FTC Takes Drugmakers to Court, Says Generic Delays Are Hurting Consumers

Source: Thinkstock

The U.S. Federal Trade Commission is seeking a $1 billion settlement from several pharmaceutical companies the agency has sued for postponing the sale of generic versions of their medications, according to a Reuters report on Friday. Patent expirations hurt sales of the brand-name version of a drug — thus, it’s in the interest of drug makers to delay patent expirations (and therefore generic versions of a drug) for as long as possible.

The FTC claims that the way in which pharmaceutical companies settle patent lawsuits hurts consumers because it raises the price of both the generic and brand-name versions of the drug. In past settlements, brand-name drug makers have paid companies that make generic versions of their drugs millions of dollars to delay putting the cheaper options on the market.

The Supreme Court ruled in June that the FTC was allowed to challenge such deals between brand-name and generic manufacturers in federal court. Deborah Feinstein, director of the FTC’s Bureau of Competition, told Reuters, “my hope is that we get a billion-dollar settlement in one of the patent-settlement, pay-for-delay cases.”

She continued: “In all truth, it’s one of the biggest priorities we have. The consumer harm there is extremely significant, and so we have a tremendous amount of resources there and hope to come out with a victory one way or another in those cases.”

The defendant companies being sued by the government agency include Solvay Pharmaceuticals, which is owned by AbbVie; Actavis; Paddock Laboratories, which is a division of Perrigo Co.; Par Pharmaceutical Cos.; and Cephalon, which is owned by Teva Pharmaceuticals.

U.S. consumers already pay a premium for drugs as it is, partially because of the law. The “U.S. government is prohibited by law from negotiating drug prices,” Sheila Dharmarajan said in an NBC report, explaining why drugs cost so much in the United States. Residents in other countries, particularly developing nations, often pay a fraction of the U.S. price.

“We have a private market for drugs in the United States so the pharmaceutical companies can charge a market price,” Dan Mendelson, CEO of Alvare Health, said to NBC. In Europe, on the other hand, drug prices are negotiated “directly with the manufacturer,” by the health system, per Mendelson.

More From Wall St. Cheat Sheet: