Actavis ($ACT) said last month that it stood to lose $200 million in sales if an appeals court didn't let it force patients over to a new, patent-protected version of Alzheimer's treatment Namenda before generics hit. But if the court does allow the so-called hard switch? The federal government stands to lose much, much more.
According to a report from the Department of Health and Human Services (HHS), if the Dublin drugmaker pulls Namenda from the market, prompting patients to take up a new, longer-lasting version before knockoffs roll out in July, the successor drug could win over 75% of what would have been the generic market.
The cost of that move to Medicare and its beneficiaries? A $6 billion spending increase between 2015 and 2024--at the least, the department said.
"We are concerned that the measures taken by Actavis undermine competition and result in excess payments by consumers and taxpayers," it wrote in the report. "… Actavis' planned conduct would exacerbate the problem of financing health care for the elderly."
Actavis, for its part, claims the move wouldn't hurt the free market. "There's a difference between being against competitors and being against competition," the pharma's attorney argued in April.
And it'll have to hope the court agrees. Thirty U.S. states require pharmacists to sub a knockoff for a branded drug whenever there's an equivalent available, which could seriously bite into the blockbuster franchise's top line.
Even if it doesn't win in court, Actavis could still see some success converting patients before copycats flood the market. In January, CEO Brent Saunders said the company had a "very good shot" at hitting a change-over rate between 65% and 70% by this summer. And Israeli drugmaker Teva ($TEVA), for one, has already shown that's doable, recently wowing analysts with the percentage of patients it's lured over to a long-lasting, patent-protected iteration of top MS med Copaxone.
- read HHS' report (PDF)
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