Allergan shelling out $750M to settle lawsuit over its Namenda 'hard switch' campaign

At the price of a $750 million settlement, Allergan has avoided going to trial with a class-action suit that accused it of blocking generic competition to its older Alzheimer’s drug Namenda through forced switching to a newer, more expensive version.

Allergan on Monday said it had settled with a group of direct purchasers of Namenda in a case set for trial this very day. The $750 million payment doesn’t mean Allergan has admitted wrongdoing, however, the company said.

Plaintiffs in the lawsuit allege that Allergan unit Forest Laboratories orchestrated what’s known as a “hard switch” or “product hopping.” Forest—led at the time by Allergan CEO Brent Saunders—had planned to pull Namenda off the market ahead of its patent expiration to force patients to switch to Namenda XR, its newer, extended-release version.

The purchasers sued Forest after the tactic drew unwelcome attention from then-New York Attorney General Eric Schneiderman. The AG sued the company in 2014 after the forced-switching plan went public, arguing the tactic was illegal under antitrust law. Allergan, then known as Actavis, bought Forest in July 2014.

Allergan made peace with New York state in late 2015, by agreeing to pay $172,000 in litigation expenses and follow a court ruling that had stopped the company from forcing the switch. The company had been planning to take the fight to the U.S. Supreme Court.

By that time the generics damage was done; Dr. Reddy’s and Mylan had already rolled out their copycat versions of the original Namenda formula.

Meanwhile, though, the group of direct purchasers of Namenda and Namenda XR had argued that they paid too much for the drugs because Allergan's tactics delayed cheap generics. In September 2016, a federal judge in the U.S. District Court for the Southern District of New York allowed the lawsuit to move forward, and last August, Allergan’s request for summary judgement was denied, setting the stage for a trial on Monday.

Now, though, the $750 million settlement will be recorded in Allergan’s third quarter 2019 earnings, the company said.

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In 2018, Namenda sales dropped to merely $71 million from $899 million in North America in 2014. And its follow-up product Namzaric never took off, with only $116 million in 2018 sales.

Namenda isn’t the only “hard switch” generic pay-for-delay suit Allergan has faced. In August, the company agreed to pay nearly $2.75 million to three union-sponsored health benefit plans to resolve a lawsuit that alleged it prevented generic competition by taking its ulcerative colitis drug Asacol off the market in favor of its delayed-release version.