There’s been a split among the courts regarding the legality of what are sometimes called “pay for delay” deals, under which brand-name drugmakers facing a patent challenge from generic rivals pay the rivals to temporarily stay out of the market.
Since 2005, several courts have ruled in favor of the arrangements, saying they were permissible as long as the brands and generics agreed that the generic would not stay out of the market for longer than the life of the patent.
But in July, a federal appeals court in Philadelphia interrupted the winning streak when it decided that these types of agreements should be presumed anti-competitive and that the burden is on the defendant to prove otherwise.
That case involved payments by Schering-Plough to two generic firms that agreed to delay a generic version of the drug K-dur, used to treat people with potassium deficiencies. More than three-dozen drug wholesalers and retailers — including CVS and Rite-Aid — sued Schering-Plough for entering into what they alleged was an illegal deal.
Merck, which now owns Schering-Plough, has appealed to the Supreme Court.
The solicitor general is asking the Supreme Court to review a different case involving Solvay Pharmaceuticals, which paid three generic drugmakers that agreed not to sell versions
of its testosterone-replacement drug, called Androgel, until 2015.
The FTC challenged the agreements, but two courts dismissed the agency’s complaint.
The agency is now hoping the Supreme Court will resolve an issue that has divided the lower courts for years. The high court could choose to hear both the FTC and the Schering-Plough cases. It could decide take one or the other. It can consolidate the two. It also could refuse to hear either one.
“We’re hopeful the Supreme Court will take our case,” said Jon Leibowitz, chairman of the FTC. “We believe that if competition law is properly applied that it could save American consumers as well as small and large businesses billions of dollars in higher health costs.”
These “sweetheart” deals cost Americans $3.5 billion annually by delaying cheaper generics, Leibowitz said. Since the government buys a third of all pharmaceuticals, the deals will boost the nation’s debt by almost $5 billion over the next decade if they go unchecked, he said, citing Congressional Budget Office figures.
The trade group that represents the brand-name drugmakers has long argued that protecting drug patents is vital to innovation and job creation. The Generic Pharmaceutical Association says consumers lose more money when these types of deals are not reached. Through these agreements, brand-name drugmakers have allowed dozens of first-time generics to come to the market many months and even years before the brand-name patents expired, the group said.
Ralph Neas, the group’s chief executive, said 17 of the 22 first-time generics launched last year were the result of patent settlements, including Zyprexa, Solodyn, Levaquin and Lipitor.
“We welcome the opportunity to have this issue before the Supreme Court,” Neas said. “The FTC position is misguided. It’s wrong on the law, wrong on the facts, and wrong on public policy grounds.”