Antitrust Law Daily Wrap Up, TOP STORY: FTC Chairwoman testifies on pay-for-delay settlements and Supreme Court’s FTC v. Actavis decision, (Jul 23, 2013)

By Jody Coultas, J.D.

On July 23, 2013, Federal Trade Commission Chairwoman Edith Ramirez testified before the Senate Judiciary Subcommittee on Antitrust, Competition, and Consumer Rights that the FTC will continue to challenge pay-for-delay court settlements in the pharmaceutical industry.

Pay-for-delay settlements, also known as exclusion payment or reverse payment settlements, are settlements of patent litigation in which the brand-name drug firm pays its potential generic competitor to abandon a patent challenge and delay entering the market with a lower cost, generic product. Because the deals are highly profitable for both the brand-name drug firm and the generic drug company, they have become increasingly more common. Anticompetitive pay-for-delay agreements violate the antitrust laws and obstruct the development of generic competition.

Chairwoman Ramirez noted that the recent U.S. Supreme Court decision in FTC v. Actavis was “an important victory for consumers and a vindication of basic antitrust and free market principles.” The Actavis decision put the FTC “in a much stronger position to protect consumers from anticompetitive drug-patent settlements that result in higher drug costs,” the testimony states.

The Commission challenged two patent settlements involving AndroGel, a testosterone replacement drug. Solvay Pharmaceuticals, Inc. agreed to pay generic drug makers to delay generic competition with AndroGel. Actavis overturned the so-called “scope-of-patent” test, which had been adopted by some courts. Under that test, a brand company, except in rare circumstances, could buy off generic competition until the day of patent expiration and face no antitrust scrutiny. The Supreme Court ruled that pay-for-delay agreements are appropriately subject to rule of reason scrutiny, the standard applied in most antitrust actions. Reverse payments had the potential for adverse effects on competition because they enabled the brand company to use its monopoly profits to induce the generic to abandon its claim and prevent competition.

The Commission will continue to pursue pay-for-delay matters and seek appropriate relief for consumers; monitor private litigations alleging pay-for-delay agreements; investigate pending pay-for-delay matters; examine new settlements that companies file with the FTC under the Medicare Modernization Act of 2003 (MMA) and investigate those that raise anticompetitive concerns; and issue regular reports on drug settlements filed with the FTC under the MMA.

MainStory: TopStory Antitrust