According to the Federal Trade Commission, pharmaceutical companies are using settlements with generic drug makers to delay the introduction of cheaper medicines. In a 12-month period that ended September 30, 2007, 14 of 33 agreements to settle patent litigation between brand-name drug companies and generics included both a restriction on the generic company’s ability to market a drug and compensation to the generic manufacturer. The Commission maintains that by jamming the pipeline of cheaper drugs, agreements of that sort harm consumers. The agency has sued to block some agreements and is supporting legislation in Congress that would ban the practice. It’s apparent that the FTC has had limited success in blocking settlements. Two appeals courts ruled in 2005 that similar agreements reached by Schering Plough Corp. and Astra Zeneca PLC with generic companies were legal.

The FTC’s report revealed that settlements with restrictions on generic drug makers increased from three in fiscal year 2005 to 14 in 2006, the same total as last year. Drug companies are required to report the settlement of patent litigation with generic drug makers under a 2003 law. FTC Commissioner Jon Leibowitz observed:

Pay-for-delay settlements continue to proliferate. That’s good news for the pharmaceutical industry, which will make windfall profits from these deals. But it’s bad news for consumers, who will be left footing the bill.

The FTC did not name any companies in its report. Pharmaceutical companies and some generic manufacturers defend the settlements as a way to reduce costly litigation and allow generic companies to introduce cheaper drugs before patents expire. The FTC says that the most common form of compensation by the drug companies to generics, included in 11 of the 14 settlements, was an agreement to not introduce a competing generic drug once a generic company is able to introduce its product.

In the other three cases, the companies reached side agreements that allowed the generics to market products that were not the subject of the patent litigation. In February, the FTC accused Cephalon Inc. in a lawsuit of illegally blocking generic competition to its drug Provigil, which combats sleepiness in patients with sleep disorders. The FTC said the company paid four generic drug makers $200 million as part of agreements reached in 2005 and 2006. Cephalon’s position was that the agreements were lawful settlements of patent litigation that allowed generics to enter the market three years before its patents expired.

Source: Associated Press

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