Industry divided over patent settlements

Patent settlements between generic and branded drug companies seem like one of the most controversial and long-standing issues in the pharmaceutical world, with strong opinions on both sides.

Typically, when a generic drug company wants to be the first to market a generic version of a drug, it will file for Food and Drug Administration approval for the generic before the branded drug has lost patent protection. This usually prompts a lawsuit from the branded drug company; and while the suits often go to trial, in many cases they will result in a settlement that allows the generic drug maker to launch at a later date. Critics call these settlements “pay-for-delay” deals, the idea being that they result in generic drugs getting into patients’ medicine cabinets later than they would if there had been no deal.

While the “pay” part of the deal may be monetary, it frequently consists of a promise on the part of the branded drug maker not to market an authorized generic — essentially the branded drug marketed at a discount under its generic name, usually by a third-party company — during the 180-day market exclusivity period to which generic companies are entitled if they are the first to win approval for a generic, when they have the sole right to compete against the branded version.

Last month, the American Medical Association became the latest player to make its voice heard when it came out in support of getting rid of the settlements. The AMA joins the Federal Trade Commission — which, under chairman Jon Leibowitz, has been aggressive in its criticism of many patent settlements — as well as legislators like Sens. Herb Kohl, D-Wis., and Chuck Grassley, R-Iowa. 

In October 2012, the U.S. solicitor general, on behalf of the FTC, petitioned the Supreme Court to review an appeals court ruling concerning the agency’s case against an agreement over the testosterone-replacement drug AndroGel. Originally filed in February 2009, the case alleges that Solvay Pharmaceuticals paid generic drug makers Watson Pharmaceuticals, Paddock Labs and Par Pharmaceutical millions of dollars per year to delay introducing generic versions of the drug and refrain from marketing them until 2015.

But the Generic Pharmaceutical Association counters that despite the settlements, generic drugs still become available months or even years ahead of the expiration of branded drug makers’ patents, and delaying launch of a generic beyond patent expiry would be illegal anyway. The patent covering AndroGel expires in August 2020, according to FDA records. And according to a report by RBC Capital Markets, generic drug companies win 48% of patent litigation settlements that go to trial, but their success rate increases to 76% when settlements are included.

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