FTC Asks Appeals Court to Reverse Ruling on Pay-to-Delay Agreements

The Federal Trade Commission (FTC) announced on Nov. 19, 2015 that it has filed an amicus brief in the US Court of Appeals for the Third Circuit urging the court to reconsider its decision on pay-to-delay deals in the pharmaceutical industry. The FTC argues that the decision in the case between Wyeth Pharmaceuticals and Teva Pharmaceuticals-in which Wyeth agreed not to launch a generic version of its own antidepressant drug Effexor XR (venlafaxine HCI) for two years so that Teva could be the exclusive generic manufacturer of the drug-should not have been allowed to stand. The deal between the companies was reportedly forged to persuade Teva to drop its patent challenge lawsuit against Wyeth and keep Teva from launching its generic form of Effexor XR in the market before Wyeth’s patent expired.

Reverse-payment deals-also widely known in the industry as “pay-to-delay” agreements-are thought to be bad for consumers, as they delay the release of lower-cost, generic therapies into the market. These delays could potentially restrict patient access to medicines and keep drug prices high; hence, FTC labels these types of agreements anticompetitive.

FTC says that a pharmaceutical company is not protected from future antitrust suits simply because it submits the appropriate patent documentation to the agency. Additionally, even if the FTC decides not to take action in a particular case, the settling parties are not protected from future antitrust litigation. FTC attests in the brief that it reviews more than 200 pharmaceutical agreements annually and “it cannot possibly identify and investigate all settlements that merit further inquiry on the timeline of private-party litigation.” In conclusion, said FTC, the court "should reject reliance on FTC inaction as a basis for insulating pharmaceutical manufacturers from antitrust liability.”

Since 2004, drug manufacturers are required to file their drug-patent litigation settlements with the FTC for review. In 2005, the Eleventh Circuit held that reverse payments do not trigger antitrust scrutiny unless they restrain competition beyond when the patent is due to expire. FTC says that this ruling “virtually immunized reverse-payment agreements from antitrust challenge.”

In the Wyeth vs. Teva case specifically, the court ruled that FTC’s “lackluster response” to the presented arguments, and the fact that the patent agreement was disclosed to FTC in advance, meant that the agreement between the two pharmaceutical companies did not constitute an “unexplained” payment as alleged. In its recent amicus brief, FTC countered that advance notice is not sufficient evidence that the parties did not intend to violate antitrust laws and that FTC’s inaction in the case should not insulate the agreement from further review. In summary, FTC says the district court “took a notice mechanism designed to give the FTC information and flexibility in its review of Wyeth’s compliance and turned it into an escape hatch for defendants to evade antitrust scrutiny.”

Source: FTC