A recent report by the Federal Trade Commission reveals an increase in the controversial “pay-for-delay” patent settlements between brand-name pharmaceutical companies and their generic counterparts.  The controversy stems from the large payments by brand-name companies to generic manufacturers in an effort postpone or prevent the introduction of the generic drugs on the market.

The Supreme Court has stepped in by agreeing to review the current FTC v. Watson Pharmaceuticals case.  The FTC takes the stance that drug producers have sidestepped competition by offering such patent settlements, reports Bloomberg.  Further opposing these deals are advocacy groups, who argue that these delays leave consumers without cheaper alternatives for too long, forcing them to buy only those drugs created by the brand-name manufacturers.

Pharmaceutical companies argue that generic drugs infringe on their patents and threaten innovation.  As a result of the Hatch-Waxman Act, a company that submits the first application with the Food and Drug Administration to sell a certain generic drug receives exclusive rights to sell that drug for six months, if approved.  Often once the application is submitted, lawsuits are filed by brand-name manufacturers claiming patent infringement. The Pharmaceutical Research and Manufacturers of America, which represents major brand-name companies, counters the FTC’s claims and argue that these settlements enhance innovation and encourage competition, especially since brand-name companies spend about $1.3 billion to produce a new drug.

Law360 reports on the major criticism of the settlements from many in Washington, including Senators Amy Klobucher and Chuck Grassley, who have vowed to renew previous efforts to ban such deals.  The FTC reports the deals are up from twenty-eight in 2011 to forty in 2012, necessitating a ban, claims Sen. Klobuchar. She stated, “I have long supported efforts to prevent this anti-consumer practice and this new report highlights the need for legislation to make sure people have access to the drugs they need at a price they can afford.”  Sen. Grassley similarly pledged to provide a legislative remedy while the Supreme Court considers the case in an effort to protect consumers.

Similar class action lawsuits have been filed against major pharmaceutical companies based on the pay-for-delay issue, including the most recent against AstraZeneca.

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