Supreme Court to Address 'Pay for Delay†Model

The Supreme Court announced earlier this month their intention to investigate a multibillion-dollar dispute between the pharmaceutical industry and federal antitrust enforcers. The practice in question is commonly referred to as the “pay-for-delay” model, whereby brand-name drug manufacturers compensate other manufacturers to hold off on selling generic versions of their drug.

According to the Federal Trade Commission (FTC), pay-for-delay agreements cost drug buyers approximately $3.5 billion each year. Although more than 100 instances of pay-for-delay deals have taken place since 2005, FTC Chairman Jon Leibowitz is seeking to crack down on the practice. “In the midst of all the Congressional work to reduce the nation’s deficits, I think it’s especially commendable that the Senate Judiciary Committee passed legislation that would put an end to the collusive pay-for-delay deals to keep generics off the market,” Leibowitz said in a statement earlier this year. “FTC staff found that the number of these deals skyrocketed more than 60% in FY 2010, from 19 in FY 2009 to 31. The increasing number of these deals is a win-win proposition for the pharmaceutical industry, and leaves consumers to dig deeper into their household budgets to pay for prescription drugs.”

Drug companies argue that these pay-for-delay settlements are beneficial in that they enhance competition and encourage innovation. Bloomberg reports that the Pharmaceutical Research and Manufacturers of America, the representative of brand-name drugmakers, “told the justices that companies spend an average of $1.3 billion to create a new drug, counting the cost of failed products.” Additionally, pharmaceutical companies contend that these deals “are an efficient and, from a business perspective, predictable alternative to the uncertainty about expensive patent lawsuits fought to the bitter end.”

Thanks to a request by the FTC and the support of 31 states that filed a brief, the Supreme Court will now begin the process of settling this issue. Oral arguments are expected to take place in May/June 2013, and a ruling could happen as early as next fall.

Around the Web

Pay-for-Delay: When Drug Companies Agree Not to Compete [FTC]

Profiting From SCOTUS and Big Pharma: Part 1 Part 2 [The Motley Fool]

U.S. Supreme Court Agrees to Take on Pay-For-Delay Deals for Generic Drugs [Business Law News]

The Supreme Court Fight Over Generic Drugs Could Be TheObamacare Of 2013 [Business Insider]