In the past decade, the Federal Trade Commission (FTC) has been challenging a costly legal tactic that more and more brand drug companies have been using to stifle competition from lower-cost generic medicines. This area of litigation, often referred to as Pay-for-Delay litigation, has not only been a hot topic with the FTC, but it has been an emerging litigation across the country.
In these “pay-for-delay” agreements, or “reverse payment” agreements, a brand-name drug company and a generic rival locked in patent litigation reach a settlement. Historically, the brand-name drug company may offer cash or something else of value to the generic drug company and, in return, gains more time to sell its brand drug without encountering lower-cost generic competition. The generic drug maker, meanwhile, also comes away with a large payment and an agreement to sell its generic equivalent at a specified future date.
Most recently, the FTC sued Endo Pharmaceuticals, Inc. and generic pharmaceutical companies Impax Laboratories, Inc. and Watson Laboratories, Inc. for allegedly delaying generic competition for the drugs Opana ER and Lidoderm. While the FTC has filed other “pay for delay” suits, this case is the first time the FTC has sued a drug company over what is referred to as a “no authorized generic” deal – which is an unlawful “reverse payment” agreement between the drug companies not to market an authorized generic.
An authorized generic is chemically identical to its counterpart brand-name drug, but sold by the brand company as a generic product under the same regulatory approval as the brand-name drug. A “no authorized generic” deal means that the brand drug company agrees that it will not launch its own authorized-generic when the first generic company begins to compete. When a brand company agrees to this, it significantly increases the first generic company’s revenues, while at the same time causing consumers to pay substantially higher prices for the drug. FTC Chairwoman Edith Ramirez said in a statement:
Settlements between drug firms that include ‘no-AG commitments’ harm consumers twice – first by delaying the entry of generic drugs and then by preventing additional generic competition in the market following generic entry. This lawsuit reflects the FTC’s commitment to stopping pay-for-delay agreements that inflate the prices of prescription drugs and harm competition, regardless of the form they take.
The FTC filed its case in the Eastern District of Pennsylvania alleging that the drug companies delayed the entry of generic drugs for Opana ER and Lidoderm. The FTC said that in 2010, Endo and Impax reached an anti-competitive “reverse payment” agreement concerning Opana ER. According to the FTC, Impax, which was the first company to file for FDA approval to market a generic version of Opana ER, agreed to delay entering the market with its cheaper generic until January 2013 in exchange for Endo’s agreement not to market an authorized generic of the drug. Without the large payment, Impax would have launched its generic version of Opana ER prior to January 2013. This unlawful and anticompetitive deal guaranteed that until January of 2013 Endo would have no competition and, in exchange, by January 2013 Impax would be the only drug company selling a generic version of Opana ER for at least 180 days. According to the FTC, Endo also allegedly entered into a second agreement to pay Impax at least $10 million, purportedly as a separate development and co-promotion arrangement. Between the two unlawful agreements, Endo has paid Impax more than $112 million.
Similarly, the FTC claimed that generic competition for the pain relief patch Lidoderm was delayed because of an illegal deal in 2012 involving Endo, Watson and Teikoku. Watson, which is now owned by Allergan PLC, allegedly agreed not to market its generic version of Lidoderm until September 2013. In return, Endo agreed not to introduce an authorized generic within a certain timeframe. For this particular “no authorized generic” deal, Watson received $96 million worth of free Lidoderm from Endo and Teikoku. It’s alleged in the FTC’s Complaint:
Endo knew that generic competition would decimate its sales of the corresponding branded product and that any delay in generic competition would be highly profitable for Endo, but very costly for consumers.
These “pay-for-delay” agreements have raised antitrust concerns for years now. The FTC has estimated that these deals cost Americans $3.5 billion annually in higher health care costs. Challenging drug makers over these anticompetitive “reverse payment” agreements is just another way Plaintiffs can positively affect the price of prescription drugs in this country. If you would like to know more about this Pay-for-Delay litigation, contact Ali Hawthorne, a lawyer in our firm’s Consumer Fraud and Commercial Litigation Section, at 800-898-2034 or by email at Alison.Hawthorne@beasleyallen.com.
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