The U.S. Federal Trade Commission’s Bureau of Competition issued a summary of agreements filed with the Commission in fiscal year 2006 by generic and branded drug manufacturers. The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 requires drug companies to file certain agreements with the FTC and the U.S. Department of Justice.

Basically, the FTC is concerned about the recent use of anti-competitive drug patent deals — especially the practice of paying generic rivals to keep alternatives off the market, known as reverse payments. The agency contends that in some cases those settlements stifle competition because drugmakers are paying generics to stay out of the market.

In fiscal year 2006, there were 28 final settlements, and in half of those – 14 – the generic both received compensation and agreed not to market its product for a period of time. In contrast, only three of the eleven settlements in 2005 and none of the fourteen settlements in 2004 had both provisions.The compensation to the generic took different forms, including: 1) payments for co-promoting the brand product, 2) payments for supplying, or being available to supply, the brand with raw material or finished drug product; 3) an agreement by the brand not to compete with an authorized generic, 4) payments for intellectual property to the brand, and 5) payments as part of a co-development project between the brand and the generic.

Nine of the 11 settlements involving first-filers contained both a payment to the generic and a restriction on generic entry. The first-filer is the first generic company to file an abbreviated new drug application that claims the patent (or patents) protecting the brand drug are invalid or will not be infringed by the generic’s product. The first-filer receives 180 days of market exclusivity, which means the Food and Drug Administration may not, with limited exceptions, approve another generic filer’s product until 180 days after the first-filer goes to market.

The report notes that all of the agreements reported in FY 2006 occurred after the 11th Circuit Court’s decision in Schering-Plough v. Federal Trade Commission, reversing the FTC decision that two settlements involving a restriction on generic entry and compensation to the generic manufacturers violated the FTC Act.

The other highlights of the summary are that: 1) overall there were 45 agreements reported; 2) eight were interim agreements that occurred during patent litigation between a brand and a generic company, but did not resolve the litigation; and 3) one agreement was between a first-filer generic and a subsequent generic filer.

Meanwhile, the Generic Pharmaceutical Association (GPhA) came out with a statement saying that patent settlements between brand and generic pharmaceutical companies can benefit consumers by bringing affordable medicines to market sooner. The GPhA urges that the Hatch-Waxman Act of 1984 works in allowing the resolution of patent disputes before the expiration of patents thus generating savings for consumers.

Text of the Report

via: Antitrust Review and Blawg Review

Also see:

Senate Committee Hears Arguments Regarding Reverse Payments

How Settlements Make Strange Bedfellows: Or How the Federal Trade Commission has Managed to Unite the Entire Pharmaceutical Industry (but only in Opposition to the FTC’s Position on Exclusion Payment Settlements)

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