FTC Sues in 'Pay-for-Delay' Pact
Drugmaker Paid Rivals to Withhold Generic, Agency Says

By Lyndsey Layton
Washington Post Staff Writer
Tuesday, February 3, 2009

The Federal Trade Commission has filed suit in federal court in an attempt to block a deal in which a manufacturer of a brand-name testosterone-replacement drug paid three competitors to delay rolling out cheaper generic versions.

The FTC said the "pay-for-delay" agreement violates antitrust laws, robs consumers of less-expensive alternatives and allows the brand-name drugmaker an unfair monopoly. The state of California joined the federal agency in its complaint, which was filed last week in U.S. District Court in the Central District of California.

FTC officials are hoping the case will ultimately reach the U.S. Supreme Court. "We want to stop these unconscionable pay-for-delay deals that force consumers to overpay for much-needed drugs," said Jon Leibowitz, an FTC commissioner.

Androgel is a synthetic testosterone gel prescribed to men who have low levels of the hormone due to aging, cancer, or HIV/AIDS, among other conditions. Solvay Pharmaceuticals was granted a 17-year patent for Androgel in 2003, and it has become the drug company's second-highest grossing drug, earning about $400 million in annual sales.

Several other drugmakers -- Watson Pharmaceuticals, Par Pharmaceuticals and Paddock Laboratories -- applied to manufacture a generic version of Androgel and challenged Solvay's patent, saying they could produce a version of the drug that did not impinge on the patent. When the U.S. Food and Drug Administration granted approval, Solvay made a deal with the would-be competitors: They would get a share of Solvay's profits in return for not marketing a generic version until 2010, the FTC complaint said.

Known as "reverse payments," the deals have become increasingly common. The FTC found that nearly half of all settlements between generic drugmakers and brand-name manufacturers in fiscal 2006 and 2007 resulted in some kind of payment to the generic maker in exchange for a pledge to stay out of the marketplace.

Generic manufacturers pose a significant threat to brand-name drugmakers because they can price their versions of drugs as much as 80 to 90 percent lower than the brand-name price.

The FTC says that such payments, also called "exclusion payment settlements," stymie the intent of the Hatch-Waxman Act of 1984, which was meant to speed generic drugs to market. The FTC has tried unsuccessfully to persuade the Supreme Court to hear two cases challenging such agreements in recent years, but each time, the Department of Justice argued that the high court should not take the case.

Leibowitz said he believes the Justice Department under President Obama will be more supportive of the FTC's position. "There seems to be a growing recognition, especially by this administration, that these deals need to be stopped," he said.

Sen. Herb Kohl (D-Wis.) and others, including then-Sen. Barack Obama, filed legislation last year that would prohibit reverse payments.

The bill, which faces strong opposition from the pharmaceutical industry, is expected to be filed again this week.

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