Supreme Court Rules "Pay for Delay" Deals Vulnerable to Antitrust Laws

The United States Supreme Court today issued a decision on FTC v. Actavis, Inc., ruling that pay-for-delay agreements between branded and generic pharmaceuticals manufacturers are subject to antitrust litigation.



The case revolved around a payment made by Solvey Pharmaceuticals, maker of a testosterone gel known as AndroGel, to generic manufacturer Actavis to keep a generic version of AndroGel off the market.


The justices ruled that this type of reverse payment is not immune to antitrust scrutiny. However, they were not ruled to be outright unlawful. The decision contains a clause instructing the "rule of reason" to be applied when deciding future cases.


"The Supreme Court's decision today regarding the pay-for-delay case will ultimately benefit hospitals and other consumers of generic drugs," says Jeffrey Cross, a partner in the Antitrust and Trade Regulation Group at Freeborn & Peters in Chicago. "Ultimately, this should mean generics should enter the market sooner."


According to the Federal Trade Commission, this ruling helps to address an issue that has cost Americans $3.5 billion in higher drug prices per year.


However, this ruling will not end pay-for-delay agreements in the industry, says Mr. Cross. The 1984 Hatch-Waxman Act established the process by which generics manufacturers seek FDA approval, and also gives generics manufacturers considerable leverage in patent litigation. Therefore, "reverse payments settlements will likely continue because of the risk shifting in the Hatch-Waxman Act," as branded manufacturers have an incentive not only to keep generics out of the market but also patent litigation out of the courtroom, says Mr. Cross.


A Supreme Court review of the case was prompted after the case was dismissed by the Eleventh Circuit but a ruling on a similar case found pay-for-delay agreements in violation of antitrust laws. Justice Stephen Breyer wrote the majority opinion, joined by Justices Anthony Kennedy, Sonia Sotomayor, Ruth Bader Ginsberg and Elena Kagan.


More Articles on Pharmaceutical Regulations:

House Passes "Track and Trace" Bill
Track and Trace Legislation: What It Is, and How to Prepare
Is the Hatch-Waxman Act Flawed and Should the Supreme Court Fix It?

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