(FROM THE WALL STREET JOURNAL 12/12/14)
By Ed Silverman
A closely watched trial that many hoped would help clarify a
contentious battle over access to generic drugs instead ended in
disappointment last week. In fact, the outcome only seems to have
underscored the difficulty in sorting out so-called pay-to-delay
deals, a topic that has embroiled the pharmaceutical industry,
regulators and the courts for years.
In these arrangements, a brand-name drug maker and a generic
rival locked in patent litigation reach a settlement. The
brand-name drug maker may offer cash or something else of value
and, in return, wins more time to sell its medicine without
encountering lower-cost competition. The generic drug maker,
meanwhile, also comes away with an agreement to sell its copycat
medicine at a specified future date.
Such maneuvering has raised antitrust concerns at the U.S.
Federal Trade Commission, which has estimated these deals cost
Americans $3.5 billion annually in higher health-care costs. For
its part, the pharmaceutical industry contends the deals are not
only legal, but allow lower-cost generic drugs to reach consumers
faster than if patent litigation dragged on.
The issue bubbled up to the U.S. Supreme Court, which last year
ruled such deals can face greater antitrust scrutiny. The case
decided last week -- in which AstraZeneca PLC and Ranbaxy
Laboratories Ltd. were accused of illegally delaying a generic
version of AstraZeneca's Nexium heartburn pill -- offered the
potential for clarity since it was the first to go to trial since
the ruling.
Instead, the federal court jury in Boston offered a mixed bag.
The jury decided the drug makers failed key litmus tests
established by the ruling. AstraZeneca offered Ranbaxy a deal that
several wholesalers and pharmacies argued in their suit was worth
up to $1 billion.
The deal involved a commitment made by AstraZeneca not to sell a
so-called authorized generic Nexium, which is a lower-cost version
of its own drug. This had value because Ranbaxy would have had less
competition, and the jury agreed this was anticompetitive and
"large and unjustified."
But AstraZeneca prevailed because the jury decided there was no
harm done. How so? The drug makers had agreed that a generic
version of Nexium wouldn't become available before May 2014 and
there was no evidence this would have happened earlier had there
not been a settlement. In other words, the jury didn't find reason
to believe Ranbaxy would have sold a pill any sooner.
"The Nexium case sends a clear signal that pay-for-delay claims
are much easier to allege than prove at trial." says Jay Lefkowitz,
an attorney at Kirkland & Ellis who represents brand-name drug
makers.
Maybe so. But there was an extenuating circumstance that is
unlikely to emerge in other cases. In this instance, Ranbaxy was
unable to sell a generic Nexium sooner than May 2014 because of
manufacturing problems that prompted the FDA to ban products made
at certain facilities.
"The plaintiffs did enough to prove their case," says Michael
Carrier, a Rutgers University School of Law professor who
specializes in intellectual-property issues and has filed a brief
in another pay-to-delay case on behalf of consumer groups. "It just
came down to one thing -- the generic company was not ready to
launch before 2014."
One issue in this case does factor into how others may be
decided -- whether antitrust law is violated only if cash is
exchanged between a brand-name drug maker and its generic rival.
Although AstraZeneca also agreed not to sell an authorized generic
Nexium, the case didn't turn on whether a cash payment was the only
means by which to measure antitrust activity.
A federal appeals court is expected to decide one such case
shortly. The impact may be significant.
"If the court says there has to be cash involved," says Seth
Silber, an attorney at Wilson, Sonsini, Goodrich & Rosati and a
former adviser at the FTC, "pharmaceutical companies would have a
lot more flexibility in how they settle cases."
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