With nuanced ruling on ‘pay for delay,’ Supreme Court hands generics partial resolution

Half a loaf, the saying goes, is better than none. For the generic drug industry, that means that the Supreme Court handed it a partial victory Monday by ruling that “pay for delay” patent settlements between brand name and generic drug companies aren’t necessarily illegal and should be considered on a case-by-case, “rule of reason” approach by the Federal Trade Commission, which staunchly opposes the practice.

The high court’s decision, reported June 17 by Drug Store News, means that pioneer and copycat pharmaceutical makers are free to continue pursuing the controversial legal settlements of patent-infringement lawsuits that can delay the introduction of generic versions of some big-selling branded drugs in return for a cash payment or other compensation. Those agreements often involve “reverse payments” to the generic company — or an agreement by the brand company not to launch its own “authorized generic” version of the drug in question — in exchange for the generic company’s agreement to delay launch of its first-to-market version of the drug. Such settlements are not “presumptively unlawful,” the Supreme Court ruled in a 5-3 decision (Justice Samuel Alito didn’t participate in the ruling).

But the court’s ruling doesn’t really settle much. Justices essentially threw the legal uncertainties and antitrust questions surrounding reverse payments and pay-for-delay back to the lower courts.

In an online report Monday, the Los Angeles Times called the court’s decision “a middle-ground position” that leaves the door open for the FTC to challenge in court any settlement between branded and generic drug makers that involves a lot of money changing hands. To wit: “A ‘large and unjustified’ payment to settle a patent dispute can trigger an antitrust claim against the brand-maker,” the Times noted.

The issue is far from simple or black-and-white. The FTC, not to mention some retail pharmacy groups and the American Medical Association, argue that pay-for-delay settlements violate antitrust laws and end up costing consumers and health plans billions of dollars in higher drug costs by delaying generic competition. But industry trade groups like the Generic Pharmaceutical Association and the Pharmaceutical Research and Manufacturers of America — not to mention the big health research firm IMS Health — say the practice actually gets many copycat drugs to market sooner and helps lower overall spending for pharmaceuticals.

“Over the past 10 years, patent settlements have enabled dozens of first-time generics to come to market many months before patents on the counterpart brand drugs expired, including the top-selling medicines Lipitor, Effexor and Lamictal,” says GPhA’s Ralph Neas, president and CEO.

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