FTC: Recent Supreme Court Decision Puts Agency in Stronger Position to Protect Consumers From Anticompetitive Pay-for-Delay Drug Settlements

The Federal Trade Commission told a Senate Judiciary subcommittee today that it will continue to challenge anticompetitive pay-for-delay court settlements in the pharmaceutical industry, and that the recent U.S. Supreme Court decision in FTC v. Actavis “is an important victory for consumers and a vindication of basic antitrust and free market principles.”

Testifying on behalf of the FTC before the Subcommittee on Antitrust, Competition and Consumer Rights, Chairwoman Edith Ramirez called the pay-for-delay issue “one of the Commission’s top priorities” and said the Commission “remains united today in its determination to end these illegal pay-for-delay agreements.”

“Because of the Actavis decision, we are in a much stronger position to protect consumers from anticompetitive drug-patent settlements that result in higher drug costs,” the testimony states.

Anticompetitive pay-for-delay agreements, the testimony, stated, “violate the antitrust laws and undermine the goal and spirit of the Hatch-Waxman Act, which seeks to prevent weak patents from obstructing the development of lower-cost generic competition.”

The Supreme Court’s decision in Actavis was a victory for the FTC in its efforts to stop anticompetitive pay-for-delay deals because it overturned the so-called “scope-of-patent” test, which had been adopted by some courts and virtually immunized pay-for-delay settlements from antitrust scrutiny, the testimony states. Instead, as the testimony explains “the Supreme Court ruled that pay-for-delay agreements are appropriately subject to rule of reason scrutiny, the standard applied in most antitrust actions.”

According to the testimony, “The decision and the Commission’s enforcement agenda should deter companies from entering into anticompetitive agreements. This, in turn, will help consumers, employers, and taxpayers who would otherwise suffer from reduced competition and higher drug prices.”

To achieve those ends, the Commission will continue to:

• pursue pay-for-delay matters currently in litigation and seek appropriate relief for consumers;
• monitor private litigations alleging pay-for-delay agreements and leverage FTC experience and expertise by filing amicus briefs where appropriate;
• investigate pending pay-for-delay matters;
• examine new settlements that companies file with the FTC under the Medicare Modernization Act of 2003 (MMA) and investigate those that raise anticompetitive concerns; and
• issue regular reports on drug settlements filed with the FTC under the MMA.

The testimony concludes that, “For almost fifteen years, the Commission has dedicated significant resources to prevent these deals because it believes that these settlements can significantly harm consumers and competition. The Supreme Court’s decision in Actavis confirms that these settlements harm consumers and competition, and the Commission will continue to aggressively prosecute these anticompetitive settlements.”

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

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{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001. 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.