The Supreme Court ruled on Monday that federal regulators can challenge deals between brand-name drug companies and generic rivals that delay cheaper medicines from going on sale, which regulators say increase costs to consumers by billions of dollars. But the court, in a 5-3 vote with Justice Samuel Alito recused, declined the Federal Trade Commission’s request to declare the deals to be presumed to be illegal. The regulatory agency has fought the practice for more than a decade.
According to the summary prepared by Reuters Health, the companies in the case were brand-name drug maker Solvay Pharmaceuticals Inc, now owned by AbbVie; generic makers Actavis Inc, previously Watson Pharmaceuticals; Paddock Laboratories Inc, now part of Perrigo Co, and Par Pharmaceutical Cos.Solvay had sued generic drugmakers in 2003 to stop the sale of cheaper versions of AndroGel. In a settlement of the lawsuit, Solvay paid as much as $30 million annually to the generic drug makers to help preserve its annual profits from AndroGel, estimated at $125 million. Under the deal, the three would keep their generic versions off the market until 2015. The patent expires in 2020. Generic drugmakers like the “pay for delay” arrangements because if they bring out their products before patent infringement litigation is over, they run the risk of paying triple damages on sales if they are found to have infringed.
The FTC filed a lawsuit against the companies in 2009, arguing that the companies had simply split up Solvay’s monopoly profits and prevented the generic firms from bringing out a cheaper version of the drug. The FTC lost at the district court level, and that loss was affirmed by 11th Circuit Court of Appeals. The Supreme Court overturned the appeals court ruling and sent the case back to the lower courts for further proceedings.
“This definitely legitimizes the role of antitrust law in these settlements that the FTC has been pursuing for a while,” said Noah Leibowitz, a patent expert with Simpson Thacher and Bartlett. “Any settlement is going to be more difficult and companies will think much more carefully about how they settle these cases,” he said.
FTC Chairwoman Edith Ramirez said the court had “taken a big step toward addressing a problem that has cost Americans $3.5 billion a year in higher drug prices.” “We look forward to moving ahead with the Actavis litigation and showing that the settlements violate antitrust law,” she said in an email statement.