Different Ways of Structuring Pay-to-Delay Deals

On the heels of last week’s study showing that generic pharmaceuticals saved US consumers around a trillion dollars over 10 years, the Generic Pharmaceutical Association (GPhA) took the opportunity to advocate for the strategy known as pay-to-delay.  In such an arrangement, the innovator company pays to settle patent litigation in exchange for an agreed-upon market entry date for the generic. In last week’s

, Generic Drug Savings in the US, GPhA said, “While the settlement issue has engendered opposition from some who contend such generic-brand agreements are anticompetitive, the federal courts and Congress have repeatedly recognized that settlements can be desirable options in patent litigation. The record is clear: settlements allow generic drugs to come to market long before patents on the counterpart brands expire, resulting in billions of dollars in annual savings.”

Perhaps in an effort to avoid the appearance of paying-to-delay, some innovator companies have adopted the strategy of agreeing not to launch an authorized generic in return for an agreed-upon market entry date for the nonauthorized generic. The Federal Trade Commission has taken the position that this arrangement, too, constitutes pay-to-delay. FTC filed an amicus brief in a private antitrust action challenging an agreement between Wyeth and Teva Pharmaceuticals, in which plaintiffs allege that Teva agreed to delay its introduction of a generic version of Wyeth’s antidepressant drug Effexor XR.  As part of the alleged no-authorized-generic (no-AG) agreement signed in 2005, Wyeth entered into an exclusivity provision in which it effectively agreed to refrain from marketing an authorized generic version of Effexor XR, and Teva agreed to delay its generic until July 1, 2010.  In the brief, the FTC says that, based on its own comprehensive study of authorized generics,  “This empirical evidence confirms what the pharmaceutical industry has long understood: that a no-AG commitment provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry.”