The US Supreme Court has ruled that pay-to-delay’ deals between pharmaceutical and generic drug companies may violate antitrust laws and should be subject to federal scrutiny.
The verdict in the long-running case allowed both protagonists – the Federal Trade Commission (FTC) and generic pharma company Actavis – to claim a victory although observers have suggested that on balance it should make it easier for the agency and others to challenge pay-for-delay deals in the courts.
The FTC described the decision as “a significant victory for American consumers”, while Actavis said it was pleased the court did not rule that settlement agreements are “presumptively unlawful”.
Pay-to-delay deals – sometime know as reverse payment agreements – typically involve a branded drug manufacturer making some form of payment to a generic maker to withdraw a patent challenge and delay market entry of a cheaper rival.
The Supreme Court justices voted 5-3 that an ongoing case brought by the FTC against AbbVie subsidiary Solvay and Watson (now part of Actavis) over a pay-for-delay deal involving testosterone replacement therapy product AndroGel should be allowed to go forward.
The FTC’s suit claimed that the generic manufacturer accepted payments of $31m to $42m a year to delay the launch of its version, forcing the healthcare system to pay inflated prices for the therapy.
Lower court rulings had upheld the validity of the settlement agreements on the grounds that the drugs in question were still in patent, but a turning point came last year when an appellate court ruled that they were “prima facie evidence of an unreasonable restraint of trade”.
Actavis scored some points of its own in the latest ruling however, as the justices agreed that the earlier appeals court ruling that courts should apply a “quick look rule” to determine if a deal breached antitrust regulations, saying each case should be subject to the traditional “rule of reason” approach.
Actavis said the ruling meant that it would now be up to the lower courts to determine “if the benefits of the settlement outweigh harm to consumers”. The case was remanded for further proceedings.
FTC chairwoman Edith Ramirez said the justices had “rejected the attempt by branded and generic companies to effectively immunise these agreements from the antitrust laws”, adding that the agency would now assess “how best to protect consumers’ interests in other pay-for-delay cases”.
The FTC has been concerned about the impact of the deals for some time, particularly as they are becoming increasingly frequent, rising from three cases in 2005 to 40 last year.
Meanwhile, the Pharmaceutical Research and Manufacturers of America’s (PhRMA) general counsel Mit Spears said the trade organisation was pleased that the Supreme Court recognised these deals were “a vital aspect of a patent owner’s ability to protect intellectual property,” adding they are “common in numerous industries”.