Appeals Court Upholds Pay-to-Delay Deals, Again

 |  Includes: ABT, BAYRY, BRL
by: Pharmalot

In yet another blow to the US Federal Trade Commission, a federal appeals court has refused to reconsider its ruling last April that upheld the legality of so-called pay-for-delay deals that thwart the introduction of generic rivals (here is the order). However, in a dissenting opinion, Justice Rosemary Pooler writes that the issue must ultimately be decided by the US Supreme Court, given the conflicting outcomes in various cases.

The initial ruling by the US Second Circuit Court of Appeals was made after reviewing a deal in which Bayer (OTCPK:BAYRY) paid Barr Pharmaceuticals (BRL), which is now owned by Teva Pharmaceuticals (NASDAQ:TEVA), to drop its patent challenge to the Cipro antibiotic. Barr challenged the Cipro patent in October 1991 and struck a deal with Bayer in January 1997, about two weeks before the case was set to go to trial.

However, a rehearing was sought after the federal appeals court also took the unusual step of inviting entities that purchase drugs and had challenged the settlement to ask that the case be reviewed by the full circuit, citing the “exceptional importance” of the antitrust implications (background here). That emboldened a group of consumers, union health and welfare funds, which have been certified as a class, to ask a California appeals court to review the same case, although how that will now play out is uncertain (look here).

The ruling is yet another setback for the Federal Trade Commission, which has been pushing aggressively to end pay-to-delay deals (look here). Earlier this year, a federal judge dismissed an antitrust lawsuit filed by the FTC against Abbott Labs’s (NYSE:ABT) Solvay unit for allegedly conspiring with several generic drug makers to delay competition for a testosterone-replacement med. And the White House included what became a scuttled proposal to make these deals illegal as part of its health care reform package.

More recently, FTC commissioner Jon Leibowitz scored a nominal victory when the US Senate Appropriations Committee voted to pass the Preserve Access to Affordable Generic Drugs Act, and not long after a companion House bill was recently passed. The legislative effort is the result of tenacious lobbying by Leibowitz, who has made pay-for-delay his primary cause, although he has suffered previous frustrations in attempting to convince Congress to address the issue.

In a triumphant declaration, the Washington Legal Foundation, a conservative think tank that supports the pay-to-delay concept, wrote that, “once again, the FTC has emerged empty-handed from court, deprived of a new talking point in its anti-patent settlement campaign. It will be interesting to watch the FTC and its crusading commissioners try to dismiss the significance of Ciprofloxacin while agitating for a legislative solution it is absolutely convinced the public requires.”