FTC Files Amicus Brief Explaining That "No-AG" Agreements Are Used by Drug Companies to Delay Generic Competition

The Federal Trade Commission filed an amicus brief before the U.S. District Court for the District of New Jersey explaining that an agreement by a branded company not to launch an authorized generic (AG) drug is a “convenient method” for branded drug firms to pay generic patent challengers to delay their entry into the market.  In a no-AG commitment, the branded firm, as part of a patent settlement, agrees that it will not launch its own generic alternative when the first generic begins to compete.  Because introduction of the branded authorized generic would cut into the revenues of a competing generic, a no-AG commitment can induce the generic company to delay its entry.

Based on its own comprehensive study of authorized generics, the agency explained in its amicus brief that,  “This empirical evidence confirms what the pharmaceutical industry has long understood: that a no-AG commitment provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry,” the amicus brief states.
The FTC filed its amicus brief in conjunction with a private antitrust action challenging an agreement between drug manufacturers Wyeth and Teva Pharmaceuticals, in which plaintiffs allege that Teva agreed to delay its introduction of a generic version of Wyeth’s blockbuster antidepressant drug Effexor XR.  As part of the alleged “no-AG” agreement signed in 2005, Wyeth entered into an exclusivity provision in which it effectively agreed to refrain from marketing an authorized generic (AG) version of Effexor XR, and Teva agreed to delay its generic until July 1, 2010.

The judge presiding over the Effexor case has asked for briefings on how the case is affected by a recent ruling by the Third Circuit U.S. Court of Appeals. Adopting the position advocated by both the FTC and DOJ, the Third Circuit Court of Appeals recently held that payments by a branded drug manufacturer to a potential generic competitor are “prima facie evidence of an unreasonable restraint of trade”  when they are part of patent settlements that delay the introduction of a generic competitor.  These agreements are sometimes called pay-for-delay settlements.  The FTC has for years opposed anticompetitive pay-for-delay patent litigation settlements.  The Commission filed its brief to explain to the U.S. District Court the role of authorized generics, and to share the empirical results of its studies on the issue of AG and no-AG commitments.

The FTC vote approving the amicus brief filing was 5-0. It was filed with the court on August 10, 2012. (FTC File No. P859910; the staff contact is Saralisa Brau, Health Care Division, Bureau of Competition, 202-326-2774.)

The FTC's Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.