FTC Staff Issues FY 2015 Report on Branded Drug Firms’ Patent Settlements with Generic Competitors

The number of reverse-payment patent settlements entered into by pharmaceutical companies in fiscal year 2015 declined from fiscal year 2014, marking a second annual decrease in such settlements, according to a new FTC staff report.

The report summarized data on patent settlements filed with the FTC and the Department of Justice during FY 2015 under the Medicare Modernization Act of 2003. This is the Bureau of Competition’s second annual snapshot of such deals since FTC v. Actavis, in which the Supreme Court held that a branded drug manufacturer’s reverse payment to a generic competitor to settle patent litigation can violate the antitrust laws.  Generic drugs often cost less than brand drugs, helping to make medicines affordable for millions of American consumers and to keep health care costs down.

“While the number of reverse-payment settlements has declined in FY 2014 and FY 2015, Bureau of Competition staff continues to review each patent settlement it receives to identify potentially anticompetitive agreements,” said FTC Acting Chairman Maureen K. Ohlhausen. “More competition from less expensive generic drugs will tend to lower both drug prices and healthcare costs overall.”

According to the report, there were 14 potentially anticompetitive patent settlement deals in FY 2015, down from 21 identified in the FY 2014 report. Moreover, excluding settlement in which the only compensation is the payment of less than $7 million in litigation fees, only five settlements in FY 2015 contained both compensation to the generic and a restriction on generic entry.

The 14 reverse-payment settlements reported by pharmaceutical companies in FY 2015 involved 11 different branded pharmaceutical products with combined annual U.S. sales of approximately $4.6 billion.

Of these 14  settlements with explicit compensation to the generic and a restriction on generic entry, seven involved generics that were so-called “first filers.” First filers are the companies that were the first to seek FDA approval to market a generic version of the branded drug, and, at the time of the settlement, were eligible to market the generic product for 180 days without competition from other non-first filing generics. Under FDA regulations, until a first filer enters the market, other generic manufacturers cannot enter.

 Finally, the total number of settlements filed with the FTC increased slightly from 160 in FY 2014 to 170 in FY 2015, causing the proportion of potentially anticompetitive settlements—as a percentage of the total number of settlements filed with the FTC—to decline to the lowest level since FY 2004.

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