FTC Continues Crackdown on Pay-for-Delay Agreements

Posted 23 January 2017 | By Zachary Brennan 

FTC Continues Crackdown on Pay-for-Delay Agreements

The Federal Trade Commission (FTC) on Monday announced several steps taken against Allergan, its subsidiary Watson Laboratories and Endo Pharmaceuticals to fight pay-for-delay settlements between brand-name and generic drug manufacturers that keep generics from entering the US market.

According to a complaint filed in the US District Court of Northern California against Allergan, Watson and Endo, FTC is challenging an anticompetitive reverse-payment agreement between Endo and Watson to obstruct lower-cost generic competition to the lidocaine patch, known as Lidoderm, which brought Endo $825 million in 2011, or 30% of its total revenue that year.

The Endo-Watson agreement required Watson to abandon its patent challenge of Lidoderm, and Watson and all its subsidiaries had to refrain from initiating future patent challenges on Lidoderm or from launching any generic version for more than a year.

In exchange, Endo agreed to pay Watson entities in two ways: Endo committed not to sell an authorized generic version of Lidoderm for up to 7½ months following Watson’s launch and Endo agreed to provide Watson Pharma’s wholly-owned wholesale distributor, Anda, with free branded Lidoderm product worth at least $96 million in 2013 and the possibility of additional free product worth up to about $240 million through 2015.

“The data available since the entry of Watson’s generic version of Lidoderm confirm the unique competitive impact of such entry on Lidoderm sales and prices,” FTC wrote it its complaint. “When Watson entered with its generic product, Endo reduced the price of branded Lidoderm as much as 40% in an effort to retain lidocaine patch sales. Nonetheless, within three months, Watson’s generic product had captured over 70% of the lidocaine patch unit sales.”

Following FTC’s complaint and under a deal forged between the FTC and Endo on Monday, among other provisions, Endo is prohibited from entering into patent infringement settlement agreements for ten years.

In addition, FTC’s complaint against Watson Laboratories and Allergan alleges, among other things, that Watson, which was the first to file for US Food and Drug Administration (FDA) approval for a generic Lidoderm patch, and its parent company agreed with Endo to eliminate the risk of generic competition for Lidoderm in exchange for a share of Endo’s extended monopoly profits. In the complaint, FTC is seeking an order permanently barring the defendants from engaging in similar anticompetitive behavior in the future and disgorgement of the defendants’ ill-gotten gains.

The FTC also filed an administrative complaint against Impax Laboratories, charging that in 2010, Impax and Endo illegally agreed that Impax would not compete by marketing a generic version of Endo’s Opana ER until January 2013. In exchange, Endo paid Impax more than $112 million.

Endo Pharmaceuticals Inc. Agrees to Abandon Anticompetitive Pay-for-Delay Agreements to Settle FTC Charges; FTC Refiles Suits Against Generic Defendants

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