## Facts

- Actavis and its subsidiary Forest sold memantine for Alzheimer’s disease as Namenda IR (twice-daily) and Namenda XR (once-daily).
- Namenda IR and Namenda XR together comprised the entire relevant memantine market; Actavis had undisputed monopoly power in that market.
- Namenda IR’s exclusivity was set to expire in July 2015, enabling entry of lower-priced AB-rated generic IR; Namenda XR had patent protection extending to 2029.
- Generic competition in prescription drugs often depends on state substitution laws that permit (or require) pharmacists to substitute an AB-rated generic for the prescribed branded drug.
- Generic Namenda IR would be substitutable for branded IR, but not for XR; if prescriptions moved from IR to XR, pharmacists could not automatically substitute generic IR.
- Actavis introduced XR and planned to withdraw or sharply restrict IR before generic IR entry to force patients to switch to XR.
- The State alleged the timing and manner of the IR withdrawal were designed to impede generic IR competition by “locking in” patients and prescribers on XR before generics became available.
- The district court granted a preliminary injunction prohibiting Actavis from restricting access to Namenda IR before generic IR entry and requiring continued availability of IR to preserve the ability of generics to compete through substitution laws.
- Actavis appealed the preliminary injunction.

## Issues

1. Whether New York showed a substantial likelihood that Actavis’s planned “hard switch” (effective withdrawal of Namenda IR to coerce switching to XR before generic IR entry) was exclusionary conduct constituting monopolization or attempted monopolization under Sherman Act § 2.
2. Whether New York satisfied the preliminary-injunction requirements, including irreparable harm to competition and consumers and an appropriate balance of equities, and whether the injunction was properly tailored.

## Decision

- The Second Circuit affirmed, holding the district court did not abuse its discretion in granting the preliminary injunction.
- The court found New York made a substantial showing of likely success on the merits because the IR withdrawal, combined with switching efforts, plausibly foreclosed generic competition that would otherwise occur through state substitution laws.
- The court found irreparable harm because completing the switch before generic entry would substantially and durably reduce the competitive impact of generic IR, and the resulting harm to competition and consumers would be difficult to remedy later.
- The court upheld the injunction as suitably limited: Actavis could continue selling and promoting XR, but could not effectively remove IR from the market before generic IR entry.

## Legal Principles

- A monopolist’s product reformulation is not automatically unlawful; antitrust law is generally skeptical of claims attacking product design changes as anticompetitive.
- “Product hopping” may be exclusionary under Sherman Act § 2 when a monopolist goes beyond introducing a new product and instead withdraws (or effectively withdraws) the old product in a manner that coerces switching and impairs generic competition.
- Conduct is more likely exclusionary when it exploits the regulatory framework for generic substitution (e.g., state substitution laws) to prevent generics from obtaining the normal competitive benefit of automatic substitution.
- At the preliminary-injunction stage, courts may enjoin conduct likely to extend monopoly power beyond patent-based exclusivity by foreclosing generic competition, where irreparable harm to competition and consumers is shown and the remedy preserves consumer choice without prohibiting lawful sales of the new product.

## Conclusion

The Second Circuit upheld a preliminary injunction requiring continued access to Namenda IR, concluding that Actavis’s planned “hard switch” likely constituted exclusionary conduct under Sherman Act § 2 by obstructing generic competition dependent on state substitution laws and threatening irreparable harm to consumers and competition.


New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015)