The number of deals between drug companies meant to delay sales of less expensive generic drugs dropped significantly in fiscal 2014 after the U.S. Supreme Court made it easier to challenge such agreements, the Federal Trade Commission said this week.
But that doesn't necessarily mean it's time for the FTC to declare victory when it comes to the battle over drug prices. Rather, drug companies are still using a number of other tactics to stave off competition for their branded products.
In fiscal 2014, the number of so-called pay-for-delay deals filed with the FTC dropped to 21 from 29 the year before and from 40 in fiscal 2012, according to the FTC report (PDF). In pay-for-delay cases, brand-name drugmakers pay settlements to generic drugmakers in patent disputes to keep cheaper generic drugs off the market. The deals are also known as reverse payments.
The slide in such agreements follows a 2013 Supreme Court decision in FTC v. Actavis that made it easier to challenge them under federal antitrust law. In May, the FTC scored a $1.2 billion settlement from drugmaker Teva Pharmaceuticals over allegations that a company it acquired delayed a generic version of its popular sleep-disorder drug Provigil from entering the market.
“Although it is too soon to know if these are lasting trends, it is encouraging to see a significant decline in the number of reverse payment settlements,” Debbie Feinstein, director of the FTC's Bureau of Competition, said in a statement.
Lisl Dunlop, a partner at the law firm Manatt, Phelps & Phillips, said the drop in the number of pay-for-delay settlements shows the FTC's success in its long-running campaign against the practice.
But she cautioned that it's “not the end of the road on drug prices.”
“The focus on pay-for-delay has forced the drug companies to be more creative,” she said.
An attempt to reach Pharmaceutical Research and Manufacturers of America, the drug industry's largest trade group, for comment on the report was not immediately successful Thursday.
Dunlop said drugmakers have been trying other ways of structuring pay-for-delay deals, such as providing generic drugmakers compensation in the form of business transactions, not just direct payments. That was what happened in the Teva case that the FTC successfully challenged.
But not all courts have come down the same way on that issue, said Michael Carrier, a professor at Rutgers Law School.
Drugmakers are also using product-hopping, which is when they replace a branded drug with a newer, slightly different branded drug. If they do that before generics become available for the first drug, consumers are forced to switch to the new drug for which no generic will be available for some time.
In May, a federal appeals court ruled in such a case that Actavis had to continue selling an Alzheimer's drug that it planned to pull off the market and replace with a newer version shortly before generics were to become available for the original drug.
“They're using an array of tactics,” Carrier said. “In the pharmaceutical industry there is a range of activity that potentially presents anti-competitive conduct.”
The FTC report released this week, however, shows that the Supreme Court ruling on pay-for-delay deals “woke up the industry to the fact” that the agreements can violate antitrust law, Carrier said.
Lawmakers have raised questions about drug prices in recent months amid backlash from consumers, insurers and providers over the tide of high-cost specialty drugs and rising prices for many generics. The matter gained notoriety from the now-infamous move by Turing Pharmaceuticals and its CEO, Martin Shkreli, to raise the price of generic drug Daraprim, used to treat toxoplasmosis, from $13.50 to $750 a pill.