Israel-based drug manufacturer, Teva Pharmaceutical Industries, is the latest pharmaceutical company to be heavily penalized by the FTC for their pay-for-delay tactics. The lawsuit against Teva alleges the company paid out more than $200 million to four generic drug manufacturers in order to delay a generic version of the drug Provigil. Provigil is a prescription medication used to improve wakefulness in adults who are sleepy during the daytime due to sleep disorders such as narcolepsy or obstructive sleep apnea.
The settlement money will refund insurers and pharmacies who paid too much for the drug; any remaining funds will be paid to the U.S. Treasury. Teva has also agreed, as part of the FTC settlement, to refrain from entering into similar deals—which artificially inflate the price of prescription drugs—in the future. The Teva settlement stems from a 2008 FTC lawsuit charging Cephalon (acquired by Teva in 2012) with unlawfully protecting the Provigil monopoly. Cephalon accomplished this through suing generic drug makers for patent infringement, then later paying them more than $200 million to drop patent challenges and halt marketing generic Provigil for a period of six years.
What is Pay-for-Delay?
During 2013, companies filed 145 final patent dispute settlements; 29 of those created the potential for pay-for-delay agreements between branded and generic drug companies. Those 29 settlements involved 21 different branded pharmaceutical products with a combined annual sales of more than $4.3 billion. Since generic drugs make prescription medications affordable for millions of consumers, this issue goes far beyond the FTC vs. large pharmaceuticals.
Pay-for-delay deals allow brand-name pharmaceutical companies to effectively stall the release of generic competition drugs which would lower prices for consumers. A pay-for-delay agreement is considered in the industry to be a win-win situation—for the drug manufacturers. The brand-name pharmaceutical company pays the generic company to delay the release of a lower-priced generic drug, thus both companies “win.”
Yet consumers miss out on generic drugs which can cost as much as 90 percent less than brand-name prices. In fact, it is estimated that pay-for-delay deals cost consumers as much as $3.5 billion per year. Further, in 2003, an appellate court held these pay-for-delay agreements were automatically illegal. Unfortunately, since that time, several appellate courts have misapplied anti-trust laws in order to hold up pay-for-delay agreements. The average pay-for-delay agreement delays a generic drug from being marketed for seventeen months.
Many of the pay-for-delay agreements are still in effect, protecting a minimum of $20 billion in sales of brand-name pharmaceuticals. Obviously, drug manufacturers defend pay-for-delay deals, asserting such agreements help resolve costly patent litigation. Yet during a PBS News Hour, aired in 2014, patient Karen Winkler, noted her Provigil out-of-pocket costs dropped from $700 for a three-month supply to just $16 for the same amount of the generic drug. Winkler takes Provigil to combat extreme fatigue due to multiple sclerosis.
How the Hatch-Waxman Act Affects Pay-for-Delay Agreements
Drug manufacturers also point to the Hatch-Waxman Act, when defending their pay-for-delay tactics. The FTC, however considers these pay-for-delay agreements a blatant exploitation of the provision in the Hatch-Waxman Act which grants short-term protection from competition to the first manufacturer to bring a generic version of the brand-name to market. The Hatch-Waxman Act allows a competitor to seek entry for their generic drug prior to expiration of the brand-name patent. The first generic to file such an application may obtain 180 days of marketing exclusivity, allowing it to be the only generic on the market. The generic must declare its drug does not infringe on relevant patents, then typically the brand-name company challenges that declaration.
At this point, litigation ensues between the generic pharmaceutical and the brand-name pharmaceutical. In order for the brand-name pharmaceutical to prevail, it must show the generic drug would infringe on the patent currently in place. Due to the costs involved, the two pharmaceuticals sometimes settle patent litigation out of court perhaps through an agreement that the generic can enter prior to the patent expiration—but not as soon as the generic would like. Pay-for-delay agreements then entered the mix, allowing the generic pharmaceutical to get a significant influx of cash, and the brand-name pharmaceutical to benefit from the delay of the generic drug.
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If you or a family member has been financially harmed after being forced to pay more for a brand name drug because a generic drug was not available, it is important to discuss your case with an experienced product liability attorney. In some cases, you may be entitled to take part in a class action lawsuit. One of our experienced class action attorneys will evaluate your case and help you determine if you are entitled to compensation.
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