FTC Takes Aim At Generics Pay for Delay

A top competition priority this year at the Federal Trade Commission (FTC) is to stop "pay-for-delay" agreements between branded and generic drug manufacturers, FTC Chairman Jon Leibowitz told the House Judiciary Subcommittee on Courts and Competition Policy on Tuesday.

According to newly released agency data, branded and generic drug companies entered into 21 "suspect patent litigation settlements" involving compensation in the first nine months of fiscal 2010 alone. This surpassed the total for all of fiscal 2009, he said.

Those settlements are assigned to "protect" $9 billion in prescription drug sales, said Leibowitz, citing an earlier FTC report. They also delay the availability of cost-saving generics by an estimated 17 months.

At the same time, the settlement filings confirm that brand and generic companies have been settling their disputes without brand companies paying their generic competitors not to compete: 75% of all final patent settlements did not involve compensation from the brand company to the generic, combined with a delay in generic entry, the report said.

"That's almost an epidemic," Leibowitz said, "Left untreated, these types of settlements will continue to insulate more and more drugs from competition. Every single FTC commissioner—going back through the Bush and Clinton administrations?has supported stopping these unconscionable agreements."

The tide, though, on these cases may be turning around," Leibowitz said. A few months ago, an appellate panel in the Second Circuit, which had previously adopted a permissive approach to pay-for-delay settlements, took the step of questioning its own standard and explicitly encouraged consumer plaintiffs to request the court's re-consideration of the pay-for-delay issue.

Both the FTC and the Justice Department filed briefs with the Second Circuit advocating that the full court revisit this issue. In another development in March 2010, a federal district court judge in Philadelphia denied a defense motion to dismiss the Commission's case against Cephalon. That case is now in the discovery phase.