FTC Finds Dwindling Number of Anticompetitive Reverse Payment Deals
Posted 23 May 2019 | By
The Federal Trade Commission (FTC) on Thursday released a report on Hatch-Waxman patent settlements in FY 2016, finding an increase in the total number of settlements, but a major decrease in anticompetitive reverse payment settlements.
In fact, FTC found that only one of the 232 agreements between generic and brand drug companies in 2016 contained a side deal or no authorized generic commitment. This was the lowest number of such pay-for-delay agreements since 2004.
“The data are clear: the Supreme Court’s Actavis decision [from 2013
] has significantly reduced the kinds of reverse payment agreements that are most likely to impede generic entry and harm consumers,” said FTC Chairman Joe Simons.
But the number of settlements with restrictions on generic entry and compensation more than doubled from 14 agreements in 2015 to 30 in 2016 (and was on par with the number of such settlements from 2010 to 2013). Of those 30 agreements, 29 contained payments in the form of litigation fees, with the brand manufacturer paying the generic manufacturer anywhere from $250,000 to $7 million.
More than a dozen settlements also featured one or more forms of “possible compensation.” FTC found that the most common form of possible compensation—appearing in nine of the settlements—is a commitment from the brand manufacturer not to use a third party to distribute an authorized generic for a period, such as during first-filer exclusivity.
In addition, 65% (151 of the 232) of the settlements from 2016 restricted the generic manufacturer’s ability to market its product but did not contain any explicit or possible compensation.
The number of settlements with restrictions on generic entry and compensation (in the form of litigation costs) for first generic filers also more than doubled from 7 to 16 between 2015 and 2016.
FTC also found 13 settlements were related to generic drugmakers that decide to launch their products at risk, meaning launched before resolving outstanding patent lawsuits. And each of the 13 settlements related to at-risk launches permitted the generic manufacturer to continue selling its product but required the generic firm to pay the brand manufacturer damages for the at-risk sales, with average amount of damages totaling about $12.5 million.
New legislation is also brewing that would do more to combat pay-for-delay settlements between brand and generic drugmakers.
Michael Carrier, distinguished professor of law at Rutgers, told Focus
: "New legislation would make sure that the trend does not reverse and go back to the Wild West before Actavis when pay-for-delay settlements were more common. Legislation that makes it easier for the FTC to bring a case and that makes clear that payment is not allowed and entry before the end of the patent is not automatically procompetitive could serve as a bulwark against backsliding in the courts."
The Association for Accessible Medicines took a different view, saying in a statement: "Current 'pay-for-delay' legislation, however, would unfortunately overturn the Actavis decision and unwind the many pro-competitive benefits that lower prescription drug costs for patients. We urge policymakers to revisit the need for legislation given this new report from the FTC.”
Carrier also said he's worried that there will be a focus on the one pay-for-delay settlement in the report, "while not recognizing that there are 14 other settlements that involve delay and possible compensation," which is concerning because they could have the same effect as a no-authorized-generic agreement.