Teva Pharmaceutical Industries ($TEVA) will fork over a record-breaking $512 million to wrap up claims that it paid generics makers to keep cheap copies of Provigil off the market. As a single settlement, it's big news for Teva. As a potential precedent in other pay-for-delay cases, it's a big deal for the rest of the pharma industry.
Teva's Cephalon subsidiary has been wrangling for years with the drug wholesalers and other direct purchasers in this case. Filed in 2006, the lawsuit claimed that Cephalon used patent-infringement settlements to persuade several generics makers not to launch their Provigil copies till 2012.
The Teva unit had plenty of reason to delay Provigil generics. When Cephalon settled those patent cases, Provigil was bringing in $500 million in annual sales, Teva says in a recent SEC filing. By the time generics hit in March 2012, Provigil had broken the blockbuster barrier, with $1 billion in sales.
That changed quickly. By 2013, Provigil sales had plummeted to $91 million, the Teva filing states. And last year, the drug managed to bring in just $70 million.
As Reuters points out, the former record-holders in the pay-for-delay settlement stakes were Abbott Laboratories ($ABT) and its TriCor partner Fournier. That was a $250 million deal reached in 2008. Mylan ($MYL) and Ranbaxy Laboratories, also defendants in the Provigil case, aren't part of this settlement.
Since that 2008 settlement, the U.S. Supreme Court has handed pay-for-delay plaintiffs some new ammunition. In a pay-for-delay case brought by the Federal Trade Commission against Abbott Laboratories and Solvay Pharmaceuticals, the U.S. high court decided that patent settlements aren't automatically illegal, even if they include cash or other "reverse payments" to generics makers. But they're not automatically legal, either.
The settlements have to be considered on a case-by-case basis, the Supreme Court said in its opinion. And the Teva deal suggests that some drugmakers are feeling vulnerable.
Other pay-for-delay cases aren't as cut-and-dried, however. Legal experts told The New York Times that the evidence in the Provigil case was particularly strong. "You had smoking-gun evidence in a way that you don't often have in these big antitrust cases," Rutgers University law professor Michael Carrier said.
Another U.S. court will soon be considering the Provigil settlements. As Reuters notes, the FTC sued Teva over those deals, and a bench trial in that case is scheduled for June. Teva is also facing Provigil pay-for-delay claims from U.S. insurers and other payers.
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