In a decision handed down on Monday, the U.S. Supreme Court ruled that pharmaceutical companies that pay rivals to keep less-costly generic versions of best-selling drugs off the market can be sued by the Federal Trade Commission (FTC) for potential antitrust violations.
The justices, in a 5 to 3 vote, threw out lower-court rulings that said such agreements, called pay-for-delay agreements, are legal, provided they did not keep a generic drug off the market beyond the term of the brand-name drug’s patent, The New York Times reports.
Drug industry analysts say the decision is likely to shift power to the generic companies, whose drugs typically cost only about 15 percent of the brand-name drug’s price, according to the Times. The original drug typically loses up to 90 percent of market share when a generic appears on the market.
In this case, the FTC had sued pharmaceutical company Actavis, which planned to produce a generic version of the testosterone gel AndroGel. The FTC said Solvay Pharmaceuticals, which holds the patent for AndroGel, paid Actavis not to produce the generic version of AndroGel. The FTC claimed this represents unlawful restraint of trade. Justice Stephen G. Breyer, who wrote for the majority, which also included Justices Anthony M. Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan, said that “a court, by examining the size of the payment, may well be able to assess its likely anti-competitive effects along with its potential justifications without litigating the validity of the patent,” according to the Times.
With pharmaceutical sales in the United States totaling roughly $320 billion in 2011, according to IMS Health, whose statistics were cited by the FTC in its arguments, billions of dollars in profits are at stake in this decision. Though brand-name drugs accounted for only 18 percent of prescriptions written in 2011, they claimed 73 percent of consumer spending, IMS reported. A former FTC policy director said that “[n]o other decision this term will have as much impact on consumers’ pocketbooks.” Edith Ramirez, FTC chairwoman, hailed the court’s decision as a “significant victory for American consumers, American taxpayers and free markets,” according to the Times.
Chief Justice John G. Roberts Jr., joined by Justices Antonin Scalia and Clarence Thomas, wrote a dissenting opinion. The dissenting justices pointed out that the agreement between Solvay and Actavis allowed for the generic drug to come to market five years before the scheduled expiration of Solvay’s patent, according to the Times. The justices said the decision would discourage the settlement of patent litigation. Justice Samuel A. Alito Jr. recused himself from the case.