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 “Pay for Delay” Drug Manufacturers Vs. the Federal Trade Commission

The Supreme Court will hear arguments starting on March 25th between the Federal Trade Commission (FTC) the Justice Department and several state Attorney Generals against large drug manufacturers such as Actavis, AbbVie and Paddock Laboratories.

The issue is whether or not brand-name drug manufacturers will be able to continue to settle patent litigation with generic drug manufacturers, in exchange for keeping generic products away from the market for some time after brand name products are already available. The settlements allow for greater profits for both manufacturers, by eliminating competition at different times during a drug's patent life.

This has been referred to as “Pay for Delay” by the FTC, which has fought against the practice for over a decade, with mixed results leading to the case before the Supreme Court now. The FTC, citing anti-trust violations, released a statement, saying, “The continuing stream of monopoly profits is large enough to pay the generic competitors more than they could hope to earn if they entered the market at competitive prices.”

While seen as an illegal practice by the FTC and others, drug manufacturers defend the settlement deals as a way to prevent harmful litigation that prevents companies from marketing their products. Paul Bisaro, CEO of generic drug manufacturer Activis, said, “In every case that we've been involved in that resulted in a settlement, it has resulted in years being taken off the patent life,”

Solvay Pharmaceuticals, now called AbbVie, sued drug manufacturers in 2003 to halt production of generic Androgel, a low-testosterone treatment. Under the settlement, Paddock Laboratories and Par Pharmaceuticals received payments of $30 million annually, while brand-name AbbVie preserved annual profits of $125 million. The generic drug manufacturers subsequently kept their products off of the market until 2015. The patent expires in 2020.

Senators Amy Klobuchar of Minnesota and Chuck Grassley of Iowa introduced legislation in February to make these settlement deals illegal. However, prior attempts to outlaw settlement deals have been defeated due to strong resistance from both brand-name and generic drug manufacturers.

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