Teva, Ranbaxy settle case for sidestepping each other's launches

Teva Pharmaceutical Industries ($TEVA) and Ranbaxy Laboratories only have to pay $300,000 in a new "pay-for-delay" settlement with the state of New York over their arrangement on generic Lipitor. The bite in the agreement is in the fact that it prevents the two from sidestepping each other on dozens of other drugs, opening up the possibility of greater generic competition.

This settlement involves a variation on pay-for-delay agreements in which makers of branded drugs arrive at financial agreements with makers of generics to delay the launch of their copycat products, The Wall Street Journal reports. In this case, generics maker Ranbaxy Laboratories had the 180-day exclusive right to sell a generic of Pfizer's ($PFE) blockbuster Lipitor in the U.S. Because of FDA concerns over the plant where it was to be made, Ranbaxy was unsure it would get FDA approval to launch it when Lipitor went off patent. The Journal says Ranbaxy struck a deal with Teva allowing Teva to take over the exclusive launch in that event. Teva agreed to not challenge the exclusivity if Ranbaxy was able to market the drug.

Ranbaxy got its version of Lipitor to market in time, but WSJ reports the two companies also agreed not to challenge each other on dozens of other drugs. The settlement with New York voids those deals and prevents them from making others. The two companies didn't admit or deny the allegations.

According to WSJ, officials in New York said they thought this agreement was the first to apply a 2013 U.S. Supreme Court ruling to this kind of horse trading. That ruling said regulators, and private parties like insurers or pharmacies, can challenge these deals on antitrust grounds, although it fell short of saying the deals are anticompetitive on their face.

In fact, pharmacies in California sued Pfizer and Teva alleging that they had their own pay-for-delay deal over Lipitor. They claimed Teva agreed to hold off its copy in the U.S. in exchange for earlier launches in foreign markets. And in yet another twist on the deals, regulators in Australia are now accusing Pfizer of offering special discounts to pharmacies there if they limited the amount of generic Lipitor they sold. Pfizer has denied any wrongdoing.

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