Healthy Skepticism Library item: 5104

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

When Drug Firms Pay Off Competitors
New York Times 2006 Jun 8
http://www.nytimes.com/2006/06/08/opinion/08thu3.html?th=&emc=th&pagewanted=print

Notes:

Ralph Faggotter’s Comments:

Time is money— especially if that time is a lag during which you have managed to purchase the inactivity of your competitors.

Full text:

June 8, 2006
Editorial
When Drug Firms Pay Off Competitors
We hope that the Supreme Court agrees to take up a pivotal drug patent case brought by the Federal Trade Commission against Schering-Plough. Otherwise, the commission may find itself powerless to block one of the more underhanded tactics used by brand-name drug manufacturers to keep generic competitors off the market.

The tactic is brutally simple. A company that holds a patent on a brand-name drug, often a blockbuster that rakes in huge profits, pays a generic manufacturer to delay the sale of a competing product that might grab a big slice of the business. The patent holder makes so much money by delaying competition that it can easily afford to buy off the generic company, with the result that both companies share the wealth. The only losers are the consumers who must continue to pay high drug prices.

The Schering-Plough case involved K-Dur 20, a potassium supplement used to mitigate the side effects of drugs that treat high blood pressure and congestive heart failure. The active ingredient is in common use and not patentable, but Schering holds a patent for a coating material that releases the active ingredient slowly. That patent does not expire until this year. But two generic manufacturers filed applications in 1995 to market competing drugs whose coatings, they said, would not infringe Schering’s patent.

Schering disagreed, sued, and then ultimately settled the cases. It paid $60 million to one generic manufacturer in a settlement that delayed market entry until 2001 and $15 million to another generic manufacturer in a deal that delayed entry until 2004.

After looking at details of the deal, the F.T.C. concluded, quite reasonably, that these settlements were essentially payoffs to delay competition. The $60 million had actually been demanded by one generic company as compensation for revenues it would lose by delaying sales of its product. And at least $10 million of the other settlement would be paid only if the generic company got government approval to market a competitive product and thus posed a threat to Schering-Plough.

Even so, a federal appeals court ruled that the payments did not violate antitrust law and that the facts did not bear out the F.T.C.‘s contention that the payments were intended to delay competition.

That was a disastrous blow to Congressional laws that seek to speed the entry of generic competitors by brushing away spurious patent infringement claims by brand-name manufacturers. Since the appeals court decision, there has been a sharp rise in the number of settlements in which brand-name companies pay off generic competitors to keep their cheaper drugs off the market.

The F.T.C. has rightly petitioned the Supreme Court to consider the case. But it has been undercut by the Justice Department, which has urged the court to keep its hands off, arguing that the case does not provide a good vehicle for resolving the complex issues involved. Whether the court acts or not, Congress should try to find a legislative route to block unscrupulous drug companies from buying off the competition.

Copyright 2006 The New York Times Company