By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
The U.S. Supreme Court ruled on June 17, 2013, that pay-for-delay agreements between brand name and generic drug manufacturers are subject to anti-trust scrutiny. These pay-for-delay agreements, or reverse payments, are usually a form of settlement between the two manufacturers in patent litigation. The Supreme Court decided that each instance must be considered on a case-by-case basis. This verdict rewrites the rules governing the release of generic drugs. It is likely to increase the number of generic drugs in the marketplace and reduce the price of generic drugs.
To read a previous blog on pay-for-delay agreements, click here.
What is a Pay-for-Delay Agreement?
Pay-for-delay agreements came as the result of the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act. The Hatch-Waxman Act gives generic drug manufacturers an incentive to challenge brand name drug patents because the first generic drug manufacturer to received U.S. Food and Drug Administration (FDA) approval to launch a generic copy of a brand name drug can receive a 180-day marketing exclusivity period for the product. The FDA cannot approve any other generic applications for the same drug until the first-to-file generic manufacturer has sold its product for 180 days or has given up its exclusivity period. Click here to read the Hatch-Waxman Act.
Brand name manufacturers often challenge generic drug manufacturers who try to sell their product prior to patent expiration. This results in litigation to determine whether the generic manufacturer is violating the brand name manufacturer’s patents.
Instead of going to court over this, brand name manufacturers often choose to pay a settlement to the generic drug manufacturers for agreeing to delay the launch of its competing product.
Why the Supreme Court Overruled Court of Appeals Decision.
The 5-3 vote overruled the 11th Circuit Court of Appeals decision that said pharmaceutical companies can’t be sued unless the patent litigation is a sham or a generic drug maker agrees to delay introduction of a generic drug into the market even after the patent has expired.
A Med Page Today article lists the Supreme Court’s five reasons why the appellate court made a mistake in giving blanket immunity to pay-for-delay agreements from the decision written by Justice Stephen Breyer:
- “A reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects.”
- “One who makes such a payment may be unable to explain and to justify it.”
- “Such a firm or individual may well possess market power derived from the patent.”
- “A court, by examining the size of the payment, may well be able to assess its likely anticompetitive effects along with its potential justifications without litigating the validity of the patent.”
- “Parties may well find ways to settle patent disputes without the use of reverse payments.”
Pay-for-Delay Agreements Allegedly Cost Patients Millions of Dollars a Year.
According to Bloomberg, the high court’s decision may discourage brand name and generic pharmaceutical companies from reaching settlements. It’s been found that pay-for-delay agreements can delay a generic drug almost 17 months before it can be put on the market. In the meantime, patients must pay higher prices for the brand name version. This also impacts Medicare and Medicaid programs. The Federal Trade Commission (FTC) claims pay-for-delay agreements cost consumers $3.5 billion a year in the form of higher drug prices.
The Case of the FTC v. Solvay Pharmaceuticals.
The Supreme Court case center around AndroGel, a treatment for low testosterone in men, made by Solvay Pharmaceuticals, Inc. The FTC sued Solvay and three generic drug companies. According to Bloomberg, the FTC said that a payment made by Solvay, the holder of a patent on AndroGel, to the generic drug manufacturers represented an unlawful restraint of trade because it was intended to keep cheaper, generic versions of AndroGel off the market until 2020.
FTC Enthusiastic About the Decision.
In a statement, the FTC Chairwoman said the Supreme Court’s decision is a “significant victory for American consumers, American taxpayers and free market.” She also stated, “The court made it clear that pay-for-delay agreements are subject to antitrust scrutiny.”
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What do you think of the Supreme Court’s ruling? Do you agree or disagree? What effect do you think it will have on the pharmaceutical industry? Please leave any thoughtful comments below.
Stohn, Greg. “Drugmakers Opened to ‘Pay for Delay’ Suits by High Court.” Bloomberg. (June 17, 2013). From: http://www.bloomberg.com/news/2013-06-17/drugmakers-opened-to-pay-for-delay-suits-by-high-court.html
Frieden, Joyce. “Supreme Court Split on Pharma ‘Pay for Delay’ Deals.” Med Page Today. (June 17, 2013). From: http://bit.ly/18SfhKb
Kaplan, Peter. “Statement of FTC Chairwoman Edith Ramirez of the U.S. Supreme Court’s Decision in FTC v. Actavis, Inc.” (June 17,2 013). From: http://www.ftc.gov/opa/2013/06/actavis.shtm
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
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