FTC’s Leibowitz Says Rising Generic Drug Deals Hurt Consumers
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May 4 (Bloomberg) -- Jon Leibowitz, chairman of the U.S. Federal Trade Commission, talks about the FTC's attempts stop drug-company deals that delay the introduction of generic drugs. Leibowitz, who spoke yesterday with Bloomberg's Erik Schatzker, also talks about antitrust laws. (This is an excerpt of the full interview. Source: Bloomberg)
May 4 (Bloomberg) -- Jon Leibowitz, chairman of the U.S. Federal Trade Commission, talks about the agency's handling of anticompetitive practices and efforts to protect consumers. Leibowitz spoke yesterday with Bloomberg's Erik Schatzker. (Source: Bloomberg)
FTC Denounces Patent Accords That Delay Generics
Jin Lee/Bloomberg
FTC Chairman Jon Leibowitz speaks during an interview in New York.
FTC Chairman Jon Leibowitz speaks during an interview in New York. Photographer: Jin Lee/Bloomberg
The U.S. Federal Trade Commission said drug-company deals that delayed the introduction of cheaper generic medicines rose 63 percent last year as the agency presses Congress and the courts to limit the settlements.
The number of deals increased to 31 from 19 in 2009, the FTC said. The agency said there were no such settlements in 2004. The cases involved 22 products and $9.3 billion in sales.
The deals “are outrageous, and they harm consumers,” FTC Chairman Jon Leibowitz said yesterday in an interview at the Bloomberg News office in New York. “Either the courts or Congress needs to stop them.”
He added, “It’s only getting worse.”
Lobbyists for the drugmakers defended the settlements as a way to cut legal costs and avoid long-running court battles. The drug industry so far has fended off the FTC’s attempts to restrict the deals through the courts and legislation.
“Without settlements, these generics may not be available to patients for years,” said Diana Bieri, executive vice president and general counsel of the Pharmaceutical Research and Manufacturers of America, a Washington-based trade group.
Prices of generic drugs are generally 20 percent to 30 percent below those of brand-name drugs and in some cases as much as 90 percent cheaper, the FTC said in a statement.
The agency has contended in court that the deals are anticompetitive and violate antitrust law. The FTC also has supported legislation in Congress that would prohibit settlements that increase the cost of prescription drugs.
Leibowitz said the settlements add $3.5 billion to drug costs for consumers annually.
Economist’s Argument
That figure is disputed by Jonathan Orszag, senior managing director at the economic consulting firm Compass Lexecon LLC in Washington, and Robert Willig, a Princeton University economics professor.
In some cases, a settlement may avoid years of patent litigation and bring a generic drug to the market sooner that it would otherwise arrive, they said in a 2009 paper. The writers said Leibowitz’s estimate that such deals cost consumers $3.5 billion a year is too high.
The settlements don’t prevent competition beyond a patent’s life, said David Belian, a spokesman for the Generic Pharmaceutical Association, a Washington-based trade group.
“The FTC is continuing to perpetuate the myth that pro- competitive, pro-consumer patent settlements are harmful to consumers,” Belian said in an e-mailed statement.
Pay for Delay
The settlements are known as reverse-payment or pay-for- delay deals because the brand-name company compensates the generic-drug maker with cash or marketing or sales deals in return for dropping challenges to patents.
In the next three years, $20 billion in brand-name drugs will lose their patents, said David Balto, a Washington-based attorney who has represented consumer groups on the issue.
“The FTC’s efforts here can make a real contribution to helping to control escalating drug prices,” he said in an e-mailed statement.
The court challenges haven’t always been successful. In September, a federal appeals court refused to reconsider whether a Bayer AG (BAYN) settlement of a challenge to its patent on the anthrax treatment Cipro was appropriate.
In February 2010, a federal judge dismissed a case in which the FTC sued Solvay SA (SOLB) along with generic-drug makers Par Pharmaceutical Cos. and Watson Pharmaceuticals involving the drug AndroGel, which helps boost men’s testosterone levels.
The federal appeals court for Florida, Georgia and Alabama will hear arguments in the case on May 13.
Bayer, Cephalon
Antitrust regulators on both sides of the Atlantic are focusing on how settlements between companies that make branded medicines and generics might harm consumers. Bayer was among drugmakers told by European Union officials in January to submit details of patent-settlement deals that may delay the introduction of generics.
Cephalon Inc. (CEPH) and Teva Pharmaceutical Industries Ltd. (TEVA) face an EU investigation of a deal that delayed generic versions of Cephalon’s biggest product, Provigil, a treatment for excessive sleepiness.
Cephalon, based in Frazer, Pennsylvania, last year lost an attempt to dismiss U.S. antitrust suits, including one by the U.S. Federal Trade Commission, over patent-infringement settlements it reached regarding generic versions of Provigil.
It also lost a U.K. bid in November that aimed to block Mylan Inc. and Orchid Chemicals & Pharmaceuticals Ltd. (OCP) from selling generic versions of the drug in Britain before a patent trial.
Bristol-Myers Squibb Co. (BMY) in 2006 tried to protect its heart pill Plavix, the company’s best-seller, from generic competition in a transaction that resulted in the firing of former Chief Executive Officer Peter R. Dolan. Dolan made a deal to delay sales of cheaper Plavix copies by Apotex Inc., violating terms of a deferred-prosecution agreement.
To contact the reporters on this story: Jeff Bliss in Washington at jbliss@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net
To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net; Michael Hytha at mhytha@bloomberg.net
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