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Who Pays For The “Delay” In “Pay For Delay” Drug Settlements?

Posted  March 2, 2010

Procrastination may be the thief not only of all time, but also of $3.5 billion from the pockets of health care consumers, according to the FTC.

Citing a cost of billions of dollars to consumers, the FTC is challenging “pay-for-delay” reverse settlements in which pharmaceutical companies pay generic drug companies to not make a generic version of a drug.

There are two fronts in this effort.  The FTC is attempting to convince Congress to ban the practice outright, and in the meantime it is litigating two lawsuits opposing the practice on antitrust grounds.

One lawsuit was filed in February 2008 in the Eastern District of Pennsylvania against Cephalon, Inc., which paid four generic drug companies to stay out of the market of the drug Provigil.  Another case was filed in January 2009 against AndroGel in the U.S. District Court for the Northern District of Georgia.  The AndroGel case has the added element of joint promotional efforts between the defendants and backup supply deals, in addition to a pay-for-delay reverse settlement.

The FTC has already been unsuccessful once in a case involving reverse payments against Schering-Plough Corporation in the Eleventh Circuit, but it hopes that additional factors in the two new cases will bring success.  The Cephalon case has an added claim of attempted monopolization of the market, while the AndroGel case involves co-promotion agreements between competitors.  Neither element was present in the Schering-Plough case.

The FTC released a report on the practice and its effects on U.S. consumers in January of this year entitled “Pay-for-Delay:  How Drug Company Pay-Offs Cost Consumers Billions.”  The FTC estimates that such reverse settlement deals could cost U.S. consumers $3.5 billion a year in higher prices.

The Obama administration has added a proposed ban on these reverse payment settlements to its health care bill in the hope that it will bring cheaper drugs to the market sooner and thus bring down costs.  As Jon Leibowitz, Chairman of the FTC put it, “When drug companies agree not to compete, consumers lose.”

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