WASHINGTON -- U.S. regulators, armed with a year-old Supreme Court decision, are stepping up investigations of pharmaceutical deals that delay the sale of generic drugs, arrangements they view as illegally hurting competition.
The Federal Trade Commission has opened new investigations into agreements between generic and brand-name drugmakers that may lead the agency to sue for disgorgement of revenue, said Markus Meier, head of the agency's health care division. Companies under scrutiny include Forest Laboratories and Endo International, according to regulatory filings this year.
"Our goal is to bring an end to this practice by whatever means are available to us," Meier said in an interview.
The agency said its enforcement efforts gained strength last June when the Supreme Court ruled antitrust law may bar deals in which brand-name drugmakers compensate generics producers for delaying sales of a particular medication. Until then, judges had found the agreements, which the agency calls pay-for-delay settlements, are legal.
The agency estimates the deals cost consumers $3.5 billion a year. In its most recent data, which covered the year ending in September 2012, it found drug companies reached 40 potential pay-for-delay deals involving 31 branded products with combined U.S. sales of $8.3 billion. That was the most since the agency began collecting data in 2003.
The agreements are still being made after the high court ruling, though companies have turned to more creative means of compensation, said Michael Carrier, a law professor at Rutgers University specializing in antitrust issues.
"They realize when one company pays money to another to delay entering the market, maybe that doesn't look so good," he said.
Forest Laboratories disclosed in May that the agency is investigating its agreements with generic-drug makers related to Bystolic, a blood-pressure treatment. Impax Laboratories Inc. said in February that the FTC is investigating whether it and Endo International and other companies it didn't name engaged in "unfair methods of competition" by entering into agreements involving the pain medication Opana ER.
In May, Endo International disclosed it had received a civil investigative demand from the FTC in February related to patent settlements with Actavis Inc. and Impax.
Representatives of the companies didn't respond to requests for comment on the FTC's scrutiny. The companies said in securities filings that they are cooperating with the agency.
With its powers enhanced by the Supreme Court decision, the FTC opened new investigations, Meier said, declining to provide details. The agency also decided to look at patent settlements between branded and generic drug manufacturers over the past 10 years to see if they warrant a deeper investigation for anticompetitive effects, he said.
Lawsuits brought by the FTC are pending against Cephalon, since acquired by Teva Pharmaceutical Industries Ltd., and Actavis.
"There is still work to be done by the FTC and private plaintiffs," agency Commissioner Julie Brill said. "It's important for the FTC to use all available tools to ensure the law continues to evolve in the right direction."
The FTC's focus on pay-for-delay deals goes back more than a decade. By keeping generic competitors off the market, the settlements harm consumers by forcing them to pay higher prices, according to the agency. Typically, the first generic sells at a 20 percent discount off the branded price, while a discount of as much as 85 percent is common in a market with multiple generics, according to the FTC.
The pay-for-delay agreements are attractive to both sides of the deal because they share "monopoly profits" from the brand-name drug, according to the FTC.
The pharmaceutical industry counters that the settlements benefit consumers. There's a high risk generic companies will lose litigation over patents to branded-drug rivals, preventing the introduction of generic versions until the patents expire, said Ralph Neas, president and chief executive officer of the Generic Pharmaceutical Association.
By settling litigation, generic drugs get to consumers on average 60 months sooner than when patents expire, Neas said. The FTC's focus on the issue leaves him "perplexed," he said.
"They seem to be hell-bent on having patent settlements with considerations be presumptively illegal," Neas said. "Just because manufacturers reach settlements, including settlements with consideration, that could be the best that can be achieved under a particular set of circumstances."
In its decision last year, the Supreme Court stopped short of adopting the FTC's proposal that such agreements should be presumed anticompetitive, ruling instead that the accords should be evaluated under a test known as the "rule of reason."
The case involved AndroGel, a treatment for low testosterone in men. The FTC sued Solvay Pharmaceuticals and generic-drug companies, including Actavis, then known as Watson Pharmaceuticals.
The FTC said the price for AndroGel was poised to fall at least 75 percent in 2007 after the Food and Drug Administration cleared the way for competition. Faced with the prospect of losing $125 million in annual profits, Solvay instead paid the generic-drug makers as much as $42 million a year to delay competing versions until 2015, the FTC said.
Meier said it's too early to determine the effect of the court's decision on the drug industry.
"It gives us the opportunity to take a much closer look at these agreements again and be in better position to challenge them should we find they violate they law," he said about the ruling.
Business on 06/24/2014