Drug Settlements May Be Illegal, U.s. Justice Department Says
The department, in a filing yesterday with the U.S. Court of Appeals in New York in a case involving Bayer AG and the anthrax treatment Cipro, said courts should presume that a “pay for delay” or “reverse payment” agreement is illegal and should force the drug companies to justify why the deal was reached.
The filing puts the Justice Department in line with the U.S. Federal Trade Commission for the first time in opposing such settlements. Last month, the FTC said banning such reverse payment settlements could save American consumers $3.5 billion a year in drug costs.
“Its a clear recognition these deals are presumptively illegal,” FTC Chairman Jonathan Leibowitz said in an interview. “Thats good news for American consumers who are paying inflated prices for much-needed drugs because of the sweetheart deals between the brand and generic companies.”
The appeals court is considering whether to allow a lawsuit that accuses Bayer AG and Barr Laboratories Inc. of using a $398 million patent settlement in 1997 to delay generic competition to Bayers Cipro anthrax treatment. A different appeals court upheld the agreement on patent grounds, and the Supreme Court last month refused to review that case.
Seeking Certainty
The DOJ said it wasnt taking a position on the Bayer case. The drug companies say such agreements help consumers because they allow the entry of generic drugs before the expiration of patents and provide certainty about when low-cost medicines will become available.
U.S. courts, including the federal appeals court in New York, have upheld such agreements as long as they dont delay the entry beyond the terms of patents held by the brand companies. The court said it will reconsider its position taken in a case involving AstraZeneca Plc and the breast-cancer drug Tamoxifen.
After generic drugs are introduced, they can take as much as 90 percent of the market from the brand-name medicine, and prices plunge to a small fraction, the FTC said last month.
That, as well as the terms of federal drug law, “create unique incentives and opportunities for settlements that threaten the public interest, incentives and opportunities apparently not found elsewhere,” the Justice Department said.
Congress is considering legislation that would ban settlements that involve financial incentives given to generic- drug companies. Such agreements affect the timing of the entry of copycat medicines without regard for the quality of the patents used to block competition, the FTC said.
President Barack Obama, as a U.S. senator, co-sponsored an earlier measure to ban the settlements, and as president he included a ban in his budget message.
The case is Arkansas Carpenters Health and Welfare Fund v. Bayer AG, 05-2852, U.S. Court of Appeals for the Second Circuit (New York.)