Ahead of oral arguments over pharmaceutical patent settlements in the Supreme Court, a Federal Trade Commission report has found that 2012 saw a record 40 "reverse payment" settlements between branded and generic pharmaceutical companies, up from 28 the year before.
Calling reverse payment accords "potentially anticompetitive," the FTC estimates that generic drugs typically cost 85 percent less than brand name versions, with the price difference costing American consumers an extra $3.5 billion a year.
In March, the Court will hear oral arguments in FTC v. Watson Pharmaceuticals, to consider whether "pay-for-delay" agreements – where pharmaceutical firms holding brand name patents pay other companies to withhold generic drugs from market – are legitimate business contracts, as three appeals courts have found, or presumptively anticompetitive and illegal, as one appeals court ruled.
Of the 140 pharmaceutical patent disputes the FTC reviewed in 2012, 40 involved reverse payment – or pay-for-delay – agreements, 81 ended in restrictions on the generic manufacturer's marketing abilities but no compensation and 19 ended with no restrictions on generic market entry. Of the 40 payment settlements, 19 included agreements by a branded firm not to market an authorized generic drug that would compete with a generic company's product.
Depending on how the Supreme Court sees it, the FTC's challenge to pay for delay agreements may soon influence a much larger debate over innovation in healthcare and the relationship between competition and regulation, as two law professors wrote on Health Affairs recently.
The case goes back to 2000, when the the Food and Drug Administration gave Solvay Pharmaceuticals (now part of Abbott Laboratories) three years of market exclusivity to the testosterone replacement treatment AndroGel. Solvay was granted a patent on AndroGel in 2003, as Watson Pharmaceuticals and others sought FDA approval to make and sell generic versions of AndroGel.
Solvay sued, and as the litigation progressed the FDA approved Watson's generic AndroGel in 2006. Later that year, Watson ended up settling Solvay's infringement claims by accepting monetary compensation and agreeing to keep generic AndroGel off the market until 2015. The FTC sued on antitrust grounds, arguing that the settlements were vehicles for price-rigging.
See also:
Centene to buy speciality pharmaceutical firm
Podcast: Pharma invests in international bioinformatics project