Pfizer takes on J&J with antitrust lawsuit

Group claims rival signed contracts with insurers to hobble its biosimilar drug

by David Crow

Pfizer alleges J&J violated federal antitrust laws by signing 'exclusionary contracts' with health insurers to ensure its medicine was given preferential treatment

Pfizer has sued Johnson & Johnson for using “anti-competitive practices” to stymie a copycat version of its $7bn arthritis drug, opening a new front in the battle over an emerging class of medicines known as biosimilars.

The lawsuit alleges J&J violated federal antitrust laws by signing “exclusionary contracts” with health insurers to ensure its medicine, Remicade, was given preferential treatment over a biosimilar alternative made by Pfizer.

Biosimilars are a relatively new type of medicine that mimic biologic medicines, which are made from living cells rather than the chemicals found in traditional pills.

Pfizer’s antitrust lawsuit — the first of its kind in the realm of biosimilars — goes to the heart of the debate over whether the knock-off versions should be treated as direct equivalents or inferior alternatives.

While it is relatively easy to produce direct replicas of chemical pills, drugmakers that wish to copy biologic medicines can only create near-identical versions that are biosimilar.

Pfizer says insurers originally classified its drug, Inflectra, at “parity” with Remicade, meaning there was no medical reason to favour one medicine over the other.

However, the lawsuit alleges insurers subsequently performed a U-turn and signed “biosimilar exclusion” contracts after J&J threatened to withhold significant rebates. Drugmakers tend to return large sums of cash via rebates to ensure their drugs are included in the list of medicines that insurers will pay for.

J&J also offered discounts on the price of Remicade to insurers that agreed not to buy biosimilar versions, according to the lawsuit.

In a statement on Wednesday, Scott White, president at Janssen Biotech, a pharmaceuticals unit of J&J, said: “We are effectively competing on value and price and to date, Pfizer has failed to demonstrate sufficient value to patients, providers, payers and employers.” He added: “Competition is bringing down the overall cost of infliximab including Remicade, and will continue to bring down costs in the future. There is no merit to this lawsuit”

Pfizer said the tactics had resulted in insurers refusing to pay for its medicine, even though it had an average selling price that was more than 10 per cent lower than J&J’s drug.

John Young, group president of Pfizer Essential Health, said: “For US patients and providers to realise the benefits of biosimilars . . . entrants should have a fair chance to compete with originator products — now and in the future — based on lawful pricing and access practices.”

Shares in J&J fell 1.5 per cent in early trading in New York while Pfizer added 1.3 per cent.

Remicade is an anti-inflammatory medicine for rheumatoid arthritis and a wide array of other conditions such as psoriasis. The drug generated almost $7bn in sales for J&J last year, accounting for about one-fifth of the company’s drug revenues.

Biosimilars have been hailed as a chance to lower the bill for drugs in the US, where a handful of biologic medicines such as Remicade, Abbvie’s Humira, Amgen’s Enbrel and Roche’s Rituxan dominate the list of top-grossing products.

But while the class of medicines has proven successful in Europe, biosimilars have not gained the same traction in the US, in part because of confusion over how they are labelled.

Some doctors also say they are wary of switching patients to biosimilars given that they are not direct replicas — especially if they are doing well on the original medicine.

Michael Carrier, professor of law at Rutgers University, said that, as the first of its kind, the lawsuit would generate a lot of attention and could help define the tactics that branded manufacturers such as J&J could use to defend their top-selling drugs.

“In a new and complicated regulatory regime, there may be more room for manoeuvres like this that convince insurers not to cover cheaper alternatives,” Mr Carrier said.

On its most recent earnings call, Alex Gorsky, J&J chief executive, said “physicians have a strong preference for Remicade versus biosimilars” and that the medicine “enjoyed a strong access position in the US”.

Dominic Caruso, chief financial officer, added that the company was anticipating less erosion to Remicade sales in the US than previously expected and that it had its “contracting in place” with insurers for 2017.

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