FTC says Teva settlement means pay-for-delay ends, maybe

Teva Pharmaceuticals ($TEVA) and the U.S. Federal Trade Commission reached a $1.2 billion settlement that could mean the end of pay-for-delay deals, or not. Asia generics makers selling in the United States are likely to be affected.

In its settlement, Teva, which bought Cephalon three years ago and inherited Provigil (modafinil), a drug for sleep disorders, agreed to a prohibition on any of its U.S. units ever doing that again. At least not the same way.

The FTC said the settlement amount was to cover the higher price patients paid for the drug because Cephalon had cut a deal with generics makers to keep their versions off the market for a certain number of years beyond the years they would achieve by breaking the patent.

Many other such deals have been cut between innovative pharmas and generics to delay bringing competition to market. Provigil sold as much as $1 billion a year until the generics were able to do so under the deal.

According to the FTC, the deals were cut as long ago as 2005 when Cephalon sued generics for patent infringement because they filed with the FDA. Out of court, it arranged as much as $300 million to the same companies in 2006 to hold off for 6 years in return for dropping the suit, the agency said.

Teva apparently caved just in time. The agency had filed for a permanent injunction against the deal and trial was set to begin Monday in a federal court. The same court must approve the settlement.

The FTC was emboldened in part since a similar action against Actavis ($ACT) was upheld partially by the Supreme Court in 2013, which said that deal was covered by the right of the government to do so under antitrust laws.

But that was in general. Still unquestioned is just what type of deals are covered. Cephalon's pay-to-delay was only one type of do-not-compete arrangements made between drug companies. The umbrella name for them is "reverse payments."

Even the agreement with Teva is limited. It means Teva and others can still make deals as long they can skirt antitrust laws because pay-for-delay still is not illegal per se.

- here's the FTC release on the case
- and on the policy