FTC files first court action to address authorized generic pay-for-delay pharmaceutical agreements

After years of challenging pay-for-delay settlements, the Federal Trade Commission (FTC) is taking strong action in court for the first time against arrangements between pharmaceutical companies that prevent generic alternatives from entering the market. The agency filed a complaint against Endo Pharmaceuticals, Inc., (Endo), Teikoku Pharma USA, Inc. (Teikoku Pharma), Watson Laboratories, Inc., Allergan PLC, and Impax Laboratories, Inc., alleging that Endo paid the first manufacturers that filed for generic approval to delay marketing drugs that competed with its branded drugs Opana® ER and Lidoderm®.

Reverse-payment agreements

The FTC challenges Endo’s “reverse-payment agreements,” which the government categorizes as anticompetitive, to prevent authorized generic drugs from entering the market. The agency points out that Opana ER and Lidoderm make up about 64 percent of the company’s annual revenues. Endo paid companies millions to delay market entrance of authorized generics (AGs), with a promise that it would allow the other company to be the only generic seller for several months before Endo entered with its own generic version. The first generic applicant is granted 180 days of generic exclusivity under federal law, except when a branded drug manufacturer decides to make its own generic. The FTC believes that these no-AG agreements are valuable to the first generic applicant, who is guaranteed to be the only producer for the 180-day period and can corner the market while charging higher prices.

In its complaint, the FTC pointed out generic drugs save patients, health plans, and government-sponsored health programs billions of dollars per year. It also noted that retail pharmacies often stock the brand and one generic, and that competition exists among generic suppliers, which serves to drive down the price. The FTC alleged that Endo’s actions eliminated the risk of generic competition for years, depriving the market of reduced prices. The agency requested a declaration that the agreements violated the FTC Act (15 U.S.C. §41 et seq.) and a permanent injunction preventing the companies from entering into similar agreements in the future.

Stipulated injunction

Along with its complaint for injunction, the FTC filed a stipulated order for permanent injunction against both Teikoku Seiyaku Co., Ltd., and Teikoku Pharma, Endo’s partners, prohibiting them from entering into prohibited brand/generic settlement agreements for 20 years. During that time, they may not pay a generic filer to stop researching, developing, manufacturing, marketing, and selling a drug unless the FTC approves the agreement.