Supreme Court Promises Clarity on "Pay-For-Delay" Agreements
The US Supreme Court promised a decision on the highly controversial “pay-for-delay” practices which cost consumers and the government billions of dollars each year.
Judges in the Supreme Court will hear arguments in the case of the Federal Trade Commission (FTC) vs. Watson Pharmaceuticals,in order to determine whether brand-name drug manufacturers can pay generic competitors to keep their cheaper products off the market.
The FTC argues that Watson and the generic drug makers Paddock Laboratories and Par Pharmaceutical, defied competition laws by accepting payments of $31-$42 million a year from Abbott Laboratories' subsidiary Solvay. This payment required Watson and the other generic competitors to restrain from putting their lower-priced generic versions of Solvay’s topicalsynthetic testosterone AndroGelon the market until 2015.
The FTC revealed that 127 pay-for-delay agreements were established between 2005 and 2011 which is an annual cost of $3.5 billion for consumers. This is another major fight for the FTC who previously brought a claim in the Californian district court in 2009 against Solvay in relation to payments which they believed unlawfully allowed an extension of the monopoly on AndroGel. At that time, the district court for Georgia dismissed it and the 11th US Circuit Court of Appeals rejected it. During the past decade, two other federal circuit courts of appeal have also permitted these payments.
The Supreme Court judges’ decision to rule on this Watson case comes after judges in the 3rdCircuit of Court of Appeals in Philadelphia disagreed with previous court rulings and insisted that these payment deals were anti-competitive on face value. This Appeals court went against the original 2001 ruling in a Merck & Co unit Schering –Plough case which previously supported these ‘pay-for-delay’ deals. With this in mind, the US Supreme Court aims to shed a clearer light on this controversial issue which has divided legal opinion.
Iowa Senator Chuck Grassley together with Wisconsin Senator Herb Kohl both approve of the examination of the Watson case. Following the decision, they have drawn up the Preserve Access to Affordable Generics Act (S 27) which would make pay-for-delay agreements illegal and provide the FTC with the power to nullify them. If the act is introduced, the Congressional Budget Office (CBO) stated that it would create savings of $4.78 billion in budget savings while reducing US drug spending by about $11 billion.
A Supreme Court decision on FTC vs. Watson Pharmaceuticals is expected before the end of June 2013. While this ruling could solve a long-running problem for consumers and the government, it is said that the court could have a split 4-4 decision as Justice Samuel Alito excused himself from the case. This means that this high-profile case might not get rid of "pay-for-delay" practice and opinion on the issue would still be divided.