Generic drugs agreement struck down as anti-competitive

After a public comment period, the Federal Trade Commission (FTC) approved, in a 4-0 Commission vote, final orders settling charges that Concordia Pharmaceuticals Inc. and Par Pharmaceuticals, Inc. entered into an unlawful non-compete sales agreement regarding generic versions of the prescription drug Kapvay, which is used to treat attention deficit hyperactivity disorder. Before the original patent for Kapvay expired in 2013, the brand name version of the drug had been bringing in $72 million a year in the U.S. alone.

As the patent expired, Par became the first drug company approved to market a generic version. However, that same year, Concordia acquired the rights to Kapvay, meaning it could sell both a brand name and generic version of the drug. Rather than placing competing products into the market, Concordia instead entered into an agreement with Par to not sell an authorized generic version of Kapvay in exchange for a share of Par’s revenues from sales of its own generic Kapvay. Under the deal, Par was granted the rights to the original patent and any future intellectual property relating to Kapvay. Concordia also agreed to delay its marketing of Kapvay for five years and to not permit any third party to market an authorized generic version of the drug for a share of 35 to 50 percent of the revenues from the sale of the drug.

Authorized generics

An authorized generic is a prescription drug that has been approved by the FDA as a brand name drug product, but is marketed by the brand company (or its representative) as a generic drug product, without the trademark of the brand name drug. An FDA authorized generic can be sold at any time. According to the FTC, competition from an authorized generic has two significant financial implications for the first generic entrant: (1) the authorized generic typically takes substantial sales from the first entrant; and (2) the competition from an authorized generic means that, on average, sales are made at lower prices. When the first generic entrant is the sole seller of the generic drug product, it enjoys approximately double the revenues that it would otherwise make in the first six months on the market if it faced competition from an authorized generic.

Consent orders

Under the terms of the FTC settlements, Concordia is prohibited from enforcing the provisions of its 2013 agreement with Par, notably the profit-sharing mechanism. Par is prohibited from enforcing provisions that bar Concordia from agreeing to not sell generic Kapvay. Concordia had begun sales of generic Kapvay once the FTC’s investigation was made public. In addition, Concordia and Par are: (1) prohibited from agreeing with other entities to bar or delay entry of an authorized generic after the patents covering the branded product have expired; (2) required to provide the FTC notice of any patent settlements made that could restrict entry of an authorized generic drug; and (3) required to established a compliance program.