'Pay For Delay' Drug Deals Under Scrutiny In US, EU And UK

from the bitter-medicine dept

The last time Techdirt wrote about "pay for delay" deals, whereby a big pharma company essentially buys off manufacturers of generics so that the former can continue to enjoy monopoly pricing long after its patents have expired, things didn't look too good. Back in 2010, the Second Circuit had refused to re-hear a case on the issue after dismissing a lawsuit arguing these deals were anti-competitive. But now things seem very different, and not just in the US.

There the Supreme Court will be examining the practise in the case of Federal Trade Commission v. Actavis, Inc. As a long and helpful post on the SCOTUS Blog previewing this case explains:

The basic issue before the Court, for all of the complexity of the laws, can be stated simply: does a brand-name manufacturer, faced with a potential generic competitor, act illegally if it pays money -- sometimes a quite sizable sum -- to the generic in a deal that postpones for a period of years the substitute version's marketing. Popularly, this practice is known as "pay for delay." It also has been called a "reverse payment agreement." The FTC has been opposed to such deals for years under antitrust law, but until the Obama administration, the Justice Department did not share its opposition; it now does.

One analyst has suggested that the legality of such deals is "the most important unresolved problem in antitrust policy today."
The rest of the SCOTUS Blog post examines the background to this case, and the arguments made by both sides in their briefs to the court, in great detail. Here's an important point at the end of its analysis, about how the case relates to growing concern over the way the patent system is functioning:
If there is a notable weakness in the industry's side of this case, it is that this Court does have its doubts about the soundness of a patent system that may, perhaps too often, grant monopolies. The briefs of the brand-name company and its settlement partners among the generic makers depend very heavily upon the Justices having a keen desire to protect exclusionary efforts by patent holders, and that simply may not exist.
The pharma industry's problems are not restricted to the US. The European Commission is investigating the negative impact that similar "pay for delay" deals may have had on Dutch consumers:
The European Commission has informed the pharmaceutical companies Johnson & Johnson (J&J, of the USA) and Novartis (of Switzerland) of its objections regarding an agreement concluded between their respective Dutch subsidiaries on fentanyl, a strong pain-killer. The Commission takes the preliminary view that the agreement delayed the market entry of a cheaper generic medicine in the Netherlands, in breach of EU antitrust rules.
Specifically:
Janssen-Cilag, the J&J subsidiary supplying the pain-killer fentanyl in the Netherlands, concluded a so-called "co-promotion agreement" with its close generic competitor Sandoz, a Novartis subsidiary, in July 2005. At the time there were no regulatory barriers to develop and market generic versions of the fentanyl patches and therefore for Sandoz to enter the Dutch market. The agreement foresaw monthly payments from Janssen-Cilag to Sandoz for as long as no generic product was launched in the Dutch market. Consequently, Sandoz abstained from entering the market with generic fentanyl patches for the duration of the agreement from July 2005 until December 2006. This may have delayed the entry of a cheaper generic medicine for seventeen months and kept prices for fentanyl in the Netherlands artificially high.
And as if that weren't enough, the UK's Office of Fair Trading has launched its own investigation into the practice:
GlaxoSmithKline could face a multimillion-pound fine over allegations it paid other drug companies to slow down production of cheaper versions of its most profitable antidepressant, burdening taxpayers with inflated costs for NHS [National Health Service] medicines.

The Office of Fair Trading has launched an investigation into GSK, alleging it abused its market dominance by agreeing so-called "pay for delay" agreements between 2001 and 2004 to protect the position of its drug Seroxat.

The regulator claims Alpharma, Genetics UK and Norton Healthcare were paid by GSK to delay production of cheaper copycat versions of the drug which could have saved the NHS millions.
It looks like authorities around the world are finally waking up to the surprisingly cosy relationships between major pharmaceutical companies and some of their supposed rivals, the manufacturers of generic drugs. That's to be welcomed, since these "pay for delay" deals have allowed pharma companies to charge near-monopoly prices well beyond the expiry of their patents, at great cost to the public. As such, they offer yet another example of greedy corporations failing to keep the basic patent bargain with society.

Follow me @glynmoody on Twitter or identi.ca, and on Google+

Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: ftc, pay for delay, pharma


Reader Comments

Subscribe: RSS

View by: Time | Thread


  1. identicon
    Anonymous Coward, 23 Apr 2013 @ 1:36am

    Pay me not to make your patent-expired drug

    Now *that's* a business model with potential. If I can get the USDA to pay me not to grow the precursors, and get local subsidies and tax rebates to pay for my new drug factory (jobsjobsjobs), I'll be seriously interested.

    All it will take is a hefty tax cut, and I'll be motivated to become a pharma entrepreneur, instead of spending all day in my valuable on-line activities. Sigh.

    link to this | view in thread ]

  2. identicon
    Anonymous Coward, 23 Apr 2013 @ 1:42am

    seems pretty straightforward to me company A agrees with company B that the drug will be sold at a higher price, with some of the profits going to company B: it's a basic anti-trust case. Why is this even controversial? ( as in, why is there even a question if what the companies are doing is illegal? it patently IS)

    link to this | view in thread ]

  3. identicon
    Anonymous Coward, 23 Apr 2013 @ 1:54am

    Thanks for this, I wasn't aware that stuff like this went on.

    link to this | view in thread ]

  4. identicon
    Anonymous Coward, 23 Apr 2013 @ 2:26am

    with this sort of thing going on, coupled with the fight of mainstream drugs companies against cheaper options produced, for example, in India, is it any wonder that people have lost their trust in pharmaceutical companies? as with so many other industries, nothing matters other than profit. lives are the last thing on the agenda!

    link to this | view in thread ]

  5. identicon
    Anonymous Coward, 23 Apr 2013 @ 2:31am

    You mean to tell me that large corporations that stand to make billions are less than honest? Eghads.

    link to this | view in thread ]

  6. identicon
    FM Hilton, 23 Apr 2013 @ 3:07am

    It's about profit

    There would be more generics if there wasn't so much profit to be had by screwing the customers, er, patients.

    link to this | view in thread ]

  7. identicon
    Anonymous Coward, 23 Apr 2013 @ 3:24am

    Stuff and nonsense. Masnick is clearly being paid by Big Small Non-corporations to post this. Bawk!

    link to this | view in thread ]

  8. icon
    Ninja (profile), 23 Apr 2013 @ 4:10am

    One of the reasons I fully agree with patents being invalidated by Brazil, India etc. If they don't keep their part of the deal the public should be free not to keep our part, right? Same with copyright =)

    link to this | view in thread ]

  9. identicon
    out_of_the_blue, 23 Apr 2013 @ 4:20am

    This is nothing more than a King Bill Nye CIA conspiracy to steal the popes dope money.

    See it all started about 30 AD when a pimp was ran over by Martha Stewart. The accident caused him to believe he was actually Bob Streisand which lead to massive LSD abuse. After 2 years of abusing the drug Bob decided to have a sex change and became Barbra Streisand.

    9 Years have passed when Barbra started huffing mountain lion piss and wrote a book. It was called The Holy Bible and it was based on a true story. "True story"

    Almost 2000 years of reincarnations were nothing new for Barbra until she was reincarnated as L. Ron Hubbard in 1911 which while on a NAMBLA ski trip had the idea of making a religion for the rich.

    You can read the rest of this story at damnimlit.brawrr!
    out_of_the_blue has spoken!

    link to this | view in thread ]

  10. identicon
    Anonymous Coward, 23 Apr 2013 @ 5:32am

    Re:

    Wrong kind of crazy for what you're trying to do...

    link to this | view in thread ]

  11. icon
    RyanNerd (profile), 23 Apr 2013 @ 5:52am

    Government SUPPORTS anti-competitive nonsense

    This kind of anti-competitive nonsense has actually been supported by the US government for some time in the agricultural industry.

    Farmers are paid ­not to grow certain crops, so that a limited supply will keep prices higher. The government is required to buy crops, particularly corn, meat, and cheese. Also, specific areas get earmarks. California get salmon fishing subsidies, while Kentucky farmers are paid to breed racehorses.

    http://www.sourcewatch.org/index.php?title=Farm_Bill_Extension_Act_of_2007#Contents_o f_the_bill

    link to this | view in thread ]

  12. identicon
    Sean, 23 Apr 2013 @ 6:20am

    Floored

    Wow, actually something that I agree with Pres Obama on.

    link to this | view in thread ]

  13. identicon
    Anonymous Coward, 23 Apr 2013 @ 7:36am

    Re: Government SUPPORTS anti-competitive nonsense

    Sorry I am weak.

    Cheese is a crop?
    That is cheesy stuff.

    link to this | view in thread ]

  14. icon
    tqk (profile), 23 Apr 2013 @ 7:36am

    Re:

    ... I wasn't aware that stuff like this went on.

    I've come to expect these days that it does.

    link to this | view in thread ]

  15. identicon
    Pixelation, 23 Apr 2013 @ 8:09am

    It sure doesn't pass the sniff test from over here.

    link to this | view in thread ]

  16. identicon
    Anonymous Coward, 23 Apr 2013 @ 8:19am

    These are the kind of business practices that are long overdue to be scrutinized. Microsoft, Google, Apple (gets all the attention these days) With all due respect, these "pay for delay" affects every single one of us directly (in our pockets).

    link to this | view in thread ]

  17. icon
    special-interesting (profile), 23 Apr 2013 @ 10:30am

    Monopolies will rule until they don't. Within their industry field they have almost absolute command. Only breaking them up with the Axe of public support of government resolve through judicial action will do this.

    Its fascinating how monopolies have morphed over the years into seemingly upstanding companies that successfully claim to benefit the very people taken advantage of. https://en.wikipedia.org/wiki/Monopolies Most large monopolistic firms have learned to avoid the ominous official definitions of a monopoly.

    In this case the drug firms government granted monopoly of patent protection has ended but they find it profitable to continue like usual. Since other firms sense the opportunities of profit and market expansion this is hard and would take some real negotiations likely combined with outright intimidation mixed with legal threats.

    The fact that these types of back door monopoly deals do exist is not a good sign in any respect. It might, from either sides perspective/viewpoint, be called extortion. (funny that)

    There are many ways a monopoly can be perpetuated and contract law is one of them. In the cooperating way its used here the technical monopolistic term would be an Oligarchy. An oligarchy is not one but several entities (people, nations or corporations) acting in concert to effect a monopoly through cooperation.

    Since drug firms routinely invest less in research than in advertising the whines of investment funding is moot. Because many people die from the high US cost of pharmaceuticals as compared to other more regulated national medical drug policies the matter has grown way out of proportion.

    India might just be better at recognizing monopolies than the US with their recent denial of a Cancer drug through weird patent extension schemes. Japan seems a good example also.

    https://www.techdirt.com/articles/20130401/09233022536/indian-supreme-court-rejects-evergreening -pharma-patents.shtml

    In many cases brought to regulatory light the fines are far less than the profits and only serve to approve whatever scheme or practice perpetrated. However its good that such efforts do the basic research that begins to highlight the root causes of such effective monopolistic methods.


    Reactionary,

    RyanNerd points out that government is not always on the side of the average Joe. There have been a disturbing number of one sided government decisions legislative, executive and judicial.

    link to this | view in thread ]

  18. identicon
    Anonymous Coward, 23 Apr 2013 @ 10:35am

    "...a big pharma company essentially buys off manufacturers of generics so that the former can continue to enjoy monopoly pricing long after its patents have expired..."

    To the extent one reading your above quote may believe that a "reverse payment" extends a patent beyond its expiration date, he/she would be mistaken. The patent expires on its normal expiration date just like any other patent.

    link to this | view in thread ]

  19. identicon
    Chris Brand, 23 Apr 2013 @ 11:02am

    Interesting wording

    "a patent system that may, perhaps too often, grant monopolies".

    Isn't the whole point of any patent system to grant monopolies ?

    link to this | view in thread ]


Follow Techdirt
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Discord

The latest chatter on the Techdirt Insider Discord channel...

Loading...
Recent Stories

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it
Close

Email This

This feature is only available to registered users. Register or sign in to use it.