FTC Seeks to Apply Recent Supreme Court Ruling in Generic Effexor Case Involving Authorized Generic

Posted 19 August 2013 | By Alexander Gaffney, RAC 

In June 2013, the US Supreme Court ruled in the case of Federal Trade Commission vs. Actavisthat so-called "pay-for-delay" settlements in which the sponsor of a patent-protected product settles a lawsuit with a generic competitor, most often for a sum of money, could be found to be anticompetitive.

However, contrary to the Federal Trade Commission's (FTC) attempts, the court ruled that such agreements were not presumptively anticompetitive, meaning each settlement would need to be considered on its own merits. While the potential impact of the agreement has been slow to emerge, that may be about to change.

An Amicus Brief

On 16 August 2013, the FTC released the text of an amicus curiae brief (translated from Latin, meaning "friend of the court") arguing that the US District Court for New Jersey should apply the logic of the FTC vs. Actavis case in a patent settlement case involving Wyeth and Teva Pharmaceuticals.

In this case, FTC explains, Teva had originally been seeking to market a generic of Wyeth's Effexor XR, a popular antidepressant.

What makes this case interesting, however, is that the settlement does not involve the exchange of money-at least not directly. Instead, the companies reportedly came to an agreement: If Teva would delay market entry for its generic Effexor competitor, Wyeth would hold off on releasing a so-called "authorized generic" of its own. Some companies have used authorized generics as a means to gain market share among those who wish to pay less for a product (or may be required to by their insurance company) while still obtaining assurances of quality. This allows the original sponsor to obtain some of the revenue it otherwise would have lost to generic competitors, while its ability to market the drug often allows it to out-compete its rivals.

The question: Is this an anti-competitive agreement? On one hand, consumers are potentially denied access to Teva's generic product (though there's no guarantee of legal victory); on the other, more consumers are likely to eventually use Teva's generic, including those enrolled in government programs.

The Definition of Value

As FTC notes in its amicus brief, the case is currently being considered for dismissal-a mistake, FTC says, that comes from a misunderstanding that the only a transfer of value in cash (as in the case of Actavis) can have anti-competitive implications. This argument "make[s] neither economic nor legal sense," FTC claims in the brief. Instead, "the allegations here raise the same type of antitrust concern that the Supreme Court identified in Actavis."

It continued: "Indeed, accepting the defendants' claim of immunity whenever patentees use vehicles other than cash to share the profits from an agreement to avoid competition elevates form over substance, and it would allow drug companies to easily circumvent the ruling in Actavis, at great cost to consumers."

The key, FTC adds later in the brief, is that a reverse payment settlement involves a transfer of value in return for a competitive advantage. And in the case of Wyeth and Teva, such value has been exchanges, the agency's argument goes.

A ruling on the case is expected by FTC sometime in September 2013.

FTC Amicus Brief

FTC Statement

Tags: Generic

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