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1. Obama-era antitrust enforcers describe their litigation against a collusive practice in pharma (pay-for-delay agreements) as a success. Thread explaining why their triumphalism is unwarranted and why we need a legislative or regulatory solution.
2. Pay-for-delay agreements among branded and generic drug companies are an important contributor to high prescription drug prices and transfer billions of dollars from patients and payors to pharma coffers every year.
3. In a pay-for-delay agreement, a branded drug company, instead of exercising its right to exclude using patent law, gives a potential generic rival cash (or other consideration) to drop challenges to the brand’s patents and to postpone market entry.
4. This is classic market allocation and a form of horizontal collusion (“the supreme evil of antitrust” according to the Supreme Court)
5. The association with patents shouldn’t excuse this conduct any more than property rights in land and structures excuse collusion among competing manufacturers.
6. In most industries, this conduct would be per se illegal and potentially invite criminal prosecution by the government
7. This is not the case for pay-for-delay arrangements, however
8. Due to a very muddled 2013 Supreme Court decision called FTC v. Actavis, enforcers and the courts must apply some form of the fact-intensive rule of reason to pay-for-delay agreements, which typically would be per se illegal
9. Despite the Supreme Court rejecting a presumptive or per se illegality test, then-FTC Chairwoman Edith Ramirez hailed Actavis as “a significant victory for American consumers, American taxpayers, and free markets” https://www.ftc.gov/news-events/press-releases/2013/06/statement-ftc-chairwoman-edith-ramirez-us-supreme-courts-decision
10. A case pending before the Fifth Circuit (Impax Laboratories v. FTC) will likely decide whether Actavis is interpreted in more, or less, enforcement-friendly ways
11. @openmarkets filed an amicus brief in support of the FTC explaining that pay-for-delay schemes are a form of market allocation and that the court should apply a standard approaching presumptive illegality https://www.openmarketsinstitute.org/publications/amicus-brief-ftc-v-impax-laboratories
12. Oral argument in June was not encouraging for the FTC and the public https://www.jdsupra.com/legalnews/impax-oral-argument-at-fifth-circuit-84118/
13. Seven years after the FTC’s supposed “significant victory” in Actavis, pharma cos continue to engage in pay-for-delay schemes (albeit in more complicated forms) and the legal standard governing the practice remains unclear
14. Litigation has failed in this area. It is time that either Congress through legislation or the FTC through rulemaking prohibits pay-for-delay agreements as per se illegal.
