Supreme Court considers legality of drug companies’ pay-for-delay deals

20120110094716SCOTUSbuilding 1st Street SE Supreme Court of the United States Wiki Supreme Court considers legality of drug companies pay for delay dealsAn attorney for the Federal Trade Commission (FTC) urged the Supreme Court to stop so-called pay-for-delay deals among pharmaceutical companies that keep generic drugs off the market longer and keep costs to consumers high.

“It’s unlawful to buy off the competition,” said Malcolm Stewart, an attorney for the FTC and the Justice Department, arguing that the practice among drug companies is “presumptively illegal.”

The hearing will determine whether there is a violation of antitrust laws when brand name drug companies pay generic drug makers of the same drug to postpone launch of their products.

New brand-name drugs to hit the market are protected from generic competition with a patent for 20 years. As long as the patent remains valid, the brand-name drug company can continue to earn monopoly profits on the drug.

Oftentimes, makers of generic drugs will try to challenge the validity of patents in order to get their copycat drugs on the market and bite into the brand name profits. Typically the generics are much less expensive than brand name drugs and thus preferred by patients and insurance companies. The patent lawsuits waged by generic companies sometimes lead to the brand name drug company offering to settle the lawsuits by paying the generic drug company to delay the launch of its copycat drug.

For example, Solvay Pharmaceuticals applied for a patent in 2000 for AndroGel, a topical gel to treat low testosterone levels. The patent protected the gel through 2020; however, the gel’s active ingredient – a synthetic testosterone – was not included in the patent. Watson Pharmaceuticals, a generic drug maker, announced it was developing a generic version of AndroGel. Fearful that the generic product would cut $125 million per year from its profits, Solvay offered Watson $19 million to $30 million a year to hold off on its generic product until 2015.

The FTC then sued Watson and Solvay claiming the settlement violated antitrust laws. A federal judge and the U.S. 11th Circuit Court of Appeals in Atlanta sided with the drug companies. The case is now in front of the Supreme Court. A decision is expected sometime in June.

Source: LA Times