By Peter Loftus 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 21, 2018).

A trial under way in federal court in Philadelphia is testing the power of U.S. competition regulators to crack down on drugmakers' alleged moves to thwart the sale of low-cost generics.

The trial, which began Feb. 7, stems from a 2014 Federal Trade Commission lawsuit accusing AbbVie Inc. of filing baseless patent-infringement lawsuits against two generic-drug companies to delay competition for its testosterone-replacement therapy AndroGel. AbbVie denies the allegations.

The FTC is seeking a judge's order that AbbVie pay $1.32 billion to consumers as compensation for the delay in generic versions of AndroGel. AndroGel's annual U.S. sales topped $1 billion earlier this decade, but have declined since generics hit the market in December 2014.

The case comes as many in government call for greater curbs on U.S. drug spending, including President Donald Trump, who released proposals this month aimed at cutting prescription costs in the federal Medicare and Medicaid programs. The FTC has said delays in the introduction of generic drugs keep spending high by depriving customers of lower-cost alternatives.

The FTC has long sought to block makers of brand-name drugs from using certain tactics to ward off generic competition, but its record has been mixed.

The agency has argued the tactics include filing baseless patent-infringement litigation against companies seeking to market generics, a step that can delay generic launch by many months.

The FTC also has objected to the ways branded and generic drug companies sometimes settle patent-infringement litigation. So-called "reverse-payment" or "pay-for-delay" settlements involve a branded drug company paying money or providing an inducement to another company to delay sales of a generic. The FTC says such deals cost consumers and taxpayers about $3.5 billion a year.

During the 2000s, appeals courts rejected several FTC lawsuits targeting such tactics. The agency had better luck in 2015, when Teva Pharmaceutical Industries' Cephalon unit agreed to pay $1.2 billion to settle FTC allegations that Cephalon, Inc. paid generic-drug companies to delay launching copies of the sleep-disorder drug Provigil. The FTC said the money would be given to drug purchasers that overpaid because of Cephalon's conduct, including wholesalers, pharmacies and insurers.

Legal experts say the FTC has much riding on the AbbVie trial, which is expected to last until early March.

"As the history of plaintiffs' success in pharmaceutical antitrust trials is mixed, and these trials are rare to begin with, a loss by FTC would undercut its bargaining strength in future similar cases," said Stephen Kastenberg, an attorney at Ballard Spahr LLP who has represented makers of brand-name drugs in antitrust litigation but isn't involved in the AbbVie case.

AbbVie's former parent, Abbott Laboratories, filed separate lawsuits against Teva Pharmaceutical Industries Ltd. and Perrigo Co. in 2011, alleging their proposed generic copies of AndroGel would infringe a U.S. patent for the drug due to expire in 2020. The companies later reached settlements that allowed generic versions of AndroGel to enter the U.S. market in December 2014.

The FTC claims Abbott's patent lawsuits amounted to "sham litigation" because Teva and Perrigo had proposed selling drugs with different ingredients that wouldn't directly violate the AndroGel patent. The FTC says Abbott couldn't reasonably have expected to win, but nonetheless filed the lawsuits to trigger a 30-month delay in the sale of generics as mandated by federal law. The law's 30-month delay after a patent lawsuit is filed is intended to give companies time to litigate and potentially resolve a dispute.

"This is the epitome of illegal monopolization through sham litigation," FTC attorney Patricia McDermott said in opening statements of the trial. She said the company's actions deprived customers of lower-cost copies of AndroGel for more than 2 1/2 years, and called the $1.32 billion the FTC wants AbbVie to provide consumers "ill-gotten monopoly profits."

Stuart Senator, an attorney for AbbVie and Abbott, disputed the allegations, saying in his opening statement that Abbott believed in the merits of the patent lawsuits. Mr. Senator said Abbott and AbbVie didn't have an illegal monopoly because AndroGel competed with other testosterone-replacement drugs.

In 2015, U.S. District Judge Harvey Bartle III in Philadelphia narrowed the FTC's case by rejecting an allegation from the original lawsuit that Teva accepted illegal payments from AbbVie in the form of a manufacturing-supply license for another drug, in exchange for delaying the launch of generic AndroGel. The judge dismissed Teva from the case, finding that the supply agreement was pro-competitive.

In September 2017, Judge Bartle ruled that Abbott's "patent lawsuits against Teva and Perrigo were without question objectively baseless." The main issue for him to determine in the trial is whether Abbott used those lawsuits to advance an illegal monopolization.

(END) Dow Jones Newswires

February 21, 2018 02:47 ET (07:47 GMT)

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