High Court Sides With Regulators In Drug Patent Case

The Supreme Court sided with government regulators in an important case involving the pharmaceutical industry and patent law. At issue were contracts between "brand-name" pharmaceutical companies and "generic" producers in which the brand-name company paid the generic not to compete. The court said the Federal Trade Commission could challenge such contracts.

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To another Supreme Court ruling now, this one about the pharmaceutical industry. Today, the justices said that federal regulators can sue drugmakers if they pay their rivals to keep generic drugs off the market. The Obama administration had argued that such agreements hurt competition and cost consumers billions of dollars. But as NPR's Jim Zarroli reports, the ruling didn't go as far as the administration hoped.

JIM ZARROLI, BYLINE: The case involved Solvay Pharmaceuticals, which held a patent on a testosterone gel called AndroGel. A generic drugmaker wanted to bring its own version of the drug to market, so it challenged the patent. The two companies negotiated and came up with a settlement in which Solvay agreed to pay the challenger to stay out of the market temporarily.

Critics call this kind of settlement a pay-to-delay agreement, and the Obama administration says such settlements drive up drug prices by hurting competition. Tom Goldstein is editor of SCOTUSblog and also filed a brief in support of the administration.

TOM GOLDSTEIN: And the claim of the Federal Trade Commission was pretty straightforward. It said, yes, you're reducing competition. You just paid somebody tens of millions of dollars to stay out of the market.

ZARROLI: Solvay argued that it wasn't hurting competition. The company noted it had a patent that gave it the right to sell AndroGel exclusively for a set period, and the settlement didn't do anything to extend the length of that patent. An appeals court agreed and tossed out the government's suit.

But in today's 5-3 ruling, the Supreme Court reinstated the suit. The court stopped short of declaring pay-to-delay settlements a violation of antitrust law, but it did say such settlements sometimes hurt competition, and the government could challenge them on those grounds.

The ruling is a significant defeat for drugmakers who now have to worry about running afoul of antitrust regulators when they try to settle patent claims. Ralph Neas, president of the Generic Pharmaceutical Association, said, as a result, generic drugmakers will be less likely to challenge patents.

RALPH NEAS: There's no question it's yet one more factor that the pharmaceutical companies will take into consideration when they make a decision as to whether or not they're going to bring a patent challenge. It has been made more difficult.

ZARROLI: And Neas says if the process becomes more difficult, then generic drugmakers will be less likely to launch patent challenges. In the long run, he says, fewer generic drugs will be brought to market, and he says that will end up hurting consumers. Jim Zarroli, NPR News, New York.

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