Zachary D Caplan JD, attorney at law firm in Philadelphia that filed amicus brief on behalf of drug wholesalers and pharmacies in FTC v. Actavis
Arthur Caplan PhD, Division of Medical Ethics, NYU Langone Medical Center
Amidst all the news about various Supreme Court decisions there is one that ought not be overlooked for its impact both on public health and healthcare reform—FTC v. Actavis. Today the Court decided, by a vote of five to three, that Big Pharma companies can be sued over deals with generic companies to not bring generic drugs to market. In so deciding, the Court endorsed the idea that Big Pharma companies with weak patents on their drugs may not pay off other companies that want to make cheaper generic versions to not do so. This practice, known as pay-for-delay, has run rampant in the pharmaceutical industry over the last two decades costing American consumers billions and restricting access to cheaper versions of drugs.
In FTC v. Actavis, the Federal Trade Commission had alleged a pay-for-delay arrangement between Solvay Pharmaceuticals and Actavis that was intended to keep Actavis from producing a generic version of Solvay’s blockbuster AndroGel testosterone drug. A lower court—the Eleventh Circuit Court of Appeals—dismissed the FTC’s complaint. Now the Supreme Court has reversed that dismissal.
The pay-for-delay problem arose because manufacturers of new and innovative drugs can obtain patents that allow them several years where they can sell their new drug free from competition. This period of time is known as patent exclusivity. This system makes sense because it encourages drug manufacturers to invest heavily in the research and development of new drugs knowing that they will be able to recoup their investments and much more if they are able to bring a new drug to market. However, Big Pharma companies discovered that they could manipulate the system by obtaining weak patents on drugs that were just reformulated versions of old drugs and that were not truly new and innovative.
A 1984 law, the Drug Price Competition and Patent Term Restoration Act, commonly known at the Hatch-Waxman Act, was intended to speed up lower-cost generic competition by setting up a system for generic pharmaceutical companies to challenge Big Pharma’s weak patents and bring cheaper generic drugs to market. Big Pharma companies were not happy with Hatch-Waxman because it meant that their weak patents could be found invalid and that they would lose billions when they lost patent exclusivity. Thus, Big Pharma found a loophole in the Hatch-Waxman system that allowed Big Pharma to pay off generic manufacturers to avoid having their weak patents challenged thereby delaying competition—hence the name pay-for-delay.
Some lower courts, such as the Eleventh Circuit, declined to get involved with evaluating the strength of a patent and let Big Pharma get away with these deals. However, today’s Supreme Court opinion in FTC v. Actavis makes clear that lower courts must consider challenges. In doing so, the Supreme Court recognized that the “thrust” of Hatch-Waxman is “generally procompetitive” and that pay-for-delay deals should be carefully evaluated to ensure that they do not ultimately harm consumers by exploiting the patent system.
When it passed Hatch-Waxman almost thirty years ago Congress saw how much money generic drugs could save consumers. Today’s decision helps ensure that Hatch-Waxman can fulfill Congress’s intent. Pay-for-delay should now be far less of an obstacle to the development of cheaper drugs for all Americans.