May 12, 2011

Pay-for-Delay-FTC Issues New Report on Pharmaceutical Settlement Agreements

by Richard F. Kurz

Money in hand.jpgOn May 3, the Federal Trade Commission ("FTC") issued a press release stating there was a "60 Percent Increase in Pharmaceutical Industry Deals That Delay Consumers' Access to Lower-Cost Generic Drugs" in 2010. Such settlements, dubbed "pay for delay" by some, have been under attack by the FTC in recent years.

FTC Chairman Jon Leibowitz states that "Collusive deals to keep generics off the market are already costing consumers and taxpayers $3.5 billion a year in higher drug prices." However, the Generic Pharmaceutical Association ("GPhA") challenges this, stating that the "FTC is continuing to perpetuate the myth that pro-competitive, pro-consumer patent settlements are harmful to consumers--an unsubstantiated position that has repeatedly failed to receive support in both Congress and the Courts."

The deals at issue are ones where "brand-name companies have paid generic challengers to settle their patent challenges." The FTC report analyzed 113 final patent settlements and found that 31 of these were settlements that contained a payment to a generic manufacturer and also restricted the generic's ability to market its product. The FTC noted that of these 31 settlements, 26 involved generics that were "so-called 'first filers,' meaning that they were the first to seek FDA approval to market a generic version of the branded drug." The FTC report found that such settlements delayed the entry of the generic drug by an average of 17 months longer than other settlements.

As mentioned in previous blog posts, the FTC is challenging such settlement agreements in court, contending that the agreements violate U.S. antitrust laws. Further, the FTC has been a proponent of legislation in Congress to prohibit these settlements. However, as the GPhA notes, the "FTC already has the authority to review and reject any patent settlement that it deems unlawful."