A US federal court is considering the legality of payments made by a brand-name drug company to a potential competitor to keep its less-expensive generic alternative drug off the market.
The case started yesterday in the US between the Federal Trade Commission (FTC) and generic drug-maker Actavis.
The FTC claim that a payment by Solvay Pharmaceuticals, who holds a patent on testosterone gel AndroGel, to Actavis was unlawful because it was intended to stop Actavis producing its own, cheaper generic version of the gel for a certain period of time, and therefore keeping it off the market, reports The New York Times.
The agency also pointed out that this raises the cost consumers pay for prescription drugs.
"It’s unlawful to buy off the competition," said Malcolm Stewart, the deputy solicitor general who represented the FTC and the Justice Department, according to the LA Times.
"It’s an agreement not to compete," he said, which is "presumptively illegal."
The FTC continued by saying that more than two dozen similar deals had cost consumers $3.5bn last year.
The deal between Actavis and Solvay Pharmaceuticals is known as a reverse payment agreement, as payment goes from the brand-name drug company to the generic competitor that is challenging the patent.
The deal was struck after Solvay Pharmaceuticals sued Actavis, which was then known as Watson Pharmaceuticals, for patent infringement after Actavis announced they were releasing a generic version of the testosterone gel.
After three years the suit ended with a deal that kept a generic gel off the market until 2015 and paid Actavis between $19m and $30m a year.
In the current case, Actavis said that such payments were legal as long as they were within the duration of the patent – as long as the delay did not extend past expiration of the brand-name patent.
According to the LA Times, Jeffrey I Weinberger, a Los Angeles attorney for Solvay and Actavis, urged the justices to reject the FTC’s anti-competition argument and uphold the validity of the settlement.
He added that a "good-faith settlement" of a lawsuit is not illegal, so long as the patent itself was valid.
18% of the total prescriptions written by doctors in the US in 2011 were made up of brand-name drugs, making up to 73% of consumer spending, say the IMS.
A generic of a brand name drug costs about 15% of the original, meaning the brand name drug maker loses about 90% of its market share.
A decision on the case is expected in June.
Image: A US federal court is considering the legality of payments by a brand-name drug company made to a potential generic competitor. Photo: Courtesy of Josef Zemanek.