Supreme Court to Drug Makers: No More ‘Pay to Delay’

Photo (cc) by StockMonkeys.com

Pharmaceutical companies pay generic drug makers millions of dollars a year to keep their cheaper products off of the market. It’s a relatively cheap way to keep prices high and maintain profits, as we’ve written before. The practice has been called “pay to delay.”

Now, because of a new U.S. Supreme Court decision, the practice could cost drug makers in ways they hadn’t expected. The justices ruled 5-3 that brand-name drug companies can be sued under antitrust laws if they make such agreements, the Los Angeles Times says.

The ruling will likely lead to lower prices, the newspaper says; the Federal Trade Commission has said these back-room deals cost consumers and health plans $3.5 billion a year.

But it’s not an outright win for the FTC, which argued that the deals were usually illegal.

Instead, these arrangements will be judged on a case-by-case basis, the Times says. The court said drug makers can be sued, but the facts of each case will determine whether the payoff was reasonable to settle a patent dispute or an attempt to block competition.

Drug makers already get a long time to dominate the market before their patents expire. Patents can last as long as 20 years, the Times writes, and can often be extended an additional 20 years by tweaking the formula or how the drug is administered. But generic makers can challenge the extended monopoly, and that’s when these “pay to delay” settlements come into play.

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