Brand-name pharmaceutical companies in the past two years have resumed the practice of entering into agreements in which they pay generic drug makers to drop challenges to patents, according to a Federal Trade Commission report, the Washington Post reports. According to the report, three such agreements were formed in fiscal year 2005, and at least seven have been made so far in this fiscal year (Kaufman, Washington Post, 4/24). The deals are the first such agreements since 1999, the AP/San Jose Mercury News reports (AP/San Jose Mercury News, 4/25). FTC since the late 1990s had prevented brand-name drug makers from paying generic rivals to drop patent challenges, the Post reports. However, late last year, the U.S. Court of Appeals for the 11th Circuit ruled that FTC was beyond its authority when it blocked a deal between Schering-Plough and Upsher-Smith Laboratories over the drug K-Dur 20, a treatment for high blood pressure and congestive heart disease. FTC, which has appealed to the Supreme Court, argues that the deals are anti-competitive and unfair to consumers.

FTC Commissioner Speech
In a speech on Monday to the In-House Counsel's Forum on Pharmaceutical Antitrust, FTC Commissioner Jon Leibowitz said that if the appeals court decision remains in effect, drug makers will have "carte blanche to avoid competition and share resulting profits." Leibowitz said the agreements mutually benefit the brand-name and generic drug makers because the brand-name company gets to maintain its patent exclusivity, while the generic competitor receives a payment. In addition, the "generic companies ... often enter into agreements to produce lower-priced version of the brand-name company's drug at a predetermined date -- far in the future," the Post reports. For example, Cephalon earlier this year made agreements with four generic companies over the drug Provigil, a sleep disorder treatment. Under the agreements, the generic companies pledged to stay out of the market until 2011, and Cephalon agreed to pay them licensing payments of $136 million. Leibowitz said, "Until recently, payments by brand-name companies to generics were the exception, but now they're the rule," adding, "They appear to be a new way to do business, and that's very troubling. Hopefully the Supreme Court will take our case and reverse." The Pharmaceutical Research and Manufacturers of America and the Generic Pharmaceutical Association declined to comment on Leibowitz's remarks or the FTC report (Washington Post, 4/24).

The FTC report is available online. Note: You must have Adobe Acrobat Reader to view the report.