Thursday, August 30, 2018

Biologics as the New Antitrust Frontier: Reflections, Riposte, and Recommendations

Daryl Lim, John Marshall, offers Biologics as the New Antitrust Frontier: Reflections, Riposte, and Recommendations.

ABSTRACT: History reminds us that without regulation, the strong do what they will and the weak suffer what they must. Self-interest drives incumbents to entrench their dominance and thwart challenge. Congress enacts laws to protect the process of competition in the marketplace from the tyranny of corporate might. In turn, courts attempt to give effect to those policies while safeguarding the incentive of incumbents and entrants to invest and innovate. The challenge of walking that tightrope at each technological frontier remains the same — whether dealing with sewing machines, computer operating systems, small-molecule (SM) drugs, or biologics. In each case, courts must operationalize antitrust precedent by adapting them to the technology before them and providing meaningful public guidance.

Michael Carrier and Carl Minniti offer a commanding survey of how antitrust policy and precedent interface with the competitive dynamics of biologics. With patent settlements, as the Authors note, the Actavis framework will continue to be applicable in situations where reference biologics (RBs) pay “follow-on biologics” (FOBs) to stay out of their markets. The Authors’ optimism that reverse payments will be less likely, however, should be tempered. Factors including the ability for FOBs to offer interchangeable therapies over time, the likelihood that FOBs must disclose manufacturing trade secrets during Biologics Price Competition and Innovation Act (BPCIA) litigation, and the real and present threat of patent revocation in post-grant proceedings both individually and may cumulatively result in a higher incidence of reverse payments than the Authors predict. At the same time, the lack of automatic reporting obligations will make anticompetitive biologic settlements more difficult to detect than those in the SM space. 

With product hopping, the Authors are similarly optimistic. RBs are less likely to reformulate biologics; FOBs must price their biologics higher, making it less attractive for RBs to engineer “hard switches”; state substitution laws do not apply to biosimilars; and the BPCIA does not provide additional exclusivity for minor reformulations. As with the reverse-payments scenario, however, interchangeable FOB therapies will become the norm over time. The primacy of process innovation in biologics will make reformulation easier than in the SM space. Actavis also cautions against the Authors’ suggestion that RBs who enter with a reformulated biologic after a FOB should qualify for a safe harbor. Rather, the rule of reason should still be applied, though that analysis may be concluded in a “twinkling of an eye.” 

Finally, as the Authors note, regulatory abuse (including (Risk Evaluation and Mitigation Strategy) REMS) will continue to raise antitrust concerns. In this regard, the Response amplifies the Authors’ analysis of refusals to deal in biologic samples for REMS purposes, as well as their analogies to patent assertion entities and standard essential patents, explain how each of these can inform the antitrust analysis in the biologics space. The Response also discusses why and how patent misuse can be used as a policy lever to address regulatory abuses, and why the cumulative nature of innovation in the biologics space makes patent misuse a particularly apt response. 

Despite the BPCIA’s thoughtful construction, antitrust law has a gap-filling role. No solution is watertight and each piece is a compromised fit at best. RBs are not malefactors any more than FOBs are angels. Like a referee calling out strikes, antitrust law simply provides a marker to identify and penalize behaviors that run contrary to expectations of good gamesmanship when competing. The enterprise of developing a coherent understanding of biologics and its antitrust implications has only begun, but in all our endeavors, we can be grateful to the Authors for helping point the way.

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