Increased Scrutiny of Patented and Generic Drug Settlements!

The Federal Trade Commission (“FTC”) is increasingly reviewing settlement agreements between companies owning branded patented drugs and their generic drug competition. The remarks from FTC Chairman, Jon Leibowitz characterize these as “Pay-for-Delay” agreements.

According to the FTC these “Pay-for-Delay” agreements are costing consumers $3.5 billion dollars a year as they deny patients access to cheaper equally effective drugs.  The controversy stems from branded patented drug owners practice of initiating a lawsuit for patent infringement against the generic drug owner.

After filing the lawsuit, the branded patented drug owner will turn around and pay off the generic drug manufacturer.  Typically, the generic drug manufacturer will get a large some of money to hold off on bringing the generic drug to the market.  The branded or patented drug owner believes that it should be entitled to enter into such an agreement to continue to be able to recoup its research and development costs.

The generic drug manufacturer may be able to use the monies to conduct its own research and development, and bring the generic drug to the market.  However, there is an increased cost to that the consumer is bearing during the agreed period of delay.  The FTC has picked up on this increased cost and is challenging these “Pay-for-Delay” agreements by filing Antitrust Complaints against the branded patented drug owner and generic manufacturer. 

It is not clear how receptive courts will be to using the Antitrust Laws to invalidate the “Pay-for-Delay” agreements.  However, if the judicial option is not available, then you may very well see legislative action in this arena.  If you or someone you know has any concerns or questions relating to this matter, then please feel free to contact us. 

See: FTC Chairman Remarks_061410

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