Supreme Court To Issue Decision on Drugmakers’ ‘Pay-for-Delay’ Deals

On Friday, the Supreme Court announced it will decide whether brand-name drugmakers can pay a competitor to keep a generic version of a high-revenue drug off the market, the Wall Street Journal reports (Kendall, Wall Street Journal, 12/7).

Over the last decade, three separate federal circuit courts have agreed that such arrangements are allowable. However, a federal appeals court in July ruled that the so-called "pay-for-delay" deals were anticompetitive, setting up the high court review (Wyatt, New York Times, 12/7).

The current case is an amalgam of Federal Trade Commission v. Watson Pharmaceuticals and two other cases (Norman, Politico, 12/10).

The high court will review pay-for-delay deals, which FTC has said are anticompetitive. The issue is a top priority for FTC, which has "waged a campaign" against such deals for several years, according to the Journal (Wall Street Journal, 12/7).

According to FTC, between 2005 and 2011, drug companies made 127 reverse payment arrangements, costing consumers $3.5 billion annually. Meanwhile, the Congressional Budget Office last year estimated that a Senate bill (S 27) prohibiting such deals would save the federal government about $4.8 billion over a decade and decrease prescription drug spending by $11 billion in that time.

However, defenders of the agreements have said they are a legitimate way to solve lawsuits by generic drugmakers challenging brand-name drugmakers' patent (Stempel, Reuters, 12/7). In addition, proponents say the current system actually saves consumers money.

In a statement, Ralph Neas, president of the Generic Pharmaceutical Association, said, "The current paradigm of challenging patents on branded drugs in order to bring new generics to the market as soon as possible has produced $1.06 trillion in savings over the past 10 years" (New York Times, 12/7).

Regardless of how the Supreme Court rules, the decision will have a major effect on drug pricing, according to observers.

David Balto, former FTC policy director, said, "There's no other case that can have as much impact on reducing health care costs" (Politico, 12/10).

Justice Samuel Alito recused himself from the case for undisclosed reasons. The court is expected to issue a ruling in 2013 (Reuters, 12/7).