GPhA Reacts to FTC Report Critical of Pay-to-Delay Agreements

Although the number of final patent settlements was similar from 2011 to 2012, potential pay-to-delay agreements increased from 28 to 40, according to a recent Federal Trade Commission (FTC) report. The majority of the potential settlements, however, were resolved without generic manufacturer compensation.

“Sadly, this year’s report makes it clear that the problem of pay-for-delay is getting worse, not better,” FTC Chairmain Jon Leibowitz said in a press release. “More and more brand and generic drug companies are engaging in these sweetheart deals, and consumers continue to pay the price. Until this issue is resolved, we will all suffer the consequences of delayed generic entry—higher prices for consumers, businesses, and the US taxpayer.”

In fiscal year 2012, companies filed 140 patent settlements, compared with 156 in 2011, the FTC report stated. Of these, 40 contained potential payments to the generic manufacturer and clauses restricting generic drug marketing. In approximately half of these potential agreements, a brandname manufacturer promised not to release an authorized generic that would compete with another generic manufacturer’s product for a specified amount of time, the FTC added. Eighty-one settlements restrict generic marketing but do not contain any explicit compensation.

In addition, 43 of the 140 total settlements were the first to seek FDA approval for a generic product, making them eligible for 180 days of exclusivity under current regulations. Delays in marketing first-time products cause competing generics to postpone releasing their products due to the exclusivity period. Those delays make the settlement deals harmful to consumers, the FTC contends.

According to an unspecified FTC report cited in the release, the settlements cost consumers up to $3.5 billion annually, adding to the federal deficit. In addition, the Congressional Budget Office estimates that legislation restricting the deals would reduce debt by about $5 billion over the next decade, the release stated.

“The FTC is wrong on the facts, wrong on the public policy and wrong on the law,” Ralph G. Neas, president and chief executive officer of GPhA, said in a release. “If successful, the FTC position would dramatically undermine the law of the land and cost patients and consumers billions of dollars every year. The FTC is continuing to perpetuate the myth that procompetitive, pro-consumer patent settlements are harmful to consumers—an unsubstantiated position that has repeatedly failed to receive support in both Congress and the Courts.”

The US Supreme Court agreed to hear a patent settlement case later in 2013. GPhA has maintained that the settlements have not impeded competition beyond a brand-name drug’s patent expiration, and have reduced the cost of generics by allowing manufacturers to avoid lawsuits.

“It is important to note that the FTC already has the authority to review and reject any patent settlement that it deems to be unlawful,” Neas added. “If the agency thought any one of the settlements it is now criticizing did not pass legal muster, the time to act was as it was considering the settlement, not by a press release after the fact.”