The US Federal Trade Commission says that a ban on ‘pay for delay’ agreements between brand-name and generic manufacturers could cut spending on pharmaceuticals by billions of dollars a year.

The FTC’s chairman Jon Leibowitz says that an internal analysis projects that stopping what he describes as “collusive” settlements between brand and generic pharmaceutical firms would save consumers $3.5 billion a year. He added that a ban would also reap significant savings for the federal government, which pays around one-third of all prescription drug costs in the USA.

Mr Leibowitz said that “the decision about whether to restrict pay-for-delay settlements should be simple”. He went on to claim that “on the one hand, you have savings to American consumers of $35 billion or more over ten years…and the prospect of helping to pay for health care reform as well as the ability to set a clear national standard to stop anticompetitive conduct”. On the other hand, “you have a permissive legal regime that allows competitors to make collusive deals on the backs of consumers,” he added.

Mr Leibowitz urged Congress to pass pending legislation to stop manufacturers of brand-name drugs pay potential generic competitors to stay out of the market, saying that “eliminating these [pay-for-delay] deals is one of the FTC’s highest priorities”. He remarked that while the Commission had successfully stopped “such illegal payments earlier this decade, recent appellate court decisions, beginning in 2005, have blessed these anticompetitive settlements”.

These decisions have “opened a Pandora’s box of settlements”, Mr Leibowitz added, with generic firms competing to be the first to get paid off to stay out of the market instead of competing to be the first to come to market.

Bayer’s Cipro deal with Barr legal
Mr Leibowitz’ comments came as the US Supreme Court rejected an appeal by the Arkansas Carpenter's Health and Welfare Fund, which had sued Bayer over the company’s $398 million deal with Teva’s Barr Pharmaceuticals unit. Under the terms of that deal, Barr agreed not to sell a copycat version of the German group’s antibiotic Cipro (ciprofloxacin).

The aforementioned pension fund had called the deal anti-competitive but a federal appeals court ruled that the payments were not illegal, a view that has also been adopted by the Supreme Court. Separate litigation on the Cipro pact brought by drug wholesalers and retailers is still pending in a lower court.