FTC Submits Amicus Brief Explaining that Drug Companies Use “No-Authorized Generic” Agreements to Delay Generic Competition

The Federal Trade Commission filed an amicus brief in the U.S. District Court for the District of New Jersey stating that an agreement by a branded drug company not to launch an authorized generic (AG) drug “provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry.”

In a “no-AG” agreement, the branded firm, as part of the patent litigation settlement, agrees that it will not launch its own generic alternative when the first generic begins to compete.  Since the introduction of the branded AG would cut into the revenues of a competing generic product, a no-AG commitment can induce the generic firm to delay entry of its product to the market.  Thus, the Commission concludes, a no-AG commitment is legally sufficient to trigger a rebuttable presumption of illegality under the law of the Third Circuit.

The Commission filed its brief to more fully explain the role of authorized generics, and to share the empirical results of its studies on the issue of AGs and no-AG commitments. The FTC filed its brief in the case of Lamictal Direct Purchaser Antitrust Litigation.  In the case, the private plaintiffs alleged that branded drug firm GlaxoSmithKline (GSK) paid Teva Pharmaceuticals to delay entry by promising not to compete with authorized generic versions of the drug Lamictal.  A question before the District Court is whether this no-AG commitment qualifies as a reverse payment, thus triggering a rebuttable presumption of illegality under the law, as laid out in a recent court ruling involving the drug K-Dur.

[Bio-Pharma]

In the K-Dur case, the U.S. Court of Appeals for the Third Circuit adopted the position of both the FTC and the U.S. Department of Justice, holding that a court considering an antitrust challenge to a drug patent litigation settlement “must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade.”

The brief filed in the current case explains that the FTC’s comprehensive study of authorized generic drugs concluded that a no-AG commitment is a method for branded drug firms to pay generic patent challengers for agreeing to delay entry.  It also presents data collected by the FTC over an eight-year period that indicates that treating no-AG commitments as payments will not prevent all patent settlements.  The FTC has for years opposed anticompetitive pay-for-delay patent litigation settlements.

The Commission vote approving the filing of the amicus brief was 5-0.  It was filed with the court on October 5, 2012.  (FTC File No. P072104, Master File No. 12-995 (WHW-MCA); the staff contact is Saralisa Brau, Bureau of Competition, 202-326-2774).