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Supreme Court Ruling Could Put More Generic Drugs in Consumer Hands

Jun 18, 2013

The U.S. Supreme Court ruled this week that pharmaceutical companies’ agreements with makers of generic drugs that keep their name-brand products on the market without competition violates antitrust laws.

Based on our previous reports, a major pharmaceutical company will pay handsomely to keep its top-selling drug on the market exclusively after the patent expires. A drug company will offer a lump sum payment to the would-be maker of that drug’s generic counterpart in exchange for the generic maker delaying the release of their drug.

This practice results in more sales for the maker of the name-brand drug but also higher medical costs for patients.

According to a New York Times report, the country’s high court overruled previous lower court decisions this week that said these financial deals between major pharmaceutical companies and makers of generics are in violation of antitrust rules. The justices said the Federal Trade Commission (FTC) could sue these pharmaceutical companies over these deals that keep more competitively priced drugs off the market.

The case that caused this reversal involved the release of a generic version of AndroGel, a testosterone drug designed for men. The FTC had sued Actavis, the maker of AndroGel, because it had entered into a “reverse payment” agreement with Solvay Pharmaceuticals, which was set to release a generic form of AndroGel because the original patent was expiring. Under the agreement between the companies, Solvay didn’t release its drug in exchange for money from Actavis, according to the New York Times.

A more competitive marketplace for prescription drugs should result from the decision, the New York Times reports. Using data from the firm IMS Health, the report notes that 18 percent of all prescriptions are written for name-brand drugs, but that equals about 73 percent of their annual spending. Generic drugs typically cost about 15 percent of the price of a name-brand drug.

If the FTC believes that any financial arrangement between these two types of drug companies is one that’s meant to delay the release of a generic at the same time a name-brand drug’s patent is expiring, it could choose to sue the maker of the name-brand drug.

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