US FTC goes after Pharma on two fronts relating to patent agreements

In what appears to be a two pronged attack on pharmaceutical industry practices, the US Federal Trade Commission (FTC) yesterday launched a new initiative on patent settlements (also called pay-for-delay settlements, and long criticized by the agency’s chairman Jon Leibowitz and key members of Congress), as well as transfer of exclusive patent rights.

First up, the FTC filed an amicus brief before the US District Court for the District of New Jersey explaining that an agreement by a branded company not to launch an authorized generic (AG) drug is a “convenient method” for branded drug firms to pay generic patent challengers to delay their entry into the market. In a no-AG commitment, the branded firm, as part of a patent settlement, agrees that it will not launch its own generic alternative when the first generic begins to compete. Because the introduction of the branded authorized generic would cut into the revenues of a competing generic, a no-AG commitment can induce the generic company to delay its entry, the FTC argues.

Based on its own comprehensive study of authorized generics, the FTC explained in its amicus brief: “This empirical evidence confirms what the pharmaceutical industry has long understood: that a no-AG commitment provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry.