A federal appeals court pulled a pay-to-delay challenge out of mothballs, forcing Merck to fight claims that its Schering-Plough unit delayed generic versions of its potassium drug K-Dur. But Merck ($MRK) isn't the only drugmaker that should keep an eye on this case.
Branded and genericsmakers are named in similar lawsuits, filed by drugstores and wholesalers that claim they've overpaid for branded drugs unnecessarily. Just over the past few months, drugstore chains have sued Pfizer ($PFE) and Ranbaxy Laboratories over alleged delays to generic Lipitor, and Pfizer's Wyeth unit and Teva Pharmaceutical Industries ($TEVA) over Effexor delays.
To hear the Federal Trade Commission talk, the court's decision is backing for its own arguments against so-called pay-to-delay deals, in which branded drugmakers pay to settle patent disputes, and genericsmakers agree to a particular launch date for their copies. FTC believes that even authorized-generic deals count as payment, putting even more patent settlements into its "not allowed" category.
"The Third Circuit Court of Appeals seems to have gotten it just right," FTC Chairman Jon Leibowitz said in a statement. "It's time for the pharmaceutical companies to return to the side of consumers."
The Third Circuit went against previous rulings that have tended to uphold similar patent settlements. Previously, courts have determined that pay-to-delay deals were OK so long as the generic launch wasn't postponed past the branded drug's patent expiration. But the appeals panel said the patent consideration was too narrow a standard. Instead, the lower court should presume that pay-to-delay deals are anti-competitive, The Washington Post reports, and put the burden on drugmakers to prove otherwise.
Not surprisingly, branded and generic drugmakers aren't happy about the ruling. Merck specifically expressed its disappointment, but so did PhRMA and the Generic Pharmaceutical Association. The GPhA's chief, Ralph Neas, told the Post that these patent settlements actually save consumers money by getting copies to market before patents expire. "We believe this is an outlier case," Neas told the newspaper.