FDAnews Drug Daily Bulletin


May 1, 2006

The FTC's pledge to challenge the constitutionality of brand name drug companies' strategy of paying generic manufacturers to drop patent-infringement suits is likely to fail, PhRMA President Billy Tauzin told FDAnews.

The FTC released a report recently that found an increase in these agreements, which led FTC Commissioner Jon Leibowitz to appeal a recent federal court decision upholding this practice to the Supreme Court. The report, prepared by FTC's Bureau of Competition is available at http://www.ftc.gov/os/2006/04/fy2005drugsettlementsrpt.pdf (http://www.ftc.gov/os/2006/04/fy2005drugsettlementsrpt.pdf).

At issue is brand companies' practice of paying generics to drop patent challenges and agree to stay off the market with generic equivalents in exchange for a payout that FTC believes constitutes collusion between industries at the expense of consumers.

But PhRMA does not believe that this challenge is likely to succeed, Tauzin said, because it violates long-standing jurisprudence and would set a dangerous precedent undermining patent protections for countless industries. Well-established law allows parties to a suit to settle their differences out of court. The FTC's challenge would improperly infringe on that right, limiting private parties' rights and harming patent protection efforts in the future, Tauzin said.

"I don't know how you don't allow two litigants to settle their case if they want to. I don't know how that's unconstitutional," he said. Such a practice is "permissible under every jurisprudence I'm aware of."

Not only is the FTC argument "a very spurious claim" that hurts the pharmaceutical industry's efforts to protect its patents, it affects other industry sectors as well, Tauzin added. The FTC is essentially challenging all parties' ability to settle out of court, which is "much bigger than pharmaceuticals." FTC will face "a lot of complaints from a lot of different industries," he predicted.

Leibowitz argued in an April 26 speech before the Second Annual In-House Counsel's Forum on Pharmaceutical Antitrust that brand companies have started to make such settlements common practice in dealing with patent challenges. These agreements allow brand manufacturers to maintain their patent exclusivity for longer periods, resulting in higher prices for consumers, Leibowitz said. (http://www.fdanews.com/did/5_84/)