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A Weird Duo: Health Insurance Lobby Joins New York AG's Battle Against Pharmaceutical Company

The leading health insurance lobby is getting behind New York’s attorney general, who has cracked down on the health insurance industry in the state. The case is against a drug company that they argue is using an illegal tactic to prevent competition from generic drugs.

Posted on February 25, 2015, at 12:31 p.m. ET

Scott Olson / Getty Images

The country's top health insurance lobby is backing New York Attorney General Eric Schneiderman in his fight against a pharmaceutical company that produces a major Alzheimer's drug.

The pairing of America's Health Insurance Plans (AHIP) with New York's progressive attorney general is on its face unusual. Schneiderman has cracked down on the health insurance industry in New York during his time as attorney general. His office even set up a health care help line where New Yorkers can report wrongdoing by insurers or providers.

AHIP filed a brief Friday in support of Schneiderman's anti-trust case against Actavis, a pharmaceutical company that he sued last September over the company's decision to phase out an older version of its Alzheimer's drug before its rights to exclusively produce the drug expire.

Schneiderman and the insurers say that what sounds like a small thing — phasing out one drug for another — stifles competition in the marketplace from other drugmakers.

Actavis intends to transition patients from Namenda IL, an older form of the drug that is taken twice daily, to a newer, once-a-day drug called Namenda XR. The older, twice-a-day version of the drug is open to competition from generic manufacturers in July, but the new, once-a-day drug's exclusivity is significantly longer.

Critics call this practice "product hopping" or "product swapping," and they say it prevents generic competition by maneuvering around state and federal laws. In most states, pharmacists can and, in some cases, must replace typically more expensive brand named drugs prescribed by doctors with a cheaper generic option. If a pharmaceutical company makes a slight change to a drug — in this case the dosage — then pharmacists can no longer make the swap.

By ending mass production of the older drug in favor of the slightly modified version before a generic drug has had the opportunity to be introduced, a drug company effectively blocks a generic manufacturer from meaningfully competing in the market.

A federal judge ruled in December that Actavis had to continue to sell the older version of the drug Namenda while the court deliberated the merits of the case. Actavis is appealing that ruling.

In their brief filed with the Second Circuit Court of Appeals, AHIP argues that Actavis' actions burden health plans and consumers by contributing to the rise in prescription drug costs.

"This case is an example of what happens when drugmakers engage in anticompetitive behavior under the guise of innovation," AHIP spokesman Ben Jenkins told BuzzFeed News in a statement. "Forcing a product switch to protect a monopoly punishes consumers in the worst possible way by delaying the entry of more affordable prescription drugs into the market."

When asked about the unlikely alliance between the AG and insurers, a spokesman for AHIP said their attention has always been on improving "value and affordability for patients."

"That means there needs to be serious attention paid to the prices being charged for treatments and medications that drive up costs across the board, and in this case, necessary action when drugmakers promote a monopoly that harms patients and employers," Jenkins said.

AHIP's brief is one of 18 briefs filed in support of the state's case against Actavis, with the AARP and the American Geriatric Society also filing briefs along with other health care, physician, senior citizen, and legal groups.

"There is widespread concern about the public harm that may be caused by Actavis' attempt to force Alzheimer's patients off a drug they rely on, as is evidenced by the growing chorus of voices we hear today," said Attorney General Schneiderman. "We will continue our efforts to protect patients and the public from these types of harmful, anticompetitive acts."

A spokesman for Actavis told BuzzFeed News in an email that the extended release drug has "significant advantages" over the twice-daily version, writing, "Alzheimer's treatment requires a balance of ensuring the patient receives critical medicines, in a manner that lessens the burden on the caregiver and patient."

The spokesman added that a survey conducted by the company found that caregivers preferred the once a day drug.

Here's the full AHIP brief:

A BuzzFeed News investigation, in partnership with the International Consortium of Investigative Journalists, based on thousands of documents the government didn't want you to see.