Actavis says it'll lose $200M in Namenda sales if appeals court nixes a 'hard switch'

Actavis ($ACT) is trying to encourage an appeals court to let it force patients over to a new, patent-protected version of Alzheimer's treatment Namenda. Hundreds of millions in sales rest on the decision. But so far, the judges aren't offering any clues about their answer.

Monday, an Actavis attorney argued before a three-judge panel that it could lose $200 million in sales if the old Namenda sticks around on the market till generics hit, Reuters reports. But to the State of New York--whose attorney general brought the suit--that's not a good enough reason to pull the older drug.

The stakes are high for Actavis, which is working hard to dodge the Namenda generics it expects to hit this July. Thirty U.S. states--New York included--require pharmacists to sub a knockoff for a branded drug whenever there's an equivalent available, which could seriously bite into the blockbuster franchise's top line. But the automatic substitution doesn't apply when doctors prescribe a new formulation like Namenda XR, a longer-acting version of the original.

Pulling the older Namenda formula ahead of time would give Actavis some time to push patients over to the newer Namenda XR--and potentially keep those patients even after generics make their debut. The so-called "hard switch" is a strategy for fighting generic rivals before they actually hit. But the New York AG argues that such a move stifles free-market competition.

Actavis disagrees. "There's a difference between being against competitors and being against competition," the pharma's attorney maintained.

As one 2nd Circuit Court of Appeals judge pointed out Monday, however, those state laws requiring generic substitution are in place for a reason--and that's to keep a competitive market in place. It's a notion that U.S. District Judge Robert Sweet seemed to buy in December, when he ordered Actavis to keep supplying the older version.

Actavis CEO Brent Saunders

For now, the panel hasn't hinted at which way it's leaning, Reuters reports. But whatever it ultimately decides, there's hope for Actavis on the patient-switching front. Back in January, CEO Brent Saunders said the company had a "very good shot" at hitting a conversion rate between 65% and 70% by this summer, and lately, Israeli drugmaker Teva ($TEVA) has shown that's possible even when an older formula is still on the market.

Since winning approval for a long-acting version of its MS star Copaxone early last year, Teva has blown analysts away with its change-over success. Last August, SVP Jon Congleton told analysts the company could afford to wait on a hard switch and avoid disrupting patients.

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Special Reports: The top 10 patent losses of 2015 - Namenda | Pharma's top 10 M&A deals of 2014's first half - Actavis/Forest Laboratories

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