FTC Asks Supreme Court To Review Pay To Delay

By Ed Silverman

The US Supreme Court is being asked to review yet another so-called ‘pay-to-delay’ case. The latest request has been made by the US Solicitor General – at the prompting of the US Federal Trade Commission – and concerns a case involving the AndroGel testosterone replacement drug. The agency hopes to reverse a series of lower-court rulings that found a settlement between various drugmakers was not anticompetitive.

The case dates back to February 2009, when the FTC filed a complaint challenging agreements in which Solvay Pharmaceuticals, which sells AndroGel, paid three generic drugmakers – Watson Pharmaceuticals, Paddock Laboratories and Par Pharmaceuticals, to delay launching copycat versions. in 2007, AndroGel generated more than $400 million, according to the FTC.

As the agency has in other instances, its complaint alleged that the drugmakers violated antitrust laws when Solvay paid thee generic drugmakers millions of dollars annually in exchange for their agreements to abandon their patent challenges to Solvay, according to an FTC statement. The generic competitors also agreed not to market their versions of AndroGel until 2015.

The bid to seek Supreme Court review is the latest effort by the FTC to restrict pay-to-delay settlements. The agency has regularly maintained these deals are anti-competitive and its forecasts show they force consumers to pay $3.5 billion a year in higher health care costs. As a result, the FTC has repeatedly tried to convince Congress to pass legislation that would impose restrictions.

Drugmakers have defended patent settlements as not only lawful, but also valuable methods for bringing lower-cost generics to market sooner than otherwise might be possible. As we have noted previously, the generic industry trade group maintains these settlements have never prevented competition beyond a patent’s expiration and made it possible for generics to become available months or years before patents have expired. This, in turn, they argue, actually saves consumers considerable money.

But the FTC is not the only one asking the Supreme Court to review these deals. A few weeks ago, Merck asked the court to review a federal appeals court ruling that a pair of patent settlements between Schering-Plough – which Merck purchased three years ago – and two generic drugmakers over the K-Dur blood pressure medication amounted to “evidence of an unreasonable restraint of trade.”

“This case,” Merck attorneys wrote, “presents one of the most significant unresolved legal questions currently affecting the pharmaceutical industry: what is the appropriate antitrust standard for evaluating settlements of patent litigation between brand manufacturers and generic manufacturers, where the settlement includes a payment from the brand manufacturer to the generic manufacturer?” (read the merck petition here).

In its own petition to the Supreme Court, the FTC argues that, “in substance, the reverse payment is a mechanism for inducing the generic manufacturer to accept a reduction in its own drug sales in order to enhance the overall welfare of the combination. That co-option of potential competitors is at the very core of what the federal antitrust laws prohibit (here is the FTC petition).

Although there is no certainty that the Supreme Court will review the petition, tiven that there have been differing rulings from different circuit courts on the issue, as the FTC noted, the likelihood that the court will review one or both cases may have increased with this additional petition. In the AndroGel case, the US Court of Appeals for the Eleventh Circuit last April upheld a District Court decision from June 2010.

The FTC vote authorizing the staff to request that the Solicitor General file the petition with the Supreme Court, by the way, was 5-0.

bribe pic thx to donhankins on flickr

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