Generic Patent Settlement Cases Could Head to Supreme Court

The US Solicitor General has filed a Supreme Court legal brief on behalf of the Federal Trade Commission (FTC) in the case of agreements to delay the release of generic equivalents to brand-name drugs.

According to an October 4, 2012, article published in the Washington Post, the brief targets settlements between generic and brand-name drug manufacturers to delay the release of a generic drug. The FTC has focused on the arrangements for more than a decade, arguing that the “pay to delay” deals violate portions of the Sherman Antitrust Act.

Court rulings from previous settlement cases determined that the agreements do not violate antitrust laws as long as manufacturing and trade is not restrained beyond the brand-name drug’s patent expiration. Despite those rulings, a July 16, 2012, decision in the third district federal appeals court determined the deals hinder industry competition.

The decision, which Pharmacy Times covered in its 2012 Generic Supplement (see http://phrmcyt.ms/S5XTXR), involves a 15-year- old agreement between Merck’s Schering unit, then ScheringPlough, and Upsher-Smith Laboratories Inc. According to the retail pharmacists and drug companies that are plaintiffs in the suit, the generic drug settlement agreement for potassium supplement K-Dur 20 caused them to pay too much for the drug because of the delayed generic release.

Merck has filed an appeal with the Supreme Court. Although the FTC brief handles a different case—involving Solvay Pharmaceutical’s agreements with 3 generic manufacturers on the delay of AndroGel (testosterone gel)—the Washington Post noted that the court has a variety of options regarding the cases. It could opt to hear 1 or both cases, combine them, or dismiss both cases.

Industry groups, including the Generic Pharmaceutical Association (GPhA), argue that the settlements ultimately allow generic products to enter the market faster because they end patent litigation that is often part of the generic drug introduction process. As a result, upholding the third court ruling would drastically change the approval and marketing process for generic manufacturers. GPhA has filed its own brief regarding the K-Dur 20 lawsuit, according to an October 2, 2012, press release on its website.

“This case could determine how an entire industry does business, because it would dramatically affect the economics of each decision to introduce a new generic drug,” Ralph G. Neas, president and chief executive officer (CEO) of GPhA, said in a press release.

“The current industry paradigm of challenging patents on branded drugs in order to bring new generics to market as soon as possible has produced $1.06 trillion in savings over the past 10 years.”

The FTC questions those determinations, Chairman Jon Leibowitz told the Washington Post.

According to Leibowitz, the settlements cost Americans $3.5 billion annually. The federal government buys a third of all generic medications as well, so the deals would boost national debt by $5 billion over the next decade, according to Congressional Budget Office figures.

“We’re hopeful that the Supreme Court will take our case,” Leibowitz told the Washington Post. “We believe that if competition law is properly applied that it could save American consumers as well as small and large businesses billions of dollars in higher health costs.”