U.S. Supreme Court Paves The Way For More Generic Drugs

While the DOMA received a lot of attention this term, another U.S. Supreme Court decision published in June had a far greater impact on seniors and public health.The case was FTC v. Actavis. The Court stated that major pharmaceutical companies can be sued when they make deals with generic companies not to bring cheaper drugs to market.  The practice, known as pay-for-delay, had run rampant over the past decade, costing Americans billions of dollars and restricting access to cheaper versions of drugs.

Whenever a company develops a novel drug, they are entitled to a twenty year patent. It allows them to sell the drug free of competition for several years. Everyone agrees this makes sense because otherwise drug companies would not invest heavily in research and development, drug trials and production of new drugs. Unfortunately, after their initial patent period expired, some major drug companies obtained weak patents on drugs that were nothing more than reformulated versions of old drugs. They were not new and innovative. To counter that practice, and get cheaper generics to market sooner, in 1984 Congress passed the Hatch-Waxman Act. It was intended to make it easier for generic drug manufacturers to challenge those weak patents.

Undaunted, some major pharmaceutical companies decided to simply pay off generic manufacturers not to challenge their weak patents or produce the drug. The major pharmaceutical company paid the generic at least as much as they could earn by producing and selling the drug, and the major pharmaceutical company reaped the high profits of continuing to own a monopoly on the drug. That’s when the FTC (Federal Trade Commission) stepped in to curb those abuses by suing the drug company in the Actavis case. The lower federal court dismissed the case saying the FTC had no standing to get involved. On appeal, the U.S. Supreme Court reversed.

The Court held that the government and private parties may seek to prove that these payments violate the antitrust laws and should be set aside. It refused, however, to hold them preemptively illegal. That means the lower courts must look at each agreement individually to see if it restrains trade. Yet, the ruling is likely to make more generic drugs available for seniors and other consumers if the FTC or private citizens continue to get involved in the issue. Let's hope for the best. 

Stay well until the next post.

Bob Gasparro

Bob Gasparro is an Elder Practitioner (accountant and attorney). He can be reached at Robert.Gasparro@lifespanlegal.com or (484) 297-2050. Comments to this post, and ideas for future posts are welcome