Supreme Court: FTC can challenge Pay to Delay Schemes
An Androgel pay to delay lawsuit was at the center of a Supreme Court case decided last summer which could eventually affect many other drug cases. The Federal Trade Commission sued the drug maker Solvay over a pay-to-delay play the company tried to make with Androgel.
Pay to Delay Scheme
Solvay and other brand-name drug makers have sometimes paid generic makers to keep their generic versions of a brand name drug off the market. When such a scheme works for the brander, it continues to enjoy its market share even after the patent has run out and generic companies have the legal right to make and sell cheaper versions of the branded drug.
The FTC charged that the pay-to-delay scheme in the Androgel case violates anti-trust laws. Pay to delay schemes obviously do stifle price competition and even give a brander a kind of monopoly, at least until whatever prior agreement the brander has made with the generic runs out and the generic maker begins manufacturing and selling the drug at a cheaper price than the brand.
The question before the Supreme Court was whether the FTC has the right to challenge pay to delay plays. The court last summer decided in favor of the FTC.
In the case before the nation’s highest court, Solvay sued three generic drug makers of Androgel, charging them with patent infringement.
Pay to Delay ruled Presumptively Unlawful by 3rd Circuit
District courts as well as the 11th Circuit Court of Appeals had all ruled for Solvay in the Androgel lawsuit. The lower courts had ruled such patent infringement settlements – known as pay to delay by the FTC – were legally viable and therefore safe from antitrust law. Last summer, however, the 3rd Circuit Court of Appeals held that a reverse payment from a branded drug maker to a generic company was “presumptively unlawful.” Because the two appeals court panels disagreed about pay to delay, the Supreme Court decided to render a decision.
The Supremes voted 5-3 (Alito recused himself) that the FTC does indeed have legal standing in the Androgel case. Nevertheless, the Court did not side with the FTC in its claim that all pay-to-delay plays were necessarily illegal.
Justice Breyer wrote: “Settlement on the terms said by the FTC to be at issue here – payment in return for staying out of the market – simply keeps prices at patentee-set levels, potentially reducing the full patent-related $500 million monopoly return while dividing that return between the challenged patentee and the patent challenger. The patentee and the challenger gain; and the consumer loses.”
Hollow Victory for Consumers
Edith Ramirez, FTC Chair, said the ruling is, “a significant victory for American consumers, American taxpayers, and free markets.” Ramirez added: “With this finding, the Court has taken a big step toward addressing a problem that has cost Americans $3.5 billion a year in higher drug prices.”
However pleased Ramirez may be with the court’s decision, it is, in the end, only one lone skirmish in the endless legal drug wars, and it is difficult to say who wins this round, even if it appears that consumers are victorious in this one case regarding brand-name Androgel. The Supreme Court’s Androgel ruling still leaves the door open for other brand-name drug makers to pull pay-to-delay plays, which may seem to actually be a loss for people, but actually could turn out to be a blessing, at least for some who may later be injured by brand name drugs instead of their generic counterparts.
Supreme Court protects Generic Drug Makers from Injured Consumers
How can one be lucky to be injured by a brand-name drug instead of a generic? The Supreme Court also ruled in PLIVA, Inc. v. Mensing (in June 2011) to insulate generic drug makers from liability. Add up the limited ruling in Androgel and the blanket generic immunity granted in Mensing, and it all may mean that even though people may need to pay higher drug prices when pay-to-delay plays work for a brander, people who take a brand name drug will at least have a chance to continue to be protected by tort law if the drug they take turns out to injure them.
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