The U.S. Supreme Court has ruled that drugmakers can be sued for paying rivals to delay low-cost versions of popular medicines. The high court, in a decision last month, has rewritten the rules governing the release of generic drugs. The 5-3 ruling is a victory for the Federal Trade Commission (FTC) and for the American people. The court reversed a lower-court decision that had effectively insulated pharmaceutical companies from liability. The FTC says those “pay for delay” accords cost drug purchasers as much as $3.5 billion a year. The industry claims the deals are legitimate patent settlements.
The ruling may lead to lawsuits by wholesalers, retailers, insurers and antitrust enforcers. Bayer AG, Merck & Co. and Bristol-Myers Squibb Co. units already have faced claims. The FTC says 40 pay-for-delay agreements, also known as reverse payments, were reached in fiscal 2012 alone.
Justice Stephen Breyer said in the court’s majority opinion “a reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects.” But Justice Breyer stopped short of adopting the FTC’s proposal that such agreements should be presumed anticompetitive. He said the accords should be evaluated under a longstanding antitrust test known as the “rule of reason.” A federal appeals court had said pharmaceutical companies can’t be sued unless the patent litigation is a sham or a generic-drug maker agrees to delay introduction even after the patent has expired. FTC Chairman Edith Ramirez said in a statement:
The Supreme Court’s decision is a significant victory for American consumers, American taxpayers, and free markets. The court has made it clear that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny.
The Generic Pharmaceutical Association’s chief executive officer, Ralph Neas, said the ruling “continues to provide a lawful pathway for companies to resolve disputes through settlements.” The case divided the court along ideological lines, with Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan joining Breyer in the majority.
The disputed settlements stem from the economics of the pharmaceutical industry, where companies can reap billions of dollars from blockbuster drugs and then have sales plummet the moment a generic alternative appears. The FTC says generic drugs sell for an average of 15 percent of the original price, with the brand-name company losing 90 percent of its market share by unit sales. Generics have saved purchasers $1.1 trillion in the last decade, the industry says.
Pharmaceutical patent settlements typically arise just as a generic-drug maker is securing Food and Drug Administration approval to introduce its version of a drug. At that stage, only the brand-name company’s patents stand in the way of competition. The FTC has said that it doesn’t object to settlements that merely set the date for a generic drug’s entry to the market. But the FDA says a payment to the generic-drug maker changes the equation, suggesting the companies are agreeing to delay the generic drug, keep prices high and split what economists call “monopoly profits.” A 2010 FTC study found that the accords cost purchasers $3.5 billion a year. The case decided by the high court centered on Androgel, a treatment for low testosterone in men that is made by Solvay Pharmaceuticals Inc. The FTC sued Solvay and three generic-drug companies, including Actavis Inc.
The FTC says the price for Androgel was poised to fall at least 75 percent in 2007 after the FDA cleared the way for competition. Faced with the prospect of losing $125 million in annual profits, Solvay instead paid the generic-drug makers as much as $42 million a year to delay their competing versions until 2015, the FTC says. At the time, Actavis was known as Watson Pharmaceuticals. The companies said Solvay, which is now part of AbbVie Inc., had a patent that, if backed by the courts, would have protected the drug an additional five years, until 2020.
Source: Insurance Journal
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