The US Federal Trade Commission says the top pharmaceutical companies have resumed the practice of paying generic drug manufacturers to keep copycat versions of brandname medicines off the market, despite abandoning the practice in the late 1990s.

The FTC’s Commissioner, John Leibowitz, said that while the practice fell out of favour in 1999, there were three cases in the 12 months to end-September 2005, and a further six since then, in which so-called ‘exclusion payments’ were made to generics companies in return for restrictions being placed on the launch of products.

The agency has an ongoing investigation into possible collusion between generic drugmakers and brandname pharmaceutical companies and, last month, subpoenaed nearly 200 pharmaceutical companies as part of a probe into ‘authorised generics’.

These are launched onto the market at the same time as the first independent generic, in some cases bypassing the exclusivity period usually awarded to the first generic manufacturer to file for approval of a copy of a branded product under the Hatch-Waxman legislation.

The FTC maintains that the exclusion payments delay the entry of cheaper generic drugs into the marketplace, raising the costs of drug treatment for patients and healthcare payers.

The agency has successfully discouraged this type of agreement in recent years by filing lawsuits against the companies involved, but recently suffered two defeats on appeal that, it is alleged, have encouraged pharmaceutical companies to adopt the practice once again.

A speech by Leibowitz, posted on the FTC website, notes that a pivotal moment came last year when an appeals court overturned an earlier ruling that Schering-Plough had conspired to keep copycat versions of its K-Dur blood pressure drug off the market through settlement payments with generic companies. This case has now gone on to the Supreme Court.

The FTC also lost another case on appeal that had been brought against AstraZeneca alleging similar activities relating to its cancer drug Nolvadex (tamoxifen), which has since been withdrawn from sale in the USA in the wake of a sales slump.

The result has been that exclusion payments now seem to be ‘the new way to do business’, claims Leibowitz, adding that some of these settlements push the generic entry date out almost to patent expiration.

One under scrutiny is between Sanofi-Aventis/Bristol-Myers Squibb and Apotex regarding the antiplatelet drug Plavix (clopidogrel), which has $3.8 billion in annual sales. An agreement between the companies means Apotex will not launch a generic until 2011, in return for an undisclosed settlement fee.

If Apotex launched generic Plavix ahead of 2011, hundreds of millions of dollars in annual consumer savings could be made, he said.

Leibowitz stressed that he was offering no view on the legality of such arrangements, but suggested that it is possible that Harch-Waxman has started to get ‘out of whack’ and may need attention.

- Last November, the FTC filed a lawsuit in a bid to unwind an agreement under which Warner Chilcott paid Barr $20 million not to enter the market with its competing generic version of the oral contraceptive Ovcon. That case is pending in federal court, said Leibowitz.