So-called "pay-for-delay" deals are nothing new for US pharmaceutical companies, where the practice of exchanging a payment in return for a set date of market entry (arguably later, hence the "delay") has seen increased use in recent years. Regulators, however, have never been particularly comfortable with the idea, saying the deals are anti-competitive and thus illegal under federal law.
Now that idea is spreading, with UK trade regulators accusing several companies, most notably including GlaxoSmithKline, of engaging in activities that had the effect of delaying effective competition.
Pay-for-delay agreements are a rare instrument in regulatory circles in that they have strong support from both innovative pharmaceutical companies and generic pharmaceutical companies-no small feat considering that they normally differ on matters related to market access and trade.
At their most basic, the agreements involve a relatively simple agreement. A potential generic competitor, having engaged in litigation with the innovative pharmaceutical company, agrees to drop its lawsuit challenging the validity of the latter's drug patent in return for a set date of market entry. In return, the innovator most often pays money to the generic company. The agreement is seen as mutually beneficial to both sides-innovative companies lessen their legal expenses and have more certainty about their remaining market exclusivity, while generic companies benefit from the payments and being certain about when they can enter the market.
But that leaves consumers and the government on the losing side of the equation, regulators have alleged, much to the disagreement of pharmaceutical groups.
To regulators, including the US Federal Trade Commission, which has frequently challenged the agreements in court, pay-for-delay agreements unnecessarily delay the market entry of generic pharmaceutical products and keep the costs of the innovative drugs high.
Pharmaceutical companies, however, claim the agreements do no such thing in the aggregate, and actually introduce a measure of certainty into the market. Yes, some drugs might be introduced later on, they say, but on the whole products actually make it to market faster than they would otherwise because the process avoids the lengthy legal process that can include numerous delays and appeals. Plus, they say, there is no limitation on other generic pharmaceutical companies going ahead and challenging the company's patent. Such companies are given 180 days of market exclusivity for doing so in the US.
Delay in the UK not OK, Says OFT
In the UK, the Office of Fair Trading (OFT) has raised similar allegations against GlaxoSmithKline, which it said engaged in behavior that is similar to the pay-for-delay agreements seen in the US.
The case in question involves four companies: GSK, a branded manufacturer, and Alpharma Limited (Alpharma), Generics UK Limited (GUK) and Norton Healthcare Limited (IVAX), all of which are generic pharmaceutical companies. The generic companies were attempting to introduce a generic version of paroxetine, an antidepressant better known as Paxil and Seroxat, into the market.
That's when GSK challenged the companies in court, alleging that the generic companies' products would infringe upon its patents, OFT alleged. In the end, all three companies settled the claims with GSK for what OFT called "substantial payments" from GSK to the generic companies in return for the delay of those same products.
Ann Pope, senior director of services, infrastructure and public markets for OFT, said that while there was "no assumption" of wrongdoing on the part of GSK at this stage of their investigation, the agency would nevertheless be making a "full investigation" into the allegations.
GSK, for its part, strenuously denied the allegations, saying in a statement that it "very strongly believes that [it] acted within the law … in entering the agreements under investigation."
"These arrangements resulted in other paroxetine products entering the market before GSK's patents had expired," it said-the very same argument put forth by US-based companies in similar cases.
It noted that those activities had occurred between 2001 and 2004, and that a similar investigation by the European Commission (EC) in 2005 and 2006 had yielded no official action and had since been closed.