Courts Review Generic and Brand Drug Maker Deals

Today in Supreme Court, generic and brand name drug makers argued against the federal government in Federal Trade Commission v. Actavis, No. 12-416.

The lawsuit, said The New York Times concerns if a brand name drug maker can pay a generic drug maker to keep the generic version of a drug off the market. When looking at antitrust law, it would seem that the answer would be no, which is how the government and one federal appeals court see the matter, said The Times.

But, three other federal appeals courts say the payments are legal, at least in the context of a patent infringement lawsuit. According to those courts, explained The Times, the payments are in line with Congressional intention concerning guidelines that encourage generic drug production.

The issue involves a company’s constitutional right to protect intellectual property via a patent that would exclude competitors and antitrust laws in which a company is banned from unfairly excluding competition, The Times explained. The court is expected to rule later this year.

“Everybody wants to believe that the big drug companies are bad, that they’re giving us these piles of money to stay off the market,” said Paul M. Bisaro, chief executive of Actavis. It is AndroGel, made by Actavis—a testosterone replacement therapy—that is at the center of the case. “But these payments have saved consumers billions and billions of dollars,” Bisaro told The Times. The agency disagrees, saying that the payment “allows the brand-name manufacturer to co-opt its rival by sharing the monopoly profits that result from an artificially prolonged period of market exclusivity.”

Brand-name drugs accounted for only 18 percent of the prescriptions written by in 2011 and 73 percent of consumer spending, IMS reported, said The Times. When a generic reaches the market, it costs just about 15 percent of the brand, said the FTC, which means the brand maker loses some 90 percent of its market share, The Times wrote.

It seems that the 1984 the Drug Price Competition and Patent Term Restoration Act, also known as the Hatch-Waxman Act, and some decades-old amendments, encourage generic drug manufacturers to challenge brand name patents, said The Times. A loophole, however, permits a brand name drug maker to pay a generic drug maker to keep its lower priced drugs off of the market for a set number of years.

In the current case involving AndroGel, its manufacturer, Solvay Pharmaceutical paid generic companies challenging its patent, said USA Today. These payments, “subvert the competitive process by giving generic manufacturers an incentive to accept a share of their rival’s monopoly profits as a substitute for actual competition,” Deputy Solicitor General Malcolm Stewart, said

Justice Elena Kagan said, “It’s clear what’s going on here is that they’re splitting monopoly profits, and the person who’s going to be injured are all the consumers out there,” according to USA Today.

Federal courts have, for the most part, found the settlements legal. Typically, the settlements replace patents, which are seen as being anti-competitive. But, drug makers and technology companies say the patents help them benefit from their huge investments in product development, said USA Today. On average it takes a drug company about 10-15 years and $1.3 billion to bring a drug to market. Meanwhile, the longer a generic is prevented from making it to market the longer the consumer must pay for a higher priced brand version.