Corporate & Securities Law

Nexium/Prilosec Antitrust Decision

By David Fischer

On Monday, the United States District Court dismissed the antitrust claims of several drugstore chains that “AstraZeneca?s decision to market and aggressively promote Nexium was exclusionary conduct prohibited by Section 2 of the Sherman Act.”  According to the opinion (footnotes omitted):

The Prilosec patent expired in October 2001 [and generic entry occured in December 2002]. AstraZeneca still manufactures and markets its prescription Prilosec capsules. In June 2003, the FDA approved an OTC version of prescription Prilosec, and granted AstraZeneca exclusivity in that market through June 2006 after Astrazeneca conducted and submitted safety studies to the FDA.

The FDA approved Nexium for sale in February 2001, just eight months before the Prilosec patent expired. The Nexium patent does not expire until 2014, and Nexium is not subject to generic substitutions before that time. Upon the introduction of Nexium, AstraZeneca very aggressively promoted and ?detailed? Nexium to doctors, and at the same time ceased promoting and detailing Prilosec.

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The gravamen of plaintiffs? complaint is that AstraZeneca ?switch[ed] the market from Prilosec, which now has generic competition, to a virtually identical drug, Nexium, which does not [have generic competition.]? (Id. ¶ 1.) Asserting that there is almost no difference between Nexium and Prilosec, and that there is no pharmacodynamic reason why a dose of (S)-omeprazole, i.e., Nexium, would interact with the stomach?s parietal cells any differently than would an equal dose of omeprazole, i.e., Prilosec (id. ¶ 54), plaintiffs contend that this switching is exclusionary and violates § 2 of the Sherman Act. They also allege that to effectuate this market switch, AstraZeneca used distortion and misdirection in marketing, promoting and detailing Nexium. (See id. ¶¶ 69, 90-95, 116, 122.) In addition, plaintiffs contend that AstraZeneca engaged in prohibited exclusionary conduct when it introduced OTC Prilosec and obtained a grant of exclusivity for three years from the FDA. (See id. ¶¶ 96-103.)

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Thus, in both Microsoft and Teva, the defendants? offending conduct had to do with eliminating choices available to the consumer. Yet, here, there is no allegation that AstraZeneca eliminated any consumer choices. Rather, AstraZeneca added choices. It introduced a new drug to compete with already-established drugs ?? both its own and others? ?? and with the generic substitutes for at least one of the established drugs.

Plaintiffs argue that because Nexium is protected by a patent and not superior to Prilosec, AstraZeneca?s conduct is exclusionary. Plaintiffs are not able to show that enjoying the benefits of patent protection is exclusionary conduct under § 2.

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Plaintiffs have also not identified any antitrust law that requires a product new on the market ?? with or without a patent ?? to be superior to existing products.

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Plaintiffs also complain that when AstraZeneca transferred its considerable sales efforts from Nexium to Prilosec, it used distortion in its efforts to persuade doctors and other medical professionals that Nexium offered advantages to Prilosec and in its advertising directed to lay persons. Plaintiffs have not identified any antitrust law that prohibits market switching through sales persuasion short of false representations or fraud, or any court that has identified such conduct as exclusionary for purposes of § 2 of the Sherman Act. The law allows AstraZeneca ?to bathe [its] cause in the best light possible. Advertising that emphasizes a producer?s strengths and minimizes its weaknesses does not, at least unless it amounts to deception, constitute anticompetitive conduct violative of § 2.?

Indeed, plaintiffs here have not identified an antitrust injury that they have suffered. They complain that AstraZeneca?s conduct cost them sales of their generic substitutes. The fact that a new product siphoned off some of the sales from the old product and, in turn, depressed sales of the generic substitutes for the old product, does not create an antitrust cause of action.

The decision is available on the Court’s website.

Full post as published by Antitrust Review on February 27, 2008 (boomark / email).