Ed's Blog

FTC files latest challenge to "pay for delay" generic drug deals

By Ed Mierzwinski
Consumer Program Director

Today the U.S. Federal Trade Commission filed a legal brief in a district court "challenging an agreement between drug manufacturers Wyeth and Teva Pharmaceuticals" as an illegal "restraint of trade." The FTC supported plaintiffs who allege "Teva agreed to delay its introduction of a generic version of Wyeth’s blockbuster antidepressant drug Effexor XR."

Fighting anti-competitive prescription drug pay-for-delay of generic entry deals that can cost consumers billions of dollars each year has emerged as a signature issue for Chairman Jon Leibowitz's FTC. And while the FTC has historically lost most cases, lately it had been making slight procedural progress, with some courts more reluctantly approving the deals.

Then, in July, the FTC had its biggest victory so far, when the U.S. Third Circuit Court of Appeals held against the industry in a significant ruling in "In Re: K-Dur Antitrust Litigation" (link to ruling is in this Pharmalot blog). The New York Times headline on the case was clear: "For Big Drug Companies, a Headache Looms." In his own press statement, Leibowitz said:

"The Third Circuit Court of Appeals seems to have gotten it just right: These sweetheart deals are presumptively anticompetitive. As our Bureau of Economics has estimated, they cost American consumers $3.5 billion a year in higher health care costs. Restricting these arrangements, as many in Congress have proposed, would reduce federal government debt by $5 billion over 10 years, according the Congressional Budget Office. It's time for the pharmaceutical companies to return to the side of consumers."

In K-Dur, the independent American Antitrust Institute and 26 law professors also had a brief against pay for delay, which explains many of the policy issues. Their brief also quotes the authors of the 1984 Hatch-Waxman Act lintended to advance generic entry but that the pay-for-delay agreements subvert, Senator Orrin Hatch (R-UT) and Rep. Henry Waxman (D-CA).

"Waxman emphasized that the purpose of the legislation was to promote generic competition, not to allow generics “to exact a portion of a brand-name manufacturer’s monopoly profits in return for withholding entry into the market.” Senator Hatch similarly found such agreements “appalling.” And his assessment mirrored that of Waxman in making clear that “[w]e did not wish to encourage situations where payments were made to generic firms not to sell generic drugs and not to allow multi-source generic competition.”

n a recent interview, FTC Commissioner Julie Brill said: "Pay-for-delay remains a key priority for this Commission. The FTC is taking a two-pronged approach to restricting pay-for-delay agreements. First, we continue our law enforcement work in the area, and second, we’re talking to Congress about legislation."

U.S. PIRG and other consumer groups have taken the position, in amicus briefs (recent AARP/U.S. PIRG brief)  and before Congress (coalition letter), that the FTC is correct. As this Forbes story and this Bloomberg story both describe there is now an increased likelihood that the Supreme Court will take up the issue. The two stories also include industry defense of their practices.

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