This is an interesting case that the Supreme Court will hear today. Does a branded drug maker, faced with a potential competitor who makes generic drugs, act illegally if it pays money to the competitor in a deal that postpones the sale of the generic drug for a period of years?
The FTC says it is unlawful, while the generic and branded drug makers disagree.
So why does this matter? Everyone knows that generic drugs are cheaper than branded drugs. As the NY Times reported, “73 percent of consumer spending” is spent on branded drugs. When a generic drug, which costs about 15% of the branded drug cost, enters the market, branded drug makers lose about 90% of their profits.
In FTC v. Actavis, Inc., the 11th Circuit Court of Appeals held companies holding the patent to the branded drug could make those payments to the generic drug maker. In this case, the generic drug maker challenged the patent of the branded drug maker in court. Both drug makers came to a settlement, whereby the generic would get some payment as long as the branded drug maker could continue to sell its branded drug exclusively for a time period.
In sum, the 11th Circuit reasoned, “absent sham litigation or fraud” when the anticompetitive effects of a patent fell within that scope, there is no antitrust claim. Further, since there was a settlement, the 11th Circuit stated that it would be hard to predict what the effect would have been. And since the settlement was with one generic drug maker, this did not impact other generic drug makers from selling the generic version of the drug.
Now, the Supreme Court has to decide on this issue.