Bayer has agreed to a $74 million settlement in a case where Plaintiffs alleged the drug maker violated antitrust laws by participating in pay-for-delay activities surrounding its drug Cipro. A class-action lawsuit charged Bayer Corporation, along with Barr Laboratories and other generic drug companies, with cheating consumers by unfairly restricting competition against its antibiotic prescription drug Ciprofloxacin (Cipro).

The scheme – which is common among Big Pharma companies – blocks consumer access to cheaper, generic versions of drugs by paying generic drug makers not to bring their alternative products to market. Just as the name implies, generic drug makers are paid to delay the debut of their drugs even after the patent on the more expensive brand-name drug has expired. This allows the manufacturer of the brand-name drug to keep raking in profits, while consumers pay for it out of their pocketbooks. In the Bayer litigation, the drug manufacturer paid the generic drug companies close to $400 million between 1997 and 2003 in exchange for their agreement not to introduce their own, cheaper generic versions of Cipro into the marketplace.

A U.S. Supreme Court decision handed down recently says pay-to-delay arrangements may be a violation of antitrust laws. The Federal Trade Commission (FTC) has been contending for some time that pay-to-delay is “presumptively illegal.” The Supreme Court ruling attempts to make a distinction between antitrust laws, which state that a corporation cannot block a rival from competition in the marketplace, and patent laws, which protect a company’s product from copycat products.

New brand-name drugs to hit the market are protected from generic competition with a patent for 20 years. As long as the patent remains valid, the brand-name drug company can continue to earn monopoly profits on the drug. Oftentimes, makers of generic drugs will try to challenge the validity of patents in order to get their copycat drugs on the market and bite into the brand-name profits. Typically the generics are much less expensive than brand name drugs and thus preferred by patients and insurance companies. The patent lawsuits waged by generic companies sometimes lead to the brand-name drug company offering to settle the lawsuits by paying the generic drug company to delay the launch of its copycat drug.

For example, Solvay Pharmaceuticals applied for a patent in 2000 for AndroGel, a topical gel to treat low testosterone levels. The patent protected the gel through 2020; however, the gel’s active ingredient – a synthetic testosterone – was not included in the patent. Watson Pharmaceuticals, a generic drug maker, announced it was developing a generic version of AndroGel. Fearful that the generic product would cut $125 million per year from its profits, Solvay offered Watson $19 million to $30 million a year to hold off on its generic product until 2015. The FTC then sued Watson and Solvay claiming the settlement violated antitrust laws. A federal judge and the U.S. 11th Circuit Court of Appeals sided with the drug companies. The U.S. Supreme Court sided with the FTC by a 5-3 ruling.

While the recent Supreme Court ruling doesn’t specifically ban pay-for-delay, it does provide a precedent that allows similar lawsuits to be filed on the basis of antitrust violations. On this one, the Supreme Court sided with the consumer and made it a little harder for Big Pharma to increase its bankroll at our expense.

Sources: Bloomberg, Los Angeles Times, and RightingInjustice.com

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