Thursday, January 31, 2013

FTC Issues New Report on “Pay for Delay” Patent Settlements


According to a new report by the Federal Trade Commission, brand-name pharmaceutical companies increased their use of “pay for delay” patent settlements last year (October 2011 – September 2012).  Of the total 140 pharmaceutical patent infringement settlements in the year, the report identifies 40 as potential “pay for delay” settlements.  This is the highest number of such settlements since the FTC began compiling such statistics in 2003.

In a “pay for delay” settlement, a patent infringement lawsuit brought by a branded drug manufacturer against a generic manufacturer is resolved by the branded manufacturer plaintiff’s decision to pay the allegedly infringing generic to terminate the lawsuit.  As a condition of the payment and termination of the suit, however, the generic defendant agrees that it will not sell its generic product into the market for an extended period of time (hence the term “pay for delay”).  The FTC has long contended that “pay for delay” settlements, which extend the branded manufacturer’s period of market exclusivity, can be anticompetitive, and that they increase the cost of drugs for consumers by billions of dollars each year. 

In a statement issued contemporaneously with the report, FTC Chairman Jon Leibowitz stated that “this year’s report makes it clear that the problem of pay for delay is getting worse, not better,” and that “until this issue is resolved, we will all suffer the consequences of delayed generic entry – higher prices for consumers, businesses and the U.S. taxpayer.”

Notably, the Supreme Court has decided to hear the “pay for delay” issue this term in FTC v. Watson Pharmaceuticals.  The case is scheduled to be heard by the court on March 25. 

The FTC report can be found here.

James M. Burns is a Member of Dickinson Wright, resident in the firm’s Washington DC office.  He is the co-leader of the firm’s antitrust practice, and he frequently comments to the legal press on significant antitrust developments.  He comments on the FTC’s recent report appeared in the BNA Antitrust and Trade Regulation Reporter, the Health Law Reporter and the Pharmaceutical Law and Industry Reporter, and can be found here.