AstraZeneca scores a victory in pay-for-delay Nexium case

Last year, the U.S. Supreme Court set a course for the battle over pay-for-delay settlements with generics companies: Those deals may not be inherently illegal, but they aren't immune to legal challenges, either.

Now, in what could become a bellwether decision for the industry, AstraZeneca ($AZN) has scored a victory in federal court. The company's deal with Ranbaxy Laboratories to settle a patent fight over its heartburn med Nexium was not anticompetitive, a jury found. A group of pharmacies, wholesalers and insurers had sued over the deal.

As Bloomberg reports, a Massachusetts jury ruled after a six-week trial that AstraZeneca and Ranbaxy's agreement did not violate antitrust laws, the first time such a case has been decided since the Supreme Court handed down its decision on pay-for-delay deals last year. The U.S. Federal Trade Commission contends that pay-for-delay deals--in which drugmakers pay generics companies to settle patent disputes--can cost consumers as much as $3.5 billion a year, a number hotly contested by the industry.

"AstraZeneca is pleased with the jury's verdict," the company said in a statement. "The Company has always maintained that the plaintiffs' allegations were without merit."

The companies' pay-for-delay legal drama surrounding generic Nexium dates back to 2012, when the group of purchasers challenged a 2008 patent settlement between AstraZeneca and Ranbaxy. According to the suit, AstraZeneca handed Ranbaxy nearly $1 billion to delay the launch of its generic Nexium until its patent ran out in May 2014. The suit also targeted two other generic drugmakers that had struck similar deals with AstraZeneca, including Teva Pharmaceutical Industries ($TEVA) and India's Dr. Reddy's Laboratories--but both of those companies settled with the plaintiffs.

The recent ruling bodes well for AstraZeneca, as it prepares to defend its blockbuster Nexium from encroaching generic competitors. The drug brought in nearly $3.9 billion in sales last year, Bloomberg notes, and so far no company has nabbed a regulatory green light to produce a generic version of the drug. AstraZeneca recently hiked its sales forecast for the second time this year, citing a 5% hop in sales and revenue of $6.54 billion that beat analysts' estimates.

Ranbaxy Laboratories is responsible for the hold-up. As first to file for generic approval, the company won 180-day exclusivity for its Nexium copy. But problems at its manufacturing plants have interfered with its winning FDA approval to launch. In November, Ranbaxy sued to reverse the agency's decision and prevent the FDA from approving any other versions of the drug until it can take advantage of that 180-day monopoly. But for now, the agency is staying mum on whether it will allow other companies to produce a generic Nexium.

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