Shire Alleges Allergan Blocked Drug From Medicare Contracts -- Update

Shire PLC filed an antitrust suit against Allergan PLC, alleging Allergan's contracts with Medicare Part D drug plans for its Restasis eye drops effectively blocked access to Shire's rival drug.

The complaint, filed Monday in federal court in Newark, N.J., says Shire offered steep discounts in bids to secure insurance coverage of the company's dry-eye drug Xiidra but the Part D plans refused, due to Allergan's "bundled discounts, exclusive dealing" and other tactics.

"There was not a level playing field for us to compete" in Part D, John Neeley, Shire's head of U.S. pricing and market access, said in an interview. Some 13% of Part D patients have access to Xiidra on their drug formularies, compared with about 88% of commercially insured patients, a Shire spokeswoman says.

Allergan declined to comment.

The lawsuit is the second in the past few weeks to take aim at the closely guarded contracts between drugmakers and health insurers and pharmacy-benefit managers that play an important but hidden role determining which drugs patients can get and will sell well.

Last month, Pfizer Inc. filed such a suit alleging Johnson & Johnson used "exclusionary contracts" to shield its arthritis drug Remicade from Pfizer's biosimilar. J&J has said the lawsuit lacked merit and the biosimilar competition was already driving down costs.

The lawsuits reflect just how influential the contracts between drug companies and drug-benefit managers have become in the commercial success of prescription medicines at a time when health plans are trying to control costs.

In the name of limiting spending, drug-benefit managers have been securing steep discounts with one drug company in exchange for restricting access to another company's product. The recent lawsuits are exploring the legality of these increasingly common contracts.

Shire's lawsuit centers on Restasis, Allergan's second-biggest selling drug, after Botox, with $1.4 billion in U.S. sales last year.

The drops treat patients, many of them elderly, whose eyes don't produce tears properly and can result in irritation, blurred vision and other symptoms. Dry-eye disease is a big market, with about a million patients in the U.S. receiving a prescription, according to Shire's lawsuit.

Restasis has dominated the market for dry-eye treatment since its approval in 2002. For years, it was the only Food and Drug Administration-approved treatment.

Now Restasis is under threat on multiple fronts. Generic-drug makers have lawsuits in federal court to invalidate Allergan's patents so they can sell lower-priced copies. In early September, Allergan sold its Restasis patents to an Indian tribe in a legal maneuver designed to get avoid challenges filed at the U.S. Patent and Trademark Office.

In August 2016, Shire began selling its own brand-name drug, called Xiidra. Shire thought it had a competitive advantage because Xiidra was approved for all dry-eye patients, while Restasis was greenlighted for only a subset, according to the lawsuit.

Xiidra has captured about 23% of total dry-eye prescriptions since entering the market, but the bulk of its market share is in commercially insured patients. About three-fifths of dry-eye patients are covered by a commercial health plan, while the rest are insured by Medicare.

Cost isn't the reason, the lawsuit says. The list prices for the drugs are comparable. A month's supply of both Restasis and Xiidra list for $465, according to Elsevier Inc.'s Gold Standard Drug Database. Shire says it offered substantial but unspecified discounts to compete with Allergan's Restasis.

In its lawsuit, Shire alleges Allergan has "compelled and coerced" Part D plans to limit access to Xiidra by offering discounts on both Restasis and the company's heavily used glaucoma drugs if the plans would favor Restasis on their formularies.

After an administrator of several Part D plans abandoned a tentative agreement to cover Xiidra and decided against putting the drug on the plans' formularies, the lawsuit says, Shire asked how it could gain coverage. "You don't," Shire's lawsuit quotes an unnamed plan official replying.

As a result of Allergan's "exclusionary agreements," Shire's lawsuit says, top Part D plans either refused to put Xiidra on their drug formularies or placed it in a less favorable position. Shire says the moves mean patients have to file difficult appeals in order to get Xiidra or pay higher copays for the drug than for Restasis.

Shire asked the court to stop Allergan from taking actions that keep Xiidra off Part D drug formularies.

Corrections & Amplifications

This article was corrected at 1:20 p.m. ET because an earlier version misstated the city in the second paragraph as Trenton instead of Newark.

Shire PLC filed an antitrust suit against Allergan PLC, alleging Allergan's contracts with Medicare Part D drug plans for its Restasis eye drops effectively blocked access to Shire's rival drug.

The complaint, filed Monday in federal court in Newark, N.J., says Shire offered steep discounts in bids to secure insurance coverage of the company's dry-eye drug Xiidra but the Part D plans refused, due to Allergan's "bundled discounts, exclusive dealing" and other tactics.

"There was not a level playing field for us to compete" in Part D, John Neeley, Shire's head of U.S. pricing and market access, said in an interview. Some 13% of Part D patients have access to Xiidra on their drug formularies, compared with about 88% of commercially insured patients, a Shire spokeswoman says.

Allergan said there is "no merit" to the lawsuit. "In our negotiations with Medicare Part D sponsors, we are competing on value and price, and competition in the chronic dry-eye therapeutic market has driven pricing down for patients and payers in Medicare Part D and commercial plans," Allergan said.

Shire's lawsuit is the second in the past few weeks to take aim at the closely guarded contracts between drugmakers and health insurers and pharmacy-benefit managers that play an important but hidden role determining which drugs patients can get and will sell well.

In September, Pfizer Inc. filed such a suit alleging Johnson & Johnson used "exclusionary contracts" to shield its arthritis drug Remicade from Pfizer's biosimilar. J&J has said the lawsuit lacked merit and the biosimilar competition was already driving down costs.

The lawsuits reflect just how influential the contracts between drug companies and drug-benefit managers have become in the commercial success of prescription medicines at a time when health plans are trying to control costs.

In the name of limiting spending, drug-benefit managers have been securing steep discounts with one drug company in exchange for restricting access to another company's product. The recent lawsuits are exploring the legality of these increasingly common contracts.

Herbert Hovenkamp, an antitrust specialist at the University of Pennsylvania Law School and Wharton School, said the bundling of products isn't by itself grounds for an antitrust violation. Shire would have to show that Allergan sold Restasis below cost to keep out Xiidra, he said.

"These allegations are very common. They are not easy to prove," Mr. Hovenkamp said.

Shire's suit centers on Restasis, Allergan's second-biggest selling drug, after Botox, with $1.4 billion in U.S. sales last year.

The drops treat patients, many of them elderly, whose eyes don't produce tears properly and can result in irritation, blurred vision and other symptoms. Dry-eye disease is a big market, with about a million patients in the U.S. receiving a prescription, according to Shire's lawsuit.

Restasis has dominated the market for dry-eye treatment since its approval in 2002. For years, it was the only Food and Drug Administration-approved treatment.

Now Restasis is under threat on multiple fronts. Generic-drug makers have lawsuits in federal court to invalidate Allergan's patents so they can sell lower-priced copies. In early September, Allergan sold its Restasis patents to an Indian tribe in a legal maneuver designed to avoid challenges filed at the U.S. Patent and Trademark Office.

In August 2016, Shire began selling its own brand-name drug, called Xiidra. Shire thought it had a competitive advantage because Xiidra was approved for all dry-eye patients, while Restasis was greenlighted for only a subset, according to the lawsuit.

Xiidra has captured about 23% of total dry-eye prescriptions since entering the market, but the bulk of its market share is in commercially insured patients. About three-fifths of dry-eye patients are covered by a commercial health plan, while the rest are insured by Medicare.

Cost isn't the reason, the lawsuit says. The list prices for the drugs are comparable. A month's supply of both Restasis and Xiidra lists for $465, according to Elsevier Inc.'s Gold Standard Drug Database. Shire says it offered substantial but unspecified discounts to compete with Allergan's Restasis.

In its lawsuit, Shire alleges Allergan has "compelled and coerced" Part D plans to limit access to Xiidra by offering discounts on both Restasis and the company's heavily used glaucoma drugs if the plans favored Restasis on their formularies.

After an administrator of several Part D plans abandoned a tentative agreement to cover Xiidra and decided against putting the drug on the plans' formularies, the lawsuit says, Shire asked how it could gain coverage. "You don't," Shire's lawsuit quotes an unnamed plan official replying.

As a result of Allergan's "exclusionary agreements," Shire's lawsuit says, top Part D plans either refused to put Xiidra on their drug formularies or placed it in a less favorable position. Shire says the moves mean patients have to file difficult appeals to get Xiidra or pay higher copays for the drug than for Restasis.

Shire asked the court to stop Allergan from taking actions that keep Xiidra off Part D drug formularies.

Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com

(END) Dow Jones Newswires

October 02, 2017 13:51 ET (17:51 GMT)