In its second landmark pharma case in the last few days, the US Supreme Court has decreed that pay-for-delay agreements between brand and generic drugmakers should indeed be subject to antitrust scrutiny.

The court's judges were reviewing a keenly-watched case of the US Federal Trade Commission versus Actavis. The former has been waging war against pay-for-delay, also known as reverse payment settlements, for many years, claiming that these deals violate antitrust laws.

In this case, the FTC claimed that generic drugmakers, notably Watson (now Actavis) accepted payments of $31-$42 million a year from AbbVie's subsidiary Solvay for agreeing not to bring their cheaper generic versions of the topical synthetic testosterone product AndroGel to market until 2015.

Now the Supremes have voted 5-3 that a lower court erred in affirming the dismissal of the FTC’s complaint, thus giving the latter the right to pursue pharmaceutical companies with lawsuits concerning this matter. However, in an opinion delivered by Justice Stephen Breyer, the court "declines to hold that reverse payment settlement agreements are presumptively unlawful" and does not say these pacts are necessarily anticompetitive.

'Victory for consumers and taxpayers'

FTC chairwoman Edith Ramirez said the decision "is a significant victory for American consumers, American taxpayers and free markets". She added that the court "has made it clear that pay-for-delay agreements between brand and generic drug companies are subject to antitrust scrutiny and it has rejected the attempt by branded and generic companies to effectively immunise these agreements from the antitrust laws".

Ms Ramirez went on to say that "we look forward to moving ahead with the Actavis litigation and showing that the settlements violate antitrust law". She concluded by noting that "we also are studying the court’s decision and assessing how best to protect consumers’ interests in other pay-for-delay cases".

Mit Spears, the Pharmaceutical Research and Manufacturers of America's general counsel, said "we are pleased that the court unanimously rejected the FTC’s position that patent settlement agreements between innovator and generic pharmaceutical companies should be viewed as presumptively unlawful". This means that the court recognised that settlements "are a vital aspect of a patent owner’s ability to protect intellectual property and are common in numerous industries".

However he added that "we are disappointed that the majority failed to provide clear and unambiguous guidance as to how patent settlements could be structured to avoid antitrust exposure short of litigating a patent dispute to the end". Mr Spears insisted that they can result in substantial costs for both innovator and generic companies, "create business uncertainty, and can result in delayed availability of generic drugs".

He argued that the decision "creates a degree of uncertainty that will make it less likely that innovator pharmaceutical and generic companies will be able to settle these disputes in the future". Furthermore, "this will negatively affect patients and discourage investment in future biomedical research".

Actavis chief executive Paul Bisaro claimed that the decision continues to provide for "a lawful and legitimate pathway for resolving patent challenge litigation in a manner that is pro-competitive and beneficial to American consumers". However, the ruling "does place an additional and unnecessary administrative burden on our industry".

The ruling comes a few days after the Supreme Court has ruled that human genes cannot be patented, but synthetic, or complementary, DNA can be.