FTC Loses Appeal in Androgel ‘Pay-for-Delay’ Patent Case

A U.S. appeals court handed the Federal Trade Commission a defeat in its campaign to block so- called pay-for-delay arrangements between brand-name and generic drug makers, ruling a settlement involving a patent on Androgel didn’t violate antitrust laws.

The appeals judges in Atlanta upheld a lower court ruling in favor of Brussels-based Solvay SA (SOLB), which sold Androgel, a treatment for low testosterone in men, and three other companies including Watson Pharmaceuticals Inc. A settlement among the four delaying generic versions until 2015 prompted the FTC’s lawsuit.

The decision is a setback for FTC Chairman Jon Leibowitz, who estimates such deals cost consumers about $3.5 billion a year in higher prescription drug prices. The agency has failed to successfully challenge such agreements in court or to persuade Congress to outlaw them.

“We continue to believe this conduct violates the antitrust laws,” Leibowitz said in a statement, calling the situation a “lose-lose” for consumers. He said the FTC “will consider all our options going forward.”

David Balto, a Washington-based attorney who represents consumer groups on the issue, said Congress may have to find a solution.

‘Extremely Dogged’

“The FTC has been extremely dogged in pursuing these settlements, but you can’t expect antitrust litigation to solve these problems,” Balto said. “We really need legislation.”

David Belian, a spokesman for the Generic Pharmaceutical Association, welcomed the ruling.

“This decision, along with several other prior court decisions in similar suits brought by the FTC, reaffirms the pro-competitive and pro-consumer nature of patent settlements,” Belian said in an e-mail.

Kate Connors, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, a Washington-based trade association, said the group doesn’t comment on specific rulings. The association has opposed restrictions of patent settlements.

Two similar cases are still pending, including one in a trial court involving Cephalon Inc.’s Provigil, a drug to improve wakefulness. The other, at the U.S. Appeals Court in Philadelphia, involves K-Dur, a drug used to treat low blood levels of potassium, by Schering-Plough Corp. USA, which was acquired by Merk & Co. in 2009.

U.S. courts, including federal appeals panels in New York, Atlanta and Washington, have upheld settlement agreements as long as they don’t delay generics beyond the expiration of patents.

The case is Federal Trade Commission v. Watson Pharmaceuticals Inc., U.S Court of Appeals, 10-12729, 11th Circuit (Atlanta).

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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