The Federal Trade Commission is, for the first time, suing a drugmaker for allegedly striking deals with other pharmaceutical companies to delay sales of cheaper generic drugs by promising to not immediately compete with those generics by offering its own version.
The FTC filed a complaint in federal court Thursday alleging Endo Pharmaceuticals and several other drug companies violated antitrust laws by using so-called pay-for-delay settlements to keep generic versions of opioid drug Opana ER and lidocaine patch Lipoderm off the market.
In these cases, also known as reverse payment deals, brand-name drugmakers pay settlements to generic-drug makers in patent disputes to keep cheaper generic drugs off the market. The FTC has long challenged such deals in court.
The lawsuit filed Thursday, however, is unique in that it alleges Endo enticed generic-drug makers to keep their drugs off the market longer not just by paying them, but also by promising not to market its own generic versions of the drugs for a certain period of time. Such an agreement is known as a “no-AG commitment” and gives a generic-drug maker more time to exclusively sell a generic drug.
The case is the first time the FTC has challenged a “no-AG commitment” deal as a form of pay-for-delay.
FTC Chairwoman Edith Ramirez said in a statement Thursday that the agency is committed to stopping pay-for-delay deals regardless of the form they take.
“Settlements between drug firms that include 'no-AG commitments' harm consumers twice – first by delaying the entry of generic drugs and then by preventing additional generic competition in the market following generic entry,” Ramirez said.
Endo said in a statement Thursday it believes the FTC's case is meritless, and the company will defend itself.
The drugmaker said the deals being challenged “were supportive of a competitive environment for a number of reasons, including that they permitted the entry of generic competition to Endo's branded pharmaceutical products well before the relevant patents expired and, therefore, benefitted consumers through increased availability and lower pricing.”
Normally, the first drugmaker to sell a generic version of a drug doesn't have to compete against other generics – except generics produced by the branded-drug maker – for 180 days. When the branded drugmaker promises not to immediately release its own generic that means the first generic won't face any competition during that time.
Making such promises is a fairly common tactic for getting generic-drug makers to delay selling their products, said Michael Carrier, a professor at Rutgers Law School. About two years ago, nearly half of all pay-for-delay deals included “no-AG commitments,” he said.
It's just one of a number of strategies drugmakers use to keep competition for their brand-name drugs at bay, he said.
Drugmakers, for example, sometimes provide generic-drug makers compensation in the form of business transactions. Companies also use 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 generics won't be available for some time.
“There is so much at stake when a medication goes off-patent and becomes generic— the price falls dramatically, so the branded companies are doing everything to delay that day as long as possible,” Carrier said. “Certainly there is every incentive in the pharmaceutical industry to engage in these agreements, but the FTC probably thinks it's going after the worst offenders.”
Industry group Pharmaceutical Research and Manufacturers of America declined to comment on the issue Thursday.
The case filed this week against Endo is yet another example of the FTC trying to make it clear that pay-for-delay cases don't have to just involve cash to violate antitrust law, Carrier said.
At least nine District Courts have already found that pay-for-delay can include deals that aren't just cash-based, Carrier said. Last year, the 3rd U.S. Circuit Court of Appeals ruled that a no-AG commitment can be considered as a type of reverse payment.
The 1st U.S. Circuit Court of Appeals also recently ruled (PDF) that pay-for-delay agreements can still be anticompetitive even when they don't involve direct payments. The FTC is taking its cue from those courts, he said.
The FTC is “trying to chip away piece-by-piece” at pay-for-delay deals, he said.
The Endo case is the second one the FTC has filed over a pay-for-delay agreement since a landmark U.S. Supreme Court decision on such agreements in 2013. The ruling in that case, FTC v. Actavis, made it easier to challenge pay-for-delay agreements under federal law.
Since that 2013 Supreme Court ruling, the number of pay-for-delay deals has dropped significantly, according to a recent FTC report. 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.
“The number has fallen in last couple years as courts have increased their antitrust enforcement,” Carrier said.
In the case filed this week, the FTC alleges Endo gave money to generic-drug makers Impax Laboratories and Watson Laboratories and promised not to market generic versions of its own drugs in exchange for those companies agreeing to hold off on offering generic versions of Opana ER and Lidoderm, respectively. Watson is based in Parsippany, N.J., and is a subsidiary of Allergen. Impax is headquartered in Hayward, Calif.