FTC: Pay-For-Delay Deals Decrease Significantly After Supreme Court Ruling
The number of pay-for-delay settlements decreased significantly in 2014 after a Supreme Court decision in 2013 found that a branded drug manufacturer’s reverse payment to a generic competitor to settle patent litigation can violate antitrust laws.
The findings from the Federal Trade Commission (FTC) note although the number of settlements slightly increased last year – 160 in FY 2014 vs. 140 in FY 2013, 145 in FY 2012 and 156 in FY 2011 -- the number of potential pay-for-delay settlements in FY 2014 is roughly half the number in FY 2012, which was the last complete year before the FTC v. Actavis decision was handed down.
In defining what constitutes a pay-for-delay settlement, the FTC made clear that it contains “both explicit compensation from a brand manufacturer to a generic manufacturer and a restriction on the generic manufacturer’s ability to market its product in competition with the branded product.”
The commission also found that in 2014, of the 21 potential pay-for-delay settlements, which involve 20 different brand-name drugs, with combined annual US sales of about $6.2 billion:
- Eleven involved first filer generics (the lowest amount since 2007), which are companies seeking FDA approval for the first generic on the market, and when delayed means other generics for the same product are also delayed. And of the total 160 settlements, 53 involved first-filers.
- Ten include compensation solely in the form of a cash payment (nine purportedly covering litigation fees and one in the form of debt forgiveness), ranging from $35,000 to $5 million.
- Six include compensation in the form of a side business deal between the brand and generic manufacturers.
- Five of the 21 agreements include compensation in the form of a brand manufacturer’s promise not to market an authorized generic in competition with the generic manufacturer’s product for some period of time, including four first-filers.
But some of the cases also were not as clear as to whether payments were involved. For instance, FTC found eight additional settlements where it is unclear whether certain provisions actually mean compensation to the generic patent challenger.
However, building off of recent years, the vast majority (somewhere between 81% and 87%) of patent disputes filed in FY 2014 were resolved without compensation to the generic manufacturer and/or without restrictions on generic competition, FTC says.