Drug industry powerhouses Pfizer Inc. and Johnson & Johnson are going head-to-head in a new antitrust lawsuit in which the courts could decide what tactics used by brand-name companies are fair in trying to prevent biosimilar competitors from capturing market share.

Biosimilars are intended to be lower-cost versions of biologics — large molecules derived from natural sources, such as microorganisms or plant or animal cells.

At stake for Pfizer is the market potential for its tumor necrosis factor blocker Inflectra, which is a biosimilar of J&J's Remicade, a drug that has been on the U.S. market since 1998.

In its lawsuit filed Sept. 20 in the U.S. District Court for the Eastern District of Pennsylvania, Pfizer is accusing J&J of using exclusionary contracts and other anti-competitive practices to impede access to lower-cost biosimilars.

Pfizer also alleged that J&J's systematic efforts to maintain its monopoly with Remicade by inappropriately excluding biosimilar competitors violates federal antitrust laws and undermines the principal goals of the Biologics Price Competition and Innovation Act, or BPCIA — a complex law enacted in 2010 as part of the Affordable Care Act that gave the U.S. Food and Drug Administration the authority to use a streamlined approach to approve biosimilars. It also established the process for resolving patent disputes.

But Scott White, president of J&J's Janssen Biotech Inc. unit, noted that the lawsuit had no merit and that his company was "effectively competing on value and price."

"To date, Pfizer has failed to demonstrate sufficient value to patients, providers, payers and employers," White told S&P Global Market Intelligence in an emailed response to questions. "Competition is bringing down the overall cost of Remicade and will continue to bring down costs in the future."

Young market

Pfizer won FDA approval in April 2016 to market Inflectra, but a lawsuit from J&J over patent rights kept the product tied up in court for several months, preventing it from entering the market until last fall.

Like Remicade, Inflectra is approved to treat pediatric and adult Crohn's disease, ulcerative colitis, rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis and plaque psoriasis. Remicade has the additional approval of pediatric ulcerative colitis, but because of its exclusivity protection for that use, Pfizer must wait before it can seek that indication.

In addition to Inflectra, there are only five other biosimilars approved by the FDA — Novartis AG unit Sandoz's Zarxio, a version of Amgen Inc.'s Neupogen; the company's Erelzi, patterned on Amgen's Enbrel; Amgen's Amjevita, a biosimilar of AbbVie Inc.'s Humira; Merck & Co. Inc.'s and Samsung Bioepis Co. Ltd.'s Renflexis, which also is a version of J&J's Remicade; and Amgen's Mvasi, a biosimilar of Roche Holding AG's Avastin.

Because of ongoing patent suits, only Zarxio, Inflectra and Renflexis are sold in the U.S.

Competing against coercion

When Inflectra entered the market in November 2016, it set its initial wholesale acquisition cost at 15% below Remicade's list price.

"The threat from Inflectra did not go unnoticed by J&J," Pfizer said in its complaint.

Within weeks, New Jersey-based J&J began to deploy what it publicly termed its "Biosimilar Readiness Plan," the core features of which were exclusionary contracts that foreclose Pfizer's access to "an overwhelming share of consumers, coupled with anti-competitive bundling and coercive rebate policies designed to block both insurers from reimbursing and hospitals and clinics from purchasing Inflectra or other biosimilars of Remicade, despite their lower pricing," the New York drugmaker said.

Pfizer said it now sells Inflectra at a list price that is 19% lower than Remicade. In negotiations with insurers and providers, it has offered substantial additional pricing concessions in the form of discounts and rebates, which in some instances were more than 40% below Inflectra's list price, the company said.

But in the second quarter, Pfizer reported only $23 million in U.S. sales for Inflectra, versus $1.53 billion for Remicade during the same period.

In its complaint, Pfizer alleged that J&J was coercing insurers into accepting its exclusionary commitments by threatening to deny rebates worth potentially tens of millions of dollars annually for those that declined the deals, thereby imposing a substantial financial penalty on them.

J&J's scheme has led to the near-total foreclosure of Inflectra with patients across the country, Pfizer said.

In the absence of Remicade's exclusionary practices, Inflectra's growth in the relevant markets would be substantially greater than it has been and would be substantially larger in the future, the company asserted.

Pfizer said it has not been the only one harmed by J&J's activities.

"They have caused substantial harm to the competitive process as well as to government payers and to consumers, who have been deprived of the principal benefits of competition — more choices and lower prices," Pfizer said.

It said that J&J's prices for Remicade have been increasing "by every measure," noting the company has twice boosted its list price by nearly 9% for the innovator biologic since Inflectra was approved by the FDA.

If J&J's conduct is not prohibited, it will be adopted by other originators of biologics aiming to preserve their dominant positions, Pfizer said.

"This case will be a bellwether for the success of Congress' biosimilars initiative, as embodied in the BPCIA," it said.