FTC Vows Strong Action After Pay-for-Delay Ruling

The Federal Trade Commission is planning strong court attacks against so-called "pay-for-delay" generic drug settlements in response to a U.S. Supreme Court ruling in June, commission Chairwoman Edith Ramirez told a Senate committee Tuesday on Capitol Hill.

The high court's ruling in FTC v. Actavis, Inc. left the agency in a much stronger position to combat settlements that regulators see as anticompetitive, starting with the continued investigation and litigation of two active cases, Ramirez told the Subcommittee on Antitrust, Competition Policy and Consumer Rights.

But Ramirez also urged the Senate to pass now-proposed bipartisan legislation that would put the burden in these cases on the drug companies to prove their settlements are not anticompetitive. Litigation is costly and time-consuming for the agency, she said.

That legislation, proposed by Senator Amy Klobuchar (D-Minn.) and co-sponsored by Senator Chuck Grassley (R-Iowa), would make drug company pay-for-delay settlements presumptively illegal, instead of the typical "rule of reason" antitrust test now in place after the Supreme Court ruling. Much of the hearing was spent debating which standard is better for consumers.

“While the rule of reason standard is an appropriate test and we intend to apply that going forward, I do believe declaring them presumptively invalid would also further help us put a stop to these types of settlements,” Ramirez said.

The two cases that the FTC is litigating are Actavis, as well as FTC v. Cephalon case in the U.S. District Court for the Eastern District of Pennsylvania.

Michael Carrier, a professor at Rutgers University School of Law in New Jersey, testified today that the legislation would be good for consumers and send a clear message to courts on these types of patent settlements.

"Antitrust alarm bells should be going off when one company is paying another company to stay out of the market," Carrier said.

Arnold & Porter partner Diane Bieri testified at the hearing on behalf of pharmaceutical research and manufacturing companies, telling the subcommittee that the parties often prefer to minimize costs, minimize litigation risks and deal with uncertainty by settling these cases rather than litigating them.

Comments

[Ron Mesnard]

Another point of view...
The FTC can pat themselves on the back for saving the public money but are they? The US public assumes creating prescription drugs is extremely profitable because the cost is so high. If that was true, there ought to be an increasing number of companies doing this. There used to be hundreds of pharmaceuticals creating new drugs in the 60s now you can count the US pharmaceuticals that patent and create new drugs on the fingers of one hand. It is too costly and the liabilities are too high to produce a new drug unless you are huge and can bear the costs. Instead of creating a new drug, small pharmaceuticals prey on the most profitable new drugs. They are a bit like patent trolls except these do produce a product. These small pharmaceuticals have a large legal department that reviews the patents of only the most costly drugs and only produce a generic before the patent's expiration date only if they can find a chink in the patent. By settling out of court prescription pharmaceuticals can cut their losses. Lost profits from early generics and class action suits only result in higher prices on new drugs. If they didn't we would be left with only generics.