Big Pharma Gains Another Foe on Pay-to-Delay Deals: 31 State A.G.s File Supreme Court Brief

Yet another group is speaking out against so-called pay-to-delay deals between brand-name and generic drugmakers. A group of 31 state attorneys general has filed a friend-of-the-court brief supporting a recent request by the US Federal Trade Commission to have the US Supreme Court review these controversial agreements.

In arguing for a review, the states maintain the deals – in which a brand-name drug maker agrees to pay a settlement to a generic rival in exchange for ending patent litigation and launching a copycat medicine at a future date – harm state programs that purchase drugs, as well as consumers.

“The states are major participants in the pharmaceutical market, because they expend funds for prescription drugs through Medicaid and other public health programs. Altogether, state Medicaid programs and local health programs across the country spent $6.5 billion for prescription drugs in 2010,” according to their brief.

Major pharmaceutical companies -- including Pfizer (PFE), Merck (MRK), Eli Lilly (LLY), Sanofi (SNY) and GlaxoSmithKline (GSK) -- are having a hard time generating revenue growth, as patents expire on existing drugs and the companies’ labs fail to develop enough new drugs.

PFE Revenue TTM Chart

PFE Revenue TTM data by YCharts

The FTC has regularly maintained the deals are anti-competitive and its forecasts show they force consumers to pay $3.5 billion a year in higher health care costs. Earlier this week, the American Medical Association concurred and adopted a policy in favor of making pay-to-delay deals illegal because the organization believes the agreements limit choices for physicians and patients, and contribute to rising healthcare costs (see Pharma news).

The agency, meanwhile, has repeatedly tried to convince Congress to pass legislation that would impose restrictions, but without any success. And so now, the agency hopes to reverse a series of lower-court rulings that found a settlement between various drugmakers was not anticompetitive (see Pharma news).

In February 2009, the FTC filed a complaint challenging agreements in which Solvay Pharmaceuticals, which sold the AndroGel testosterone treatment and is now part of Abbott Laboratories (ABT), paid three generic drugmakers – Watson Pharmaceuticals (WPI), Paddock Laboratories and Par Pharmaceuticals, to delay launching copycat versions.

To read the remainder of this article, go to Pharmalot.

Ed Silverman is the editor of Pharmalot and a contributor to YCharts, which includes the just-released YCharts Pro Platinum for professional investors.

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