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FTC to Court: Pay-for-Delay Drug Deals Unfair

On Behalf of | Aug 21, 2012 | In The Courts/Legislation

Agreements in which the maker of a brand name drug promises a patent challenger, it will not launch a competing authorized generic are anti-competitive and should be stopped, the Federal Trade Commission (FTC) told a federal court.

The FTC argued that under such circumstances, generic companies will settle a patent challenge and agree to launch their product at a later date, resulting in a longer wait for generics to come online, the commission wrote to the U.S. District Court for the District of New Jersey in an amicus brief late last week.

The outcome of that agreement is a so-called “pay-for-delay” settlement, which the FTC has fought hard against in recent years.

Because it would lose profits competing with authorized generics (AGs)  –  products manufactured by the brand drugmaker but distributed by a generic drugmaker  –  generic drug companies would rather operate without an AG. The brand company receives a portion of the AG sales and recoups some profit it otherwise would lose to competing generics.

“A no-AG commitment provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry,” the FTC wrote in the 13-page brief.

In the case, known as Professional Drug Co. v. Wyeth, a wholesaler alleged it was illegal for Pfizer subsidiary Wyeth to settle with Teva Pharmaceuticals.

In the settlement at issue, Wyeth agreed not to launch an AG of depression drug venlafaxine HCl extended release (Effexor XR) during Teva’s 6-month exclusivity period, which Teva was awarded for being the first successful generic applicant for Effexor XR. Teva was trying to ward off competition during the exclusivity period.

Teva didn’t launch its generic until July 2010, almost 2 years after the original compound patent expired, according to the wholesaler’s complaint.

The FTC had a big win on the pay-for-delay issue in the Third Circuit Court of Appeals this summer, when the court ruled that any payment from a patent holder to a challenger to delay market entry should be viewed as an “unreasonable restraint of trade.”

New Jersey, where this case is being tried because Wyeth does business in the state, lies in the Third Circuit. The FTC’s brief came in response to a request by the judge in the Effexor case for briefs on how the current case is affected by the Third Circuit ruling.

Teva argued to the New Jersey court that the recent decision should apply only to “overt cash payments,” but the FTC disagreed.

“That is because a no-AG commitment has the same capacity to purchase delay as an ‘overt cash payment’,” the commission wrote.

The brand and generic pharmaceutical industries agree that “pay-for-delay” settlements aren’t anti-competitive and argue for their continuation.

Congress has tried unsuccessfully for the past several years to make such deals illegal. A ban on “pay-for-delay” settlements was included in an initial draft of the Affordable Care Act, but didn’t make it into the final bill.

Source: David  Pittman, Washington Correspondent, MedPage Today.  Published: August 15, 2012

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