Supreme Court rules FTC can prevent patent holders from paying rivals to keep generics off shelves

WASHINGTON (Reuters) – The Supreme Court ruled on Monday regulators can challenge deals between brand-name drug companies and generic rivals that delay cheaper medicines from going on sale, which regulators say increase costs to consumers by billions of dollars.

But the court, in a 5-3 vote with Justice Samuel Alito recused, declined the Federal Trade Commission’s request to declare the deals to be presumed to be illegal. The regulatory agency has fought the practice for more than a decade.

“While we believe the Supreme Court decision will open the door to broader FTC scrutiny of brand/generic settlements, we believe a majority of settlements will still be allowed even if reviewed by the FTC,” JP Morgan analyst Chris Schott said in reaction to the ruling.

The companies in the case were brand-name drug maker Solvay Pharmaceuticals Inc, now owned by AbbVie; generic makers Actavis Inc, previously Watson Pharmaceuticals; Paddock Laboratories Inc, now part of Perrigo Co, and Par Pharmaceutical Cos.

Solvay had sued generic drugmakers in 2003 to stop the sale of cheaper versions of AndroGel, a gel used to treat men with low testosterone.

In a settlement of the lawsuit, Solvay paid as much as $30 million annually to the generic drug makers to help preserve its annual profits from AndroGel, estimated at $125 million.

Under the deal, the three would keep their generic versions off the market until 2015. The patent expires in 2020.

Generic drugmakers like the “pay for delay” arrangements because if they bring out their products before patent infringement litigation is over, they run the risk of paying triple damages on sales if they are found to have infringed.

The FTC filed a lawsuit against the companies in 2009, arguing that the companies had simply split up Solvay’s monopoly profits and prevented the generic firms from bringing out a cheaper version of the drug.

The FTC lost at the district court level, and that loss was affirmed by 11th Circuit Court of Appeals. The Supreme Court overturned the appeals court ruling and sent the case back to the lower courts for further proceedings.

“This definitely legitimizes the role of antitrust law in these settlements that the FTC has been pursuing for a while,” said Noah Leibowitz, a patent expert with Simpson Thacher & Bartlett.

More at: http://www.rawstory.com/rs/2013/06/17/supreme-court-rules-ftc-can-prevent-patent-holders-from-paying-rivals-to-keep-generics-off-shelves/