Generics 'pay-to-delay' ruling may lead to lower Rx costs

Prescription drug costs may go down after the U.S. Supreme Court ruled today (PDF) that the Federal Trade Commission can proceed with its “pay-for-delay” case, which argues that pharmaceutical manufacturers illegally restrict competition by reaching deals with generic drug companies to keep cheaper versions of drugs off the market.

The commission had brought a case which alleged that it was illegal for Solvay Pharmaceuticals, a subsidiary of Abbott Laboratories, to pay competing drug companies in exchange for an agreement not to market generic versions of a testosterone drug.

However, the Supreme Court decision said the 11th Circuit erred when it affirmed the dismissal of the FTC's complaint. The court voted 5-3. Justice Samuel Alito recused himself.

“Although the anticompetitive effects of the reverse settlement agreement might fall within the scope of the exclusionary potential of Solvay's patent, this does not immunize the agreement from antitrust attack,” the opinion said.

Under the terms of the settlement with Solvay, Actavis said it would not bring a generic version of the drug to market until August 2015. The FTC in 2009 sued Solvay and Actavis as well as Paddock Laboratories and Par Pharmaceutical Cos., two generic-drug makers that also reached settlements with Solvay.

In addition, the companies agreed to promote AndroGel, Solvay's testosterone drug, to physicians as part of the agreements.

“We believe this decision continues to provide for a lawful and legitimate pathway for resolving patent challenge litigation in a manner that is pro-competitive and beneficial to American consumers,” Actavis President and CEO Paul Bisaro said in a statement. “The court's ruling however, does place an additional and unnecessary administrative burden on our industry.”

FTC Chairwoman Edith Ramirez called the decision “a significant victory.”

“The court has made it clear that pay-for-delay agreements between brand and generic-drug companies are subject to antitrust scrutiny, and it has rejected the attempt by branded and generic companies to effectively immunize these agreements from the antitrust laws,” she said in a statement.

FTC officials have said that such “pay-for-delay” deals increase drug costs for patients, Medicare Part D and other government health plans.

The decision will likely lead to the FTC increasing its scrutiny of reverse payment agreements, which could mean lower drug prices in the future and the possibility of fewer such settlements. AARP said it's hopeful that the ruling will lead courts to find that such settlements are anticompetitive and that the end of the agreements will lead to lower drug costs.

Matthew Cantor, a partner at law firm Constantine Cannon, said he doesn't expect reverse payment agreements to go away anytime soon.

“You're still going to see a lot of settlements occur,” he said. “But now the FTC has an emboldened position to scrutinize these settlements.”