 (and perhaps not until other patents held by Glaxo expire even further in the future)," Posner noted.

Under the settlement, Pentech acknowledged the validity of GSK's Paxil patent 4,721,723 (claiming crystalline paroxetine HCl hemihydrate) and received rights to launch an "authorized" generic immediately in Puerto Rico, and as soon as another generic entered in the mainland U.S. (¹ Also see "Paxil Authorized Generic: Par Gets Puerto Rico Now, States Later" - Pink Sheet, 21 April, 2003., p. 40).

Apotex received approval for its paroxetine ANDA and proceeded with an "at risk" launch in September, so Par now sells the "authorized" generic throughout the U.S. (² Also see "Apotex Generic Paxil Priced At 7% Discount Following “At Risk” Launch" - Pink Sheet, 15 September, 2003., p. 3).

Asahi filed the suit after Pentech and its licensee, Par, agreed to settle patent litigation with GSK. Posner was assigned the case because he was the presiding judge in both the Pentech and Apotex patent cases.

Posner dismissed the antitrust claims after concluding that Asahi had no standing to bring the suit as an active ingredient supplier. The relevant market from an antitrust perspective, Posner ruled, is the finished dose market, where the competitors currently are Glaxo, Par/Pentech and Apotex.

"Glaxo competes with firms that sell drugs, such as (among generic manufactures) Apotex and Pentech," Posner wrote. "Its principal competitive weapon is its patents. To the extent valid, the patents exclude competition lawfully and Glaxo has no need to worry about suppliers of bulk materials, any more than it has to worry about suppliers of bottles or labels," Posner declared.

GSK "has no interest in preventing Asahi from supplying Pentech - on the contrary, since it, Glaxo, is supplying Pentech with the bulk paroxetine free of charge, it would be delighted if Pentech decided to buy its paroxetine from Asahi instead....The only effect would be to increase Glaxo's net royalty," Posner said.

Although Posner formally dismissed the claims based on lack of standing, the judge also offered an analysis of the underlying antitrust issues.

"If I am wrong in my legal analysis and Asahi does have 'standing' to sue Glaxo and Pentech for violation of federal antitrust law, still its antitrust claim regarding the settlement and license must be dismissed," Posner declared.

Posner disputed the premise of Asahi's litigation: that GSK settled with Pentech because it expected to lose the underlying patent litigation and wanted to maintain some share of the paroxetine market.

Posner ruled in March that Apotex' generic form of paroxetine does not infringe the '723 patent. However, "I made clear that the issue was a close one. The case is now on appeal to the Federal Circuit, which for all that anyone can know may reverse."

Posner acknowledged that the infringement claim against Pentech was probably weaker than the claim against Apotex, because Pentech's product is an amorphous anhydrous form of paroxetine, while Apotex' is a crystalline anhydrous form.

However, "no one can be certain that he will prevail in a patent suit," Posner noted. In addition, separate litigation is pending in Philadelphia involving a patent on anhydrous paroxetine HCl and, if Apotex is ruled to infringe, "it would in all likelihood demonstrate that Pentech would have lost its suit with Glaxo had the suit gone to judgment."

"Pentech's product may be closer than Apotex' to being securely within the public domain," Posner said. "But this Glaxo fiercely contests and there is no reason to think that its infringement case against Pentech was so weak that the settlement amounts to paying Pentech to stay out of the market."

Posner also dismisses any suggestion that the authorized generic agreement is a form of "reverse payment" that merits heightened antitrust scrutiny.

The judge notes that the Federal Trade Commission and at least one court ruling suggest that "reverse payments" - where a brand company pays an allegedly infringing generic manufacturer as part of a settlement - are per se antitrust violations (³ Also see "Aventis/Andrx Cardizem CD Deal Violated Antitrust Laws, Judge Says" - Pink Sheet, 12 June, 2000., p. 29). Recent cases have ruled against FTC on the issue (⁴ [A#00650380005], p. 9).

Posner suggests skepticism about the "reverse payment" antitrust theory: "a ban on reverse-payment settlements would reduce the incentive to challenge patents by reducing the challenger's settlement options should he be sued for infringement, and so might well be thought anticompetitive."

"At any rate," Posner declared, "the theory, good or bad, is inapplicable here."

"There is no doubt a sense in which Glaxo 'paid' Pentech to stay out of (part of) the market: it gave it paroxetine free of charge and in exchange Pentech agreed to confine itself to Puerto Rico until Apotex began selling its generic," Posner noted.

"But any settlement agreement can be characterized as involving 'compensation' to the defendant, who would not settle unless he had something to show for the settlement. If any settlement agreement is thus to be classified as involving a forbidden 'reverse payment,' we shall have no more patent settlements."

In this case, the settlement terms "led to increased competition, first in Puerto Rico and now throughout the U.S.," Posner wrote. "Another way to put this is that in this case there is only a 'payment' to the settling defendant when competition breaks out."

That also appears to be FTC's position on the settlement. GSK and Par submitted the settlement to the agency for review before it took effect.

FTC also told GSK that it has closed an investigation into the company's multiple "Orange Book" patent listings for paroxetine. The investigation began in 2000 (⁵ Also see "SmithKline Paxil patents" - Pink Sheet, 11 December, 2000., In Brief).

Although FTC is closing the investigation without taking any formal antitrust actions against GSK, the agency did play a significant role in accelerating the launch of generic versions of paroxetine.

FTC cited Paxil as an example of Orange Book abuse in a 2002 report on the Waxman/Hatch process (⁶ Also see "Paxil Late-Listed Patents Are Questionable For Orange Book Listing – FTC" - Pink Sheet, 5 August, 2002., p. 8). The report helped shape the pending Waxman/Hatch reform legislation and FDA's own regulatory reform efforts.

Once FDA issued a final rule changing its patent listing criteria, GSK asked to de-list the Paxil patents cited by FTC - clearing the way for Apotex' generic approval (⁷ Also see "GSK Paxil Patent Delistings Open Door For Generic Paroxetine Approvals" - Pink Sheet, 7 July, 2003., p. 21).

FTC issued a press release hailing Apotex' decision to launch the generic "at risk." While the agency press release has no legal force, it would help Apotex in the court of public opinion if its generic is subsequently ruled to infringe.

FTC also filed an amicus brief in a suit filed by Apotex seeking to force FDA to delist the patents. An appeals court ultimately sided with FDA that the agency's role should be strictly "ministerial" (⁸ [A#00650440011], p. 19).

Posner's ruling may not be the last word on the legality of the GSK/Par settlement. Apotex has indicated an intent to pursue an antitrust case of its own (⁹ Also see "Paxil Generics Grab 65% Of New Scripts; Apotex May Sue Over Par/GSK Deal" - Pink Sheet, 20 October, 2003., p. 6).

As one of the finished dose competitors in the market, it would avoid the "standing" questions that torpedoed Asahi's case. The company is also expected to file suit in Philadelphia, so Posner's analysis of the underlying competitive issues may not apply.

Posner, however, is a Seventh Circuit appellate judge who has presided over the Paxil cases by designation to the Chicago district court, so his ruling may carry added weight.

Posner did allow Asahi to proceed with two state contract claims against Pentech.

Asahi alleges breach of contract, claiming that Pentech has failed to follow an indemnification agreement between the two companies. Pentech maintains the agreement "was limited to the expenses of litigating a suit arising out of Pentech's attempt to sell its paroxetine product to treat sexual dysfunction," Posner noted. However, the scope of the contract cannot be adjudicated without proceeding to trial, he ruled.

Asahi also claims tortious interference based on an alleged understanding that Pentech would purchase bulk paroxetine from Asahi in 2003.

GSK/Par Paxil Generic Deal Upheld In Court; FTC Closes Patent Investigation

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