The US Supreme Court is to review the payments made by brand name drug makers to the manufacturers of unbranded, and often cheaper, generic equivalents to keep their competing products off the market. The practice has been estimated to cost American consumers around US$3.5bn per year.
The justices announced on 7 December that they would consider competing appeals court decisions over whether the practice known as reverse payments, or ‘pay for delay’, illegally reduces competition by putting back the launch date and sale of generic drugs.
The payments typically are made to resolve patent infringement claims by the brand name manufacturers against makers of generic drugs. The practice is unusual in that typically the claim is resolved by a payment from the company that holds the patent rights to a drug to the company accused of violating them.
The US Federal Trade Commission (FTC) has said that either Congress or the Supreme Court should take action to protect consumers from what it believes to anti-competitive agreements, as generic drugs can sell for as little as 10% of the brand name price and thereby eliminate much of the market for higher-priced brand name drugs.
FTC chairman, Jon Leibowitz, has described the agreements as “win-win deals for both companies”, but ones that “leave American consumers footing the bill”. According to the FTC, the settlements typically add 17 months to the time it takes to get generic drugs on the market.
Drug makers retort that the settlements are an efficient way to end costly patent litigation and also speed the delivery of cheaper treatments to the market.
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