US Pay-For-Delay Deals Can be Challenged but are Not Illegal
Deals by pharmaceutical companies to delay generic competition can be challenged by US regulators but are not in themselves illegal, according to a recent ruling by the Supreme Court.
After a 5 – 3 vote, with Justice Samuel Alito abstaining, the Supreme Court rejected the Federal Trade Commission’s (FTC) request to declare these ‘pay-for-delay’ payments illegal. But it did discard drug manufacturer claims that their patents permitted them to exclude competitors. The FTC could now overcome their previous claims as this decision of the Supreme Court allows antitrust regulators to pursue and challenge these ‘pay-for-delay’ agreements.
The companies associated with this case (Federal Trade Commission v. Watson Pharmaceuticals Inc et al)included branded pharmaceutical company Solvay, now owned by AbbVie. They wanted to delay cheaper versions of its AndroGel product from reaching the market, making payments to generic competitors Actavis to delay production. In 2009, the FTC filed a lawsuit against the companies claiming that they had split Solvay’s profits and were stopping generic competitors from producing cheaper versions of the drug. However, the FTC lost this district court ruling and then this decision in favour of Solvay was confirmed by the 11th Circuit Court of Appeals.
The above ruling by the Circuit Court was reversed by this decision of the Supreme Court who sent this case back to the lower courts for further proceedings.
Over the last decade, regulators have argued that this ‘pay-for-delay’ practice has prevented health systems from gaining access to cheaper drugs. As part of his decision for the majority in the Supreme Court, Justice Stephen Breyer stated that these deals could also hurt competition:
“Settlement on the terms said by the FTC to be at issue here - payment in return for staying out of the market - simply keeps prices at patentee-set levels, potentially reducing the full patent-related $500 million monopoly return while dividing that return between the challenged patentee and the patent challenger. The patentee and the challenger gain; and the consumer loses.”
His opinion went on to state that pharmaceutical companies could claim that some of these deals are ‘legal’ under the ‘rule of reason’.
FTC Chairwoman Edith Ramirez has praised this decision saying that the Supreme Court has “taken a big step toward addressing a problem that has cost Americans $3.5 billion a year in higher drug prices.
We look forward to moving ahead with the Actavis litigation and showing that the settlements violate antitrust law.”
This decision also comes at a time when European antitrust regulators prepare to penalise Lundbeck for a similar ‘pay-for-delay’ deal with the EU as well as the UK Office of Fair Trading’s investigation into GlaxoSmithKline for the same kind of agreements.