Stopping the Pharmaceutical “Product Hop”

By Phebe Hong

It happens every year like clockwork: Apple releases a new iPhone, and then hordes of people rush to buy it, despite still owning perfectly functional older models. We’re willing to shell out hundreds of dollars for a few extra camera features and new colors. As a result, Apple profits. A similar phenomenon is occurring in the drug industry, but with less consumer choice and more dire consequences.

“Product hopping” in the drug industry occurs when a pharmaceutical manufacturer winds down production of an old drug formulation whose patent expiration date has passed or is approaching. The company then forces or persuades patients to switch prescriptions to the drug’s new – and newly patented – formulation. A successful “product hop” extends a pharmaceutical manufacturer’s monopoly and therefore its ability to charge high prices.

On September 19th, Rep. David Cicilline introduced a new bill to crack down on product hopping. The Affordable Prescriptions for Patients Through Promoting Competition Act seeks to strengthen the Federal Trade Commission’s ability to bring cases against drug manufacturers engaging in product hopping. Recent court decisions addressing product hopping suggest how future courts may rule on such cases.

Affordable Prescriptions for Patients Through Promoting Competition Act

The proposed bill establishes that a pharmaceutical manufacturer will have engaged in an “unfair method of competition” if it caused a 1) “hard switch” or 2) “soft switch.” In a hard switch, the manufacturer removes its original product from the market, thus forcing patients to switch to a new formulation. In a soft switch, the manufacturer leaves the original product on the market, but uses marketing, promotion, and other strategies to switch patients onto the new formulation. If the FTC has reason to believe that a manufacturer is engaging in such anticompetitive behavior, it can impose an administrative proceeding or bring suit in a district court seeking an injunction or equitable remedies.

Hard switches are simpler to discern – the court simply asks: “Did the manufacturer, in anticipation of generic entry, cease production or block access to its drug, in efforts to force patients onto a newer formulation?” Soft switches, by contrast, are harder to define. According to the bill, a soft switch should be found in instances where the manufacturer takes actions that “impede[] competition from a generic drug or biosimilar biological product that is highly similar to, and has no clinically meaningful difference with respect to safety, purity, and potency from, the reference product, which may be established by objective circumstances.”

The debate comes down to what constitutes a “clinically meaningful difference.” Often the newer formulations being touted by manufacturers provide marginal benefits, such as better dosing, shorter infusion time, or convenient route of administration (e.g., oral, sublingual). The question becomes: is the manufacturer marketing a clinically superior new drug formulation that actually benefits patients? Or is it engaging in product hopping? 

Recent Court Precedents

Several scholars have proposed new antitrust liability frameworks for analyzing product hopping cases (see here and here). Four cases highlight the various ways courts or parties have approached the issue:

• New York ex rel. Schneiderman v. Actavis PLC: Brand manufacturer Forest removed Alzheimer’s drug Namenda IR (taken twice a day) from the market and replaced it with Namenda XR (taken once a day), which gave the company 14 additional years of patent protection. In 2015, the Second Circuit upheld an injunction that prevented Forest from removing Namenda IR from the market.
• Mylan Pharma v. Warner Chilcott: Brand manufacturer Warner Chilcott ceased sales of its acne drug Doryx, replacing it with a reformulated version in tablet form. In a 2016 decision, the Third Circuit acknowledged that Warner had intended to “delay generic market entry,” but upheld the manufacturer’s conduct anyway. The court reasoned that generic competitors, such as Mylan, were still able to enter the market despite Warner’s intentions to impede competition.
• Walgreen Co. v. AstraZeneca Pharma: Brand manufacturer AstraZeneca introduced heartburn drug Nexium onto the market right as its older formulation, Prilosec, approached patent expiration. In 2008, the District of Columbia Court rejected a finding of “product hopping,” ruling that AstraZeneca had actually “added choices” for patients by marketing Nexium.
• FTC v. Reckitt Benckiser: The FTC filed its first product hopping lawsuit in July 2019 against brand manufacturer Reckitt Benckiser for switching patients to a film version of the opioid treatment drug Suboxone. In September 2019, the parties settled, with Reckitt paying $50 million to the FTC, with the agreement to notify the agency of future medication reformulations.

Rep. Cicilline’s bill, if enacted, would allow FTC to bring cases in a legal landscape that is still developing its “product hopping” jurisprudence. Even if the FTC were to gain greater enforcement powers, it is unclear whether increased litigation would truly curb product hopping behavior.