US Supreme Court backs ‘rule-of-reason’ for pay-for-delay
The chair of the Federal Trade Commission (FTC) has said it will continue to challenge pay-for-delay court settlements in the pharmaceutical industry and has hailed a Supreme Court ruling as a victory for consumers.
Speaking to a US senate subcommittee, Edith Ramirez, chair of the FTC, said the controversial issue was one of the commission’s “top priorities” and said it remains determined to end illegal agreements.
Pay-for-delay occurs when brand name drugmakers settle patent infringement lawsuits by paying generic companies to postpone marketing cheaper versions of the products.
The FTC, which has fought the practice for more than a decade, says it costs consumers and the US government an additional $3.5 billion on drug costs each year and keeps cheaper generic drugs off the market for longer.
The Supreme Court ruled in FTC v. Actavis on June 17, saying regulators can now challenge the deals on antitrust grounds.
The decision overturned the so-called scope-of-patent test, which was claimed to virtually immunise pay-for-delay settlements from scrutiny and ruled that agreements should be subject to rule of reason scrutiny, the standard applied in most antitrust actions.
According to the FTC, the decision will deter companies from entering into “anti-competitive agreements.”
“This, in turn, will help consumers, employers, and taxpayers who would otherwise suffer from reduced competition and higher drug prices,” it says on its website.
“Because of the Actavis decision, we are in a much stronger position to protect consumers from anti-competitive drug-patent settlements that result in higher drug costs,” said Ramirez.
Following the court’s ruling, the FTC plans to pursue pay-for-delay cases that it is already litigating and investigate new settlements to determine if they are legal, Ramirez said.
"The vast majority of patent settlements do not involve (pay-for-delay)," she said. "What we are trying to stop are anti-competitive settlements."
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