For years, the Federal Trade Commission lamented the ever-growing number of pay-for-delay patent settlements--three in 2005, 14 in 2007, up to a record 40 in 2012--and vowed to turn the tide.
Now, it looks as if that's happening.
In an annual report, the FTC cited just 21 suspect settlements between branded drugmakers and generics companies for fiscal 2014. That's down from 29 in 2013, and about half of 2012's record.
|FTC commissioner Julie Brill|
What changed? After all, the FTC spent years suing drugmaker after drugmaker and lobbying Congress. Its top officials went on barnstorming tours to attribute multibillion-dollar costs to cash-based patent settlements.
Two things: The FTC won a legal fight or two, for one. But more importantly, in 2013, the U.S. Supreme Court ruled that the pay-for-delay deals, which drugmakers long defended as perfectly legal, actually weren't, at least not all the time.
The patent settlements weren't by definition illegal, the court ruled, which disappointed the FTC. But certain features would make them so, and the FTC could crack down on patent settlements that crossed the line, the court said.
Without a free pass from the Supreme Court, drugmakers may have thought twice in 2014 before wrapping up a patent suit with the sort of cash payment--or noncash arrangement, such as an authorized generic deal--that could run afoul of antitrust rules. And in the wake of the SCOTUS ruling, other pay-for-delay court fights were revived. One appeals court resurrected two payers' fight against a patent deal between GlaxoSmithKline ($GSK) and Teva ($TEVA), over the branded seizure drug Lamictal.
The numbers might well decrease for fiscal 2015, too. Last year, in a long-standing pay-for-delay suit, the FTC won a $1 billion-plus ruling against Teva Pharmaceutical and its Cephalon unit. The drugmaker was ordered to disgorge past profits from a Provigil patent settlement.
For fiscal 2014, the FTC didn't identify which patent deals it considered suspect. It did say that the settlements involved 20 branded meds with sales worth a total of $6.2 billion. Ten included cash payments, and 6 involved related business deals. Five included a promise to hold off on marketing an authorized copycat that would compete with the generics maker's own version.
"Consumers are better off when there is more competition from lower-priced generic medicines," Debbie Feinstein, director of the FTC's Bureau of Competition, said in a statement. "So although it is too soon to know if these are lasting trends, it is encouraging to see a significant decline in the number of reverse payment settlements."
- see the release from the FTC
Special Report: The top 10 patent losses of 2015