FTC Issues FY 2011 Patent Settlement Report; Attempts to Keep Up the Heat on Passage of the Preserve Access to Affordable Generics Act

By Kurt R. Karst –      

On October 25, 2011, the Federal Trade Commission (“FTC”) announced the release of its annual summary of agreements filed with the Commission during the last fiscal year (Fiscal Year 2011)  – “Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003” – saying that “pharmaceutical companies continued a recent anticompetitive trend of paying potential generic rivals to delay the introduction of lower-cost prescription drug alternatives for American consumers.”  We had an idea the report was coming out soon when we read an editorial in the Washington Post supporting the FTC’s crusade against what they call “pay-for-delay settlements.”  (Contrast the Washington Post’s editorial with one from the Wall Street Journal last year – here.) 
 
According to the FTC, the Commission received 156 final resolutions of patent disputes between a brand and a generic in Fiscal Year 2011.  This is an increase of 43 settlements over the Fiscal Year 2010 figures.  A total of 28 final settlements involving 25 different branded pharmaceutical products “contain both compensation to the generic manufacturer and a restriction on the generic manufacturer’s ability to market its product,” says the FTC.  In addition, 54 of the settlements reportedly involve generics eligible for 180-day exclusivity, and 18 of them “contain both compensation to the generic manufacturer and a restriction on the generic manufacturer’s ability to market its product,” according to the FTC.  Both of the groups of 28 and 18 settlement agreements are tagged by the FTC as “potential pay-for-delay” deals in the handy-dandy table included in the report (below).
Based on the figures provided by the FTC, the Commission concludes that “FY 2011 witnessed the continued trends of (a) record numbers of brands and generics resolving patent litigation prior to a final court decision on the merits and (b) significant numbers of such settlements potentially involving pay-for-delay.” 

Of course, the FTC’s numbers only tell one side of the statistics story.  If, instead of comparing the fiscal year-over-fiscal year “potential pay-for-delay” deal numbers, you compare the “potential pay-for-delay” deals as a percentage of the overall final settlement agreements for each fiscal year, then there is no recent upward trend.  Our friends over at PatentDocs did that last year and here’s what they found – see here.  The Fiscal Year 2011 numbers are the lowest percentages in their respective categories since the FTC began issuing its reports – at 18% in the “Potential Pay-for-Delay” category, and at 11.5% in the “Potential Pay-for-Delay Involving First Filers” category.

The FTC uses its announcement of the latest report to once again express its support for S. 27, the Preserve Access to Affordable Generics Act, which would amend the FTC Act to enact what some have commented would be an effective ban on patent settlement agreements.  The FTC, the Obama Administration (see here, page 42), and the sponsors of S. 27 have urged the Joint Select Committee on Deficit Reduction (i.e., the “Super Committee”) to include the legislation in its deficit reduction plan.

The Generic Pharmaceutical Association (“GPhA”) responded to the FTC report, saying that “the FTC continues to miss the fundamental point: Patent settlements speed up the availability of less costly generic drugs and save money for everyone; banning settlements and forcing drugs makers to continue lengthy litigation with uncertain outcomes will be costly.”