Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Bill to Stop So-Called “Pay-for-Delay” Agreements Between Drug Companies Introduced in Senate, (Feb 7, 2013)

By Jeffrey May, J.D.

Senator Amy Klobuchar (Minnesota), chair of the Senate Judiciary Committee’s Antitrust Subcommittee, and Senator Chuck Grassley (Iowa), the Judiciary Committee’s ranking member, have introduced legislation aimed at so-called “pay-for-delay” agreements or “reverse-payment” agreements between brand name and generic drug companies that delay entry of low-cost generic competition. The proposed “Preserve Access to Affordable Generics Act” (S. 214) was introduced on February 4.

The measure is substantively identical to a bi-partisan measure (S. 27) introduced in the last Congress by then-Senator Herb Kohl (Wisconsin). By a vote of ten to eight, the Senate Judiciary Committee passed that measure. There was an attempt to include the proposal in deficit reduction measures later in 2012, but the effort failed.

Under the proposed legislation, agreements under which brand-name drug companies compensate generic drug companies to delay the entry of generic drugs to the market, a practice known as an “exclusion payment settlement,” would be presumed illegal. The FTC would have the authority to challenge such an agreement as a violation of Sec. 5 of the FTC Act, and the drug companies would have an opportunity to convince a judge why the agreement was not anticompetitive. If an agreement is found illegal, the FTC could assess civil penalties up to three times the profits gained by the drug companies.

The legislation comes as the U.S. Supreme Court is taking up the legality of “pay-for-delay” agreements in patent disputes between branded and generic drug companies. The Supreme Court has agreed to review a decision of the U.S. Court of Appeals in Atlanta (677 F.3d 1298, 2012-1 Trade Cases ¶77,865), affirming dismissal of an FTC action challenging patent litigation settlements concerning testosterone-replacement drug AndroGel.

The FTC argues that the agreements should be treated as presumptively unlawful under a “quick look” rule of reason analysis. Under Eleventh Circuit precedent, “absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.” The Court could resolve a split among the circuits by accepting the “scope of the patent” approach or the approach advocated by the FTC and adopted by the Third Circuit.

“These pay-for-delay deals keep more affordable generic drugs off the market, hurting consumers and stifling competition,” said Klobuchar in a statement announcing the legislation. “I have long supported efforts to crack down on this behavior and the recent rise in pay-for-delay agreements underscores the need for legislation to help make sure people have access to the drugs they need at a price they can afford.”

“Clearly, pay-for-delay deal-making is an obstacle to getting cheaper prescription drugs on the market,” Grassley said. “These anti-competitive patent settlements between brand and generic drug companies hurt consumers’ access to affordable medications, and they hurt taxpayers who pay for prescription drugs under both Medicare and Medicaid. It’s a practice that puts the interests of drug companies above the interests of consumers, and it’s time for it to end.”

News: Antitrust