The Federal Trade Commission's crusade against "Pay for Delay" patent settlements between brand name and generic drug makers got a boost yesterday when a district court judge refused to dismiss a 2008 antitrust suit against Cephalon Inc.
The case, now consolidated in U.S. District Court for the Eastern District of Pennsylvania, involves reverse payment settlements over the drug Provigil. The medicine, used to treat excessive sleepiness in people with sleep disorders, had sales of over $920 million in 2008.
The FTC in court papers describes the case as “a straightforward story of anticompetitive conduct.”
In late 2002, four generic companies filed drug applications with the Food and Drug Administration to make generic versions of Provigil. Each claimed it could make the drug without infringing Cephalon’s only remaining unexpired patent on Provigil – narrow coverage related to distribution of a certain particle sizes.
Cephalon sued the companies - Barr Laboratories, Inc.; Mylan Laboratories, Inc.; Teva Pharmaceutical Industries, Ltd., and Ranbaxy Pharmaceuticals, Inc.– for patent infringement, but by 2005, generic competition seemed imminent.
According to the FTC, “Cephalon therefore entered a series of settlement agreements under which it compensated each generic company – more than $200 million collectively – to abandon its patent challenge and forgo entry until April 2012.”.
The FTC charged that this violates Section 1 of the Sherman Act and should be declared a per se antitrust violation. The consolidated case includes other plaintiffs as well – King Drug Co., Vista Health Plan, and Apotex Inc.
“To date, neither the Third Circuit nor any judge in this district has established a framework under which reverse payment patent settlements should be analyzed,” wrote Judge Mitchell Goldberg in his March 29 decision refusing to dismiss the case.
After reviewing cases in other circuits, including at least one involving the FTC, Goldberg found “sufficient facts have been alleged to establish that the agreements in question grant greater rights than those conferred under the patent... plausible antitrust allegations have been pled.”
Cephalon is represented by Wilmer Cutler Pickering Hale and Dorr partners James Burling, Hartmut Schneider and special counsel Wendy Terry. Burling could not be reached for comment.
FTC lawyers include Markus Meier, Bradley Albert, Elizabeth Hilder, Saralisa Brau, Mark Woodward and Jeffrey Bank.
FTC Chairman Jon Leibowitz in a statement said that the decision “seems to reflect a growing understanding—first in Congress now in the courts—that brand name drug companies must not be allowed to make pay-offs to their generic competitors to keep low-cost generic drugs off the market. These deals are costing American consumers $3.5 billion a year in higher drug costs.”
The health care bill included a provision strongly supported by the FTC that would have banned most reverse payment deals, but it was removed from the legislation in the final days of negotiations.