Supreme Court Smites Dastardly Drugmakers

Photograph by Jonathon Kambouris/Gallery Stock

In an era of political polarization and social fragmentation, here’s something most people who don’t work for big drug companies can agree on: It’s really annoying that those companies have gotten in the habit of paying rivals to delay low-cost versions of popular medicines.

Well, this morning the Supreme Court said the pharmaceutical manufacturers can be sued over such “pay for delay” deals. Score one for common sense!

The 5-3 ruling “shifts the rules governing the release of generic drugs,” our Bloomberg News comrade Greg Stohr observes. It represents a victory for the Federal Trade Commission, the Obama administration, and consumers. The FTC says that pay-for-delay deals cost drug purchasers as much as $3.5 billion a year.

The decision may lead to lawsuits against big drugmakers by wholesalers, retailers, insurers, and antitrust enforcers. Or, preferably, the large pharma companies will stop seeking arrangements whereby they try to postpone the introduction of cheaper versions of medicines. (Wouldn’t that be a better idea than unleashing the lawyers?)

Here’s Stohr’s delightfully concise summary of the majority opinion:

Writing for the court, Justice Stephen Breyer stopped short of adopting the FTC’s proposal that such agreements should be presumed anticompetitive. He said the accords should be evaluated under a longstanding antitrust test known as the “rule of reason.” A federal appeals court had said pharmaceutical companies can’t be sued unless the patent litigation is a sham or a generic drugmaker agrees to delay introduction even after the patent has expired.

As a practical matter, it now becomes more perilous for brand-name pharma manufacturers to make deals with generic drug companies that have the effect of propping up prices.

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