US FTC Finds Sharp Rise In ‘Pay-For-Delay’ Deals Blocking GenericsPublished on 18 January 2013 @ 6:48 pm
By William New, Intellectual Property Watch
The United States Federal Trade Commission, which keeps an eye out for anticompetitive behaviour, has issued a study finding that in 2012, a record number of deals were struck between brand-name and generic drug companies to keep the lower-priced generics off the market. Such deals, which arise from patent disputes, cost American consumers billions of dollars annually while piling on the federal deficit, it said.
The Federal Trade Commission staff report [pdf] found that drug companies made 40 potential pay-for-delay deals in FY 2012 (1 October 2011 through 30 September 2012). “The figure is significantly higher than last year’s total of 28 deals, and is the highest of any year since the FTC began collecting data in 2003,” it said in a release. “Overall, the agreements reached in the latest fiscal year involved 31 different brand-name pharmaceutical products with combined annual U.S. sales of more than $8.3 billion.”
Of the 40 final settlements that potentially involve pay-for-delay, FTC staff found that 19 – nearly half – involved agreements by the branded firm not to market an AG product that would compete with the generic company’s product, the agency said. “Such ‘no-AG’ promises are valuable to generic firms, as they significantly reduce the level of competition the new generic entrant will face, allowing the generic firm to secure greater market share and extract higher prices from consumers,” it stated.
The deals involve certain brand-name companies paying generics firms to settle patent challenges and, in turn, delay the introduction of lower-cost medicines, the FTC said.
“Sadly, this year’s report makes it clear that the problem of pay-for-delay is getting worse, not better,” said FTC Chairman Jon Leibowitz. “More and more brand and generic drug companies are engaging in these sweetheart deals, and consumers continue to pay the price. Until this issue is resolved, we will all suffer the consequences of delayed generic entry – higher prices for consumers, businesses, and the U.S. taxpayer.”
Generic drugs are more affordable, typically 85 percent cheaper than brand-name versions, and help hold down costs for taxpayer-funded health programmes such as Medicare and Medicaid, FTC said.
Another FTC study has found that patent settlements that include a payment delay generic entry by an average of 17 months longer than those that with no payment, it said, adding that, “By delaying the entry of cheaper generics, pay-for-delay deals cost Americans $3.5 billion annually and will add to the federal deficit. The Congressional Budget Office has estimated that legislation restricting these agreements would reduce the debt by almost $5 billion over the next decade.”
The FTC said it has challenged a number of these patent settlement agreements in court, contending that they are anti-competitive and violate US antitrust laws. One case, involving the generic testosterone-replacement drug AndroGel is currently pending before the US Supreme Court. The agency also has supported legislation in Congress that would restrict pay-for-delay settlements.
According to the FY 2012 staff report, companies filed a total of 140 final patent settlements. The FTC said: “Of those, 40 settlements contained a payment to a generic manufacturer and also restricted the generic’s ability to market its product. Of the 140 settlements, 43 involved generics that were so-called “first filers,” meaning that they were the first to seek FDA approval to market a generic version of the branded drug, and, at the time of the settlement, were eligible to exclusively market the generic product for 180 days. Because of the regulatory framework, when first filers delay entering the market, other generic manufacturers are impeded from entering the market, which makes such patent settlement deals particularly harmful to consumers.”
William New may be reached at email@example.com.