Healthy Skepticism Library item: 15951

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Publication type: news

Decker S.
Drug Patent Settlements May Be Illegal, U.S. DOJ Says (Update1)
Bloomberg.com 2009 Jul 7
http://www.bloomberg.com/apps/news?pid=20601202&sid=asN6arCrs5GY

Full text:

The U.S. Justice Department said settlements in which makers of brand-name drugs pay to delay the introduction of generic competitors should be considered illegal in many cases.

The department, in a filing yesterday with the 2nd U.S. Circuit Court of Appeals in New York in a case involving Bayer AG and the anthrax treatment Cipro, said courts should presume that a “pay for delay” or “reverse payment” agreement is illegal and should force the drug companies to justify why the deal was reached.

The filing puts the Justice Department in line with the U.S. Federal Trade Commission for the first time in opposing such settlements. Last month, the FTC said banning such reverse payment settlements could save American consumers $3.5 billion a year in drug costs.

“It’s a clear recognition these deals are presumptively illegal,” FTC Chairman Jonathan Leibowitz said in an interview. “That’s good news for American consumers who are paying inflated prices for much-needed drugs because of the sweetheart deals between the brand and generic companies.”

The appeals court is considering whether to allow a lawsuit that accuses Bayer AG and Barr Laboratories Inc. of using a $398 million patent settlement in 1997 to delay generic competition to Bayer’s Cipro anthrax treatment. The U.S. Court of Appeals for the Federal Circuit, which handles patent appeals, upheld the dismissal of part of the suit on patent grounds, and the Supreme Court last month refused to review that case.

Seeking Certainty

The DOJ said it wasn’t taking a position on the Bayer case pending in New York. The drug companies say such agreements help consumers because they allow the entry of generic drugs before the expiration of patents and provide certainty about when low- cost medicines will become available.

U.S. courts, including the 2nd Circuit in New York, have upheld such agreements as long as they don’t delay the entry beyond the terms of patents held by the brand companies. The court said it will reconsider its position taken in a case involving AstraZeneca Plc and the breast-cancer drug Tamoxifen.

Prices Plunge

After generic drugs are introduced, they can take as much as 90 percent of the market from the brand-name medicine, and prices plunge to a small fraction, the FTC said last month.

That, as well as the terms of federal drug law, “create unique incentives and opportunities for settlements that threaten the public interest, incentives and opportunities apparently not found elsewhere,” the Justice Department said.

European Union antitrust regulators also are investigating the drug industry to see if brand-name drugmakers are misusing patents to keep would-be generic rivals from selling less expensive copies of medicines. A report on drug-industry competition is scheduled to be released tomorrow in Brussels.

In the U.S., Congress is considering legislation that would ban settlements that involve financial incentives given to generic-drug companies. Such agreements affect the timing of the entry of copycat medicines without regard for the quality of the patents used to block competition, the FTC said.

President Barack Obama, as a U.S. senator, co-sponsored an earlier measure to ban the settlements, and as president he included a ban in his budget message.

‘Sweetheart’ Deals

The Justice Department’s position is “enormously helpful” in ending the practice, the FTC’s Leibowitz said.

The FTC and DOJ split in 2006 over the issue. The FTC asked the Supreme Court to review a decision from the 11th U.S. Circuit Court of Appeals in Atlanta that threw out claims Schering-Plough Corp. illegally paid $70 to two generic-drug makers to keep competing versions of a heart medicine off the market.

The Justice Department’s antitrust division and then- Solicitor General Paul Clement urged the Supreme Court not to take the case.

In 2007, Clement, the top courtroom lawyer in the administration of former President George W. Bush, came out against a Supreme Court appeal of the 2nd Circuit’s decision in the Tamoxifen case. Clement said the appeal had “procedural problems” even though he thought the appeals court had applied an “insufficiently stringent standard” in evaluating the potential anticompetitive effect of the settlement.

The case is Arkansas Carpenters Health and Welfare Fund v. Bayer AG, 05-2852, U.S. Court of Appeals for the Second Circuit (New York.)