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9 October 2019AmericasSarah Morgan

California outlaws pay-for-delay deals

California has become the first US state to ban pay-for-delay deals in the pharmaceutical industry.

Pay-for-delay deals, where a branded drug manufacturer pays a generic competitor to settle patent litigation and keep lower-cost generics off the market, will now automatically be considered anti-competitive and open to civil litigation under the Californian law.

On Monday, October 7, Governor Gavin Newsom signed into law AB824 to lower the cost of prescription drugs, by making the agreements between brand name and generic drug manufacturers presumptively anticompetitive.

“California will use our market power and our moral power to take on big drug companies and prevent them from keeping affordable generic drugs out of the hands of people who need them,” said Newsom. “Competition in the pharmaceutical industry helps lower prices for Californians who rely on life-saving treatments.”

A 2010 study from the Federal Trade Commission (FTC) found that pay-for-delay agreements are estimated to cost American consumers $3.5 billion per year.

Three years later, in 2013, the US Supreme Court said that where a drug manufacturer pays a generic competitor to settle patent litigation could potentially violate anti-competition law, and that regulators should be free to challenge such agreements.

‘Considerable increase’

Earlier this year, the regulatory authority reported that the number of pay-for-delay patent settlements reached in fiscal year (FY) 2016 represented a “considerable increase” from the previous year.

However, there has been a considerable reduction in the most problematic settlements since 2013. In FY2012, the fiscal year before the Supreme Court ruling, there were 40 such settlements, but this dropped to 29 the year after the decision. It further decreased to 21 in FY2014, and 14 in FY2015.

But, despite regulatory pressure, pay-for-delays do still occur.

In July, the state of California secured a $69 million settlement with Teva, which allegedly entered into collusive pay-for-delay agreements with generic competitors to obtain a six-year delay of a generic narcolepsy drug, Provigil (modafinil).

That same month, Ireland-headquartered Endo Pharmaceuticals agreed to pay $2.3 million to 18 states, settling allegations that it paid a competitor to keep a generic version of pain relief drug Lidoderm (Lidocaine patch 5%) off the market.

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More on this story

Americas
13 January 2020   California’s governor wants the state to establish its own generics brand in a bid to bring down the cost of prescription drugs.
Americas
25 February 2020   The US Court of Appeals for the Ninth Circuit has blocked generics makers’ request to halt California’s ban on pay-for-delay deals while they challenge the legislation.
Americas
10 March 2020   A Virginia judge has approved Par Pharmaceutical’s settlement with a group of direct purchasers, allowing the pharmaceutical company to escape a pay-for-delay lawsuit.

More on this story

Americas
13 January 2020   California’s governor wants the state to establish its own generics brand in a bid to bring down the cost of prescription drugs.
Americas
25 February 2020   The US Court of Appeals for the Ninth Circuit has blocked generics makers’ request to halt California’s ban on pay-for-delay deals while they challenge the legislation.
Americas
10 March 2020   A Virginia judge has approved Par Pharmaceutical’s settlement with a group of direct purchasers, allowing the pharmaceutical company to escape a pay-for-delay lawsuit.