FTC Reports Uptick in Pay-For-Delay Deals

Drug manufacturers are striking more deals than ever with generic competitors to delay the entry of generic drugs to market, officials from the Federal Trade Commission (FTC) said in a May 2011 staff report.

The “pay-for-delay” patent settlements increased by more than 60% in fiscal 2010 compared with fiscal 2009, according to the report. A total of 31 deals were made in 2010, involving 22 different brand name drugs with combined annual US sales of $9.3 billion. This compared with just 19 deals in 2009.

The FTC has historically opposed the settlements, which it argues hurt consumers by delaying the introduction of lower-cost medicines by an average of 17 months. FTC chairman Jon Leibowitz called the deals “a winwin proposition for the pharmaceutical industry, but a lose-lose for everyone else.”

The report elicited a strongly worded response from the Generic Pharmaceutical Association (GPhA), an outspoken advocate of “pay-fordelay” settlements. The association, which represents the nation’s generic drug makers, sees the practice as procompetitive and pro-consumer, and said the FTC report was “flawed” and “misleading.”

A major sticking point for the trade group is the FTC’s assessment that patent settlements limit access to low-cost generic drugs. In fact, GPhA asserts, the opposite is true—patent settlements “generally have resulted in making lower-cost generics available months and even years before patents have expired.”

Instead of focusing on deals between industry insiders, GPhA said, Washington lawmakers should redouble their efforts to decrease drug spending in other areas, such as improving generic drug utilization in Medicare and Medicaid and speeding the approval of generic drugs.