The US Federal Trade Commission has slapped the world’s largest generic drugmaker Teva with a $1.2bn fine over allegations that it blocked the sale of cheaper medicines.
Israeli-based Teva has reached a settlement resolving the Commission’s antitrust suit charging its subsidiary Cephalon, with illegally blocking generic competition to its blockbuster sleep-disorder drug Provigil (modafinil).
The settlement is one of the largest ever to be paid to drug wholesalers and retailers over allegations of delaying generic medicines.
The FTC said that Teva, which acquired Cephalon in 2012, will make a total of $1.2bn available to compensate purchasers, including drug wholesalers, pharmacies, and insurers, who overpaid because of Cephalon’s illegal conduct.
As part of the settlement, Teva also has agreed to a prohibition on the type of anti-competitive patent settlements that Cephalon used to artificially inflate the price of Provigil.
FTC chairwoman Edith Ramirez, said: “Today’s landmark settlement is an important step in the FTC’s on-going effort to protect consumers from anticompetitive pay for delay settlements, which burden patients, American businesses, and taxpayers with billions of dollars in higher prescription drug costs.
“Requiring wrongdoers to give up their ill-gotten gains is an important deterrent.”
In the year before generic entry, Provigil sales in the United States exceeded $1bn.
The settlement stems from a 2008 FTC lawsuit, which charged that Cephalon unlawfully protected its Provigil monopoly through a series of agreements with four generic drug manufacturers in late 2005 and early 2006.
The FTC alleged that Cephalon sued the generic drug makers for patent infringement and later paid them over $300m in total to drop their patent challenges and forgo marketing their generic products for six years, until April 2012.
These types of payments are known as pay-for-delay deals, where pharma firms developing branded drugs make payments to a generic company in return for that firm agreeing to delay its entry into the market.
This means the generic firms are compensated for delaying the sale of their drugs, and pharma companies can keep artificially bringing in revenue from their branded medicines after patents have expired.
This may benefit the firms involved, but can cost patients and healthcare providers billions in extra money it shouldn’t need to pay out.
The Federal Trade Commission in the US has in recent years taken a dim view of such arrangements and has taken a proactive approach to stopping such deals.
The FTC released a report in 2011 saying that these types of deals were costing US patients $3.5bn extra a year in higher drug costs.