Supreme Court ruling allows antitrust regulators to challenge some ‘pay-for-delay’ drug deals

The U.S. Supreme Court has ruled in a 5-3 decision that some “pay-for-delay” settlements between brand-name and generic drug companies may violate antitrust laws, opening the deals to anti-competitive challenges by federal regulators.

The decision in Federal Trade Commission v. Actavis responds to the FTC’s ongoing criticism of reverse-payment patent litigation settlements in which brand-name drug companies agree to pay generic manufacturers to delay less-expensive versions of a drug from coming to market after the original patents expire.

The court’s decision, written by Justice Stephen Breyer, describes several scenarios under which antitrust regulators could challenge settlements.

Breyer described a hypothetical settlement as keeping prices at “patentee-set levels, potentially producing the full patent-related $500 million monopoly return while dividing that return between the challenged patentee and the patent challenger. The patentee and the challenger gain; the consumer loses.”

The case stems from FTC antitrust charges that Solvay Pharmaceuticals, the patent holder, paid Actavis to delay production of its generic version of a Solvay testosterone gel known as AndroGel.

Analysts expect the decision to have major implications for consumers plus brand-name and generic drug companies. The court heard oral argument on March 25.