Supreme Court refuses to hear pay-for-delay case

Pharmacies and drug wholesalers say paying generic companies to slow marketing is anticompetitive and limits access to low-cost medications.

By Alicia Gallegos — Posted March 28, 2011

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The U.S. Supreme Court will not hear a legal challenge against a deal by Bayer Corp. and Barr Pharmaceuticals in which Bayer paid the generic drugmaker to drop a patent lawsuit over the antibiotic ciprofloxacin.

The rejection is another setback for pharmacies and drug wholesalers who say such negotiations are anticompetitive and restrict low-cost drug access. The so-called pay-for-delay deals are defined as patent settlements between drugmakers that delay the introduction of equivalent generics.

Barr, now owned by Teva Pharmaceutical Industries, challenged the Cipro patent in 1991, attempting to enter the market with a generic equivalent of the drug before Bayer's patent expired in 2003. Bayer sued, alleging patent infringement.

In 1997, two weeks before the case was due for trial, Bayer and Barr settled the dispute, with Bayer paying more than $100 million for Barr to drop its patent challenge. As part of the agreement, Bayer provided the drugmaker a license to sell brand-name Cipro at a reduced rate six months before the patent's expiration, according to court records.

In 2000, more than 30 antitrust lawsuits were filed against Bayer over the Cipro deal, including a complaint by Louisiana Wholesalers Drug Co. and CVS Pharmacy Inc. The plaintiffs said the settlement exceeded the scope of Bayer's patent rights because the company paid millions of dollars to keep potential competitors from fighting its patent. The cases were consolidated for the court's review.

In 2010, the 2nd U.S. Circuit Court of Appeals upheld the settlement. The plaintiffs appealed to the Supreme Court.

Bayer officials are pleased with the high court's decision not to hear the case, Bayer spokeswoman Marcy Funk said.

"This ends over a decade of antitrust litigation in the federal courts, entirely vindicating Bayer's settlement of patent litigation concerning Bayer's innovative antibiotic drug, Cipro," she said in a statement.

Bill seeks to stop deals

Legal disputes against pay-for-delay deals have passed through the courts for years, as agencies such as the Federal Trade Commission have pushed legislators to prevent the practice. The FTC was not involved in the Cipro case, but the agency said in a statement that it is hopeful the high court eventually will tackle the problem.

"I am confident that it's only a matter of time before the Supreme Court takes up this important issue and puts a stop to these anticompetitive deals between branded drugmakers and generic competitors," said Richard Feinstein, director of the FTC Bureau of Competition.

Eliminating such deals would save consumers $3.5 billion a year in prescription drug costs, the FTC said.

A bill that would prohibit pay-for-delay deals was introduced in Congress in 2006. The Preserve Access to Affordable Generics Act, which was reintroduced this session, is before the Senate Judiciary Committee.

With so much focus on the federal budget, the bill probably will not see any movement in the next two months, said Joe Bonfiglio, a spokesman for Sen. Herb Kohl (D, Wis.), the bill's sponsor.

Sen. Charles Grassley (R, Iowa), one of several bill co-sponsors, is optimistic that the Senate will pass the bill before the congressional session ends, said spokeswoman Beth Levine.

President Obama's fiscal 2012 budget proposal includes restrictions on pay-for-delay deals that he said would save $8.8 billion during the next decade. But the Pharmaceutical Research and Manufacturers of America argues that overly broad restrictions on patent settlements would decrease the value of patents and reduce incentives for innovation of new medicines.

"Restricting patent settlements can discourage pro-consumer settlements that do not delay generic entry past patent expiration, but instead often bring generics to market years before patent expiration," Diane Bieri, PhRMA executive vice president and general counsel, said in a statement. "Without settlements, these generics may not be available to patients for years."

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