Court Opens Small Door to Lower Drug Prices

The most important question is what will Congress do (or not) now?

A recent U.S. Supreme Court decision — FTC v. Actavis — may have taken the first step in helping consumers with the cost of prescription drugs. The court has given the Federal Trade Commission the authority to challenge deals between pharmaceutical manufacturers of brand name medications and generic drug-makers to keep specific generic drugs off the market for certain time periods.

When manufacturers of generic and brand-name drugs go to court over a patent, often the case is settled and the brand-name manufacturer pays a significant amount of money to the generic company. This is called “pay to delay” — because you are being paid to delay bringing your generic medication to the market that results in lower prices.

In FTC v. Actavis, Solvay Pharmaceuticals filed a New Drug Application for a brand-name drug called AndroGel. The Federal Food and Drug Administration approved the application in 2000. Solvay obtained the relevant patent and notified the FDA of this event in 2003. Subsequently, Actavis Inc. and Paddock Laboratories filed for its generic drugs modeled after AndroGel, asserting that Solvay’s patent was invalid and their respective generic drugs did not infringe it.

Solvay filed suit against Actavis and Paddock. The FDA approved Actavis’ first-to-file generic product, which entitled Actavis to 180 days of exclusivity from the initial commercial marketing of its drug. In 2006, all parties to the patent litigation reached a settlement, which provided that the generic manufacturers would not bring their products to market until August 31, 2015.  In exchange, Solvay paid $12 million to Paddock, $60 million to Par and $19-$30 million annually for nine years to Actavis.

The FTC challenged this settlement arguing that it violated the Federal Trade Commission Act by abandoning their patent challenges, and agreeing to refrain from launching their low-cost generic products to compete with AndroGel for nine years. The U.S. District Court dismissed the case on grounds that there was no antitrust violation. The11th Circuit Court of Appeals Circuit affirmed, reasoning that “absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.”

The FTC appealed the case to the U.S. Supreme Court asking the court to decide whether these pay to delay settlements was immune from antitrust attack or presumptively unlawful. It believed that this kind of pay to delay agreements would be a clear violation of the Sherman Antitrust Act, because the agreement between Solvay and the generic manufacturers would suppress competition and extend a monopoly. The Supreme Court ruled by a 5-3 vote that the FTC should have been able to argue its antitrust case against Solvay and its settlement partners fully before a federal court.

Why is this important? Pharmaceutical manufacturers are constantly confronted with generic competition. Part of the FTC’s responsibilities is to ensure that businesses are not acting in an anti-competitive manner that may harm the interests of the public.

In “pay to delay” agreements, the public is hurt. Generic medications are not brought to the market as quickly thereby forcing consumers to continue to pay higher prices.

However, it is important to recognize that the Actavis case is a slight door opener. In other words, the Supreme Court did not rule that pay to delay was patently illegal — they left that question alone.  Rather, Justice Stephen Breyer who authored the opinion for the court ruled that the FTC should have the right to review the decision and “prove its antitrust claim.”

One final note: Regardless of the Supreme Court decision and the possible slight crack in PhRMA’s armor, the most important question is what will Congress do (or not) now? In an era of bipartisan Congressional spasm, the public needs to carefully watch whether and if both the U.S. Senate and House hold hearings on this matter, open a dialogue on the Senate or House floor, or simply sit on their hands while the delicate balance of the public interest and corporate profits continues to be left to the courts. Whether their silence is deafening will be the true hallmark of Congress over the next few weeks and months.