FTC: Legal settlements delay cheaper drugs

Pharmaceutical companies eager to keep less expensive alternatives to their drugs off the market are increasingly reaching legal agreements with generic drugmakers to accomplish that goal, a government agency said Wednesday.

More than 30 patent lawsuits were settled in the 12 months ending last Sept. 30 between brand-name drug companies and generic manufacturers, the Federal Trade Commission said. Fourteen of those settlements included both a restriction on the generic company's ability to market a drug and compensation to the generic manufacturer, the agency said in an annual report.

The FTC says that by jamming the pipeline of cheaper drugs, such agreements harm consumers. The agency has sued to block some settlements and is supporting legislation in Congress that would ban the practice.

The FTC has had limited success in thwarting what it calls "pay-for-delay" settlements. Two appeals courts ruled in 2005 that similar agreements reached by Schering Plough Corp. and Astra Zeneca PLC with generic companies were legal.

Settlements with restrictions on generic drugmakers increased from three in fiscal year 2005 to 14 in 2006, the same total as last year, the agency's report said. Drug companies are required to report the settlement of patent litigation with generic drugmakers under a 2003 law.

"Pay-for-delay settlements continue to proliferate," FTC Commissioner Jon Leibowitz said in a statement. "That's good news for the pharmaceutical industry, which will make windfall profits from these deals. But it's bad news for consumers, who will be left footing the bill."

The FTC did not name any companies in its report.

Pharmaceutical companies and some generic manufacturers defend the settlements as a way to reduce costly litigation. Many of the agreements still allow generic companies to introduce cheaper drugs before patents expire, the companies say.

The Pharmaceutical Research and Manufacturers of America, a trade group for the brand-name drug industry, also said case-by-case evaluation of the settlements by the FTC and the courts is preferable to the ban proposed in Congress.

The most common form of compensation by the drug companies to generics, included in 11 of the 14 settlements, was an agreement to not introduce a competing generic drug once a generic company is able to introduce its product, the FTC said.

In the other three cases, the companies reached side deals that allowed the generics to market products that were not the subject of the patent litigation, the agency said.

In February, the FTC accused Cephalon Inc. in a lawsuit of illegally blocking generic competition to its drug Provigil, which combats sleepiness in patients with sleep disorders.

The FTC said the company paid four generic drugmakers $200 million as part of agreements reached in 2005 and 2006.

Cephalon has said the agreements were lawful settlements of patent litigation that allowed generics to enter the market three years before its patents expired.