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FTC Sues Cephalon over Provigil Pricing

Charges it blocked sale of low-cost generics

February 14, 2008
The Federal Trade Commission has filed a complaint against Cephalon, Inc., charging that the company acted illegally to prevent competition against its branded drug Provigil.

According to the FTC, the anticompetitive conduct includes paying four firms to refrain from selling generic versions of Provigil until 2012.

Cephalon’s anticompetitive scheme, said the agency, denies patients access to lower-cost, generic versions of Provigil and forces consumers and other purchasers to pay hundreds of millions of dollars a year more for Provigil.

Cephalon is accused of entering into agreements with four generic drug manufacturers that each planned to sell a generic version of Provigil. Each of these companies had challenged the only remaining patent covering Provigil, one relating to the size of particles used in the product.

The complaint charges that Cephalon was able to induce each of the generic companies to abandon its patent challenge and agree to refrain from selling a generic version of Provigil until 2012 by agreeing to pay the companies a total amount in excess of $200 million. In so doing, Cephalon achieved a result that assertion of its patent rights alone could not.

The suit against Cephalon seeks to “undo a course of anticompetitive conduct that is harming American consumers by depriving them of access to lower-cost generic alternatives to an important branded drug,” said FTC Bureau of Competition Director Jeffrey Schmidt.

“Cephalon prevented competition to Provigil by agreeing to share its future monopoly profits with generic drug makers poised to enter the market, in exchange for delayed generic entry. Such conduct is at the core of what the antitrust laws proscribe,” he added.

With U.S. sales of Provigil totaling over $800 million in 2007, and accounting for more than 40 percent of Cephalon’s total sales, the prospect of generic competition was a major financial threat to the company, the complaint states.

Generic entry can significantly reduce the sales of existing branded drugs, and Cephalon knew that it would profit by keeping lower-cost generic alternatives to Provigil off the market, the agency contends.

According to the Commission, by late 2005, generic competition to Provigil appeared imminent. Several years earlier, on the first day permitted by regulation, four companies --- Teva Pharmaceuticals USA, Inc., Ranbaxy Pharmaceuticals, Inc., Mylan Pharmaceuticals Inc. and Barr Laboratories, Inc. -- submitted applications with the U.S. Food and Drug Administration (FDA) to market their own generic versions of Provigil.

Facing the prospect of billions of dollars in lost revenue, Cephalon entered into agreements through which it compensated each of the four generic companies to settle the patent litigation and agree to forgo generic entry until April 2012, the FTC alleges. These agreements contained payments to the generic companies totaling more than $200 million.

No other generic company could compete with branded Provigil, unless and until all four “first filers” either relinquished their marketing exclusivity or 180 days after one of them entered the market. Cephalon therefore was able to erect a barrier that protected it from other companies that have also sought approval to sell generic Provigil.

The FTC is seeking a permanent injunction against Cephalon that would allow generic Provigil entry before 2012. Further, it is seeking a final court judgment against Cephalon declaring that its course of conduct, including its agreements with Teva, Ranbaxy, Mylan, and Barr, violates Section 5(a) of the FTC Act and barring Cephalon from engaging in similar or related conduct in the future.

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