Posts Tagged: "pay for delay"

The pharmaceutical industry presents some of the most important and challenging issues lying at the intersection of the patent and antitrust laws. On the one hand, patents play a crucial role in the industry, which is unique in the cost and duration of reaching the market. But on the other, a complicated regulatory regime and the event of generic entry (which dramatically lowers price and which the brand firm has interest in delaying) opens the door for potentially anticompetitive behavior. One area where this tension has surfaced in recent years has involved the settlement of patent litigation. In 2013, in FTC v. Actavis, the Supreme Court held that agreements by which brand-name drug companies pay generics to settle patent litigation and delay entering the market could have “significant anticompetitive effects” and violate the antitrust laws.

It has been five years since FTC v. Actavis. In that landmark ruling, the Supreme Court held that settlements by which brand-name drug companies pay generics to settle patent litigation and delay entering the market could have “significant anticompetitive effects” and violate the antitrust laws. What has happened in these five years? For starters, the number of “pay for delay” settlements (involving payment and delayed entry) has declined.

On January 23rd, the Federal Trade Commission (FTC) announced that it had taken steps to resolve antitrust charges involving business activities employed by Irish/U.S. drugmaker Endo International (NASDAQ:ENDP) designed to delay the entry of generic pain medications into the U.S. to preserve monopoly profits. The FTC filed a complaint for injunctive relief and a motion for entry of stipulated order for permanent injunction against Endo and others in the U.S. District Court for the Northern District of California (N.D. Cal.). These actions revive charges from a lawsuit filed by the FTC last March against Endo involving pay-for-delay patent settlements.

The FTC’s complaint alleges that Endo paid the first generic companies that filed for FDA approval – Impax Laboratories, Inc. and Watson Laboratories, Inc. – to eliminate the risk of competition for Opana ER and Lidoderm, in violation of the Federal Trade Commission Act. The FTC is asking the district court to declare that the defendants’ conduct violates the antitrust laws, and further seeking an order that the companies disgorge their ill-gotten gains. Of course, the FTC asks for a permanent bar to prevent the companies from engaging in similar anticompetitive behavior in the future.

The number of these potentially anticompetitive deals has fallen significantly following the Supreme Court’s landmark antitrust decision in FTC v. Actavis in 2013. The total number of such deals filed with the FTC has dropped to 21 in FY 2014 from 29 in FY 2013, and 40 in FY 2012 prior to the Actavis ruling. The FTC staff report for FY 2014 represents the first annual snapshot of such deals following the Actavis decision.