Pay-for-Delay Deals: FTC Notes Continued Decline Since SCOTUS Ruling

The total number of deals in which brand name drugmakers pay to delay the entry of generic competitors continues to decline, and only 5 of the 170 final settlements in FY 2015 included compensation to the generic and a restriction on generic entry, the Federal Trade Commission (FTC) said in a report released Wednesday.

FY 2015 is the second complete year of filings since the Supreme Court decided FTC v. Actavis, Inc. in June 2013, when it found that a branded drug manufacturer’s reverse payment to a generic competitor to settle patent litigation can violate the antitrust laws. The decline in FY 2015 follows a similar decline revealed in an FTC report from last year.

"Consistent with FY 2014, the number of settlements potentially involving pay for delay continues to decrease significantly in the wake of the Actavis decision, even though the total number of settlements filed with the FTC has increased," the report said.

In FY 2015, the total number of final settlements was 170, which compares with 140 in FY 2012, 145 in FY 2013 and 160 in FY 2014. However, the number of potential pay-for-delay agreements in FY 2015 declined to 14, from a high of 40 pay-for-delay settlements in FY 2012.

Of those 14, 10 included compensation solely in the form of a cash payment for litigation fees (one of which included a cash payment of more than $7 million), while the other four involved compensation in the form of a brand manufacturer’s promise not to market an authorized generic in competition with the generic manufacturer for a period.

Ten additional final settlements are categorized by FTC as containing "possible compensation" because it is not clear if certain provisions in the deals amount to what should be considered compensation to the generic patent challenger.

"For example, an agreement containing a declining royalty structure, in which the generic’s obligation to pay royalties is reduced or eliminated if a brand launches an authorized generic product, may achieve the same effect as an explicit no-AG commitment," the report said.

In addition, 126 of the 170 final settlements restricted the generic manufacturer’s ability to market its product but did not include explicit or possible compensation.

FTC Report