Pay-for-delay settlements court ruling could hurt drugmakers, says Fitch

The possibility of a Supreme Court review regarding patent settlements, often dubbed "pay-for-delay" agreements, between brand-name and generic drug manufacturers has no immediate credit implications, according to Fitch Ratings.

However, the USA-based ratings group believes that, if and when a decision is made ruling the settlements illegal, this could have negative credit implications for the industry. Generic competition has increasingly placed pressure on key pharmaceutical sales, with generic utilization significantly over the past 30 years - at roughly 75% in 2011 versus around15% in 1980.

A federal appeals court in Philadelphia this month sided with the Federal Trade Commission (FTC), labeling the settlements anti-competitive, suggesting these deals keep other potential generics off the market. Following that decision, the US Generic Pharmaceutical Association (GPhA) reiterated its views, stressing that the GPhA has long maintained that patent settlements are a vital tool for providing patients with early access to safe and affordable generic medications (The Pharma Letter July 18). Over the past 10 years, patent settlements have enabled dozens of first-time generics to come to market many months and even years before patents on the counterpart brand drugs expired, the trade group argued.