Court says deals to protect drug patents can be challenged

Prescription pill bottles.

Let’s say I’ve invented a drug -- we’ll call it Androgel -- and it’s about to go off patent. Now let’s say you’re a generic drug maker and you’re ready to put your version of the product on the market, to compete.

Can I pay you to sit on the sidelines, to extend my patent monopoly?

Today the U.S. Supreme Court said those kinds of deals can be challenged. They're one reason Americans pay much more for drugs than people in other countries.

The Federal Trade Commission brought this case to the Supreme Court, and declared victory today. It argued more and more brand-name drug companies buy off generic makers, to delay competition. That cost consumers $3.5 billion a year in pricier drugs, the FTC said.

“The end of pay-for-delay settlements will have a beneficial effect for consumers by bringing generic drugs to the market sooner,” says Scott Hemphill at Columbia Law. He’s advised the FTC in the past.

Now, the ruling doesn’t end fishy settlements. It just lets them be challenged.

Still, that’s notable to Michael Carrier at Rutgers Law. He says for years, courts leaned in favor of innovation, and drug developers. And cared less if they played fair.

“Antitrust had not only been ignored,” Carrier says, “but kicked to the side of the stage so much so that it was almost off the stage.”

Wouldn’t it be great if pay-for-delay cases were obvious? Not so much. The line between egregious deal and not so egregious can be fuzzy.

“There’s definitely shades of gray,” says Damien Conover at Morningstar. “And black and white doesn’t come up in patent law most of the time.”

He says today’s upshot could be more litigation and less certainty. Maybe that’s why drug company stocks didn’t move much after the ruling.

And, some think it’ll drive drug companies to disguise pay-for-delay deals -- to, say, give money to a generic firm for, ahem, inventory reimbursement, or marketing.

As one analyst put it, “I still think the world is full of very smart lawyers.” No dissent there.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.

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