Restricting drug patent settlements would result in protracted litigation

{mosads}There is no better example of this success than Lipitor – the best-selling prescription drug of all time – which became available to patients five years prior to the brand patent expiration as a result of a patent settlement between a generic and brand company. This early introduction is projected to save consumers as much as $4.5 billion per year by 2014. Had the parties not settled and the brand company won the suit, generic Lipitor would not have been available until 2017. Over the past three years, several other blockbuster drugs — including generic versions of Effexor XR, Paxil CR and Adderall — have become available to consumers as a result of settlements long before patents covering the reference brand name drugs expired.

Yet, in a case before the Supreme Court next week, the Federal Trade Commission (FTC) seeks to severely restrict the ability of brand and generic drug companies to settle their patent litigation, an essential component of the very process that has led to these dramatic savings. The facts do not support the FTC position. Nor does public policy or the law.

Drug patent settlements like the one that brought Lipitor to market are pro-innovation, pro-consumer and pro-competition. Federal law spurs innovation and competition by providing incentives for generic drug makers to challenge brand name drug patents and develop bioequivalent drugs. The use of generic drugs is a vital component to holding down the rate of growth in health care spending. Generic pharmaceuticals fill 80 percent of the prescriptions dispensed in the U.S. but account for just 27 percent of total drug spending.

Settling drug patent cases essentially guarantees that lower cost generic versions of brand name drugs come to market before patents expire because, contrary to what some assert, patent settlements cannot prevent competition beyond the patent expiration.

Restricting patent settlements would result in protracted litigation, delayed competition and higher prices for consumers and taxpayer-funded government health programs. If the only option is to continue litigation to its conclusion, fewer patent challenges would result and consumers would be forced to wait longer for lower cost generic alternatives.

The FTC asserts that generics win three-quarters of the drug patent cases litigated to conclusion. But that’s based on faulty decade-old information that only takes into account a small number of patent cases. Current data show that generic drug makers win less than 50 percent of their patent challenges.  That means, more than 50 percent of the time, consumers have to wait until the patents expire on more expensive brand drugs. However, settlements greatly improve those numbers. Between successful litigation challenges and patent settlements, generic drugs come to the market before patent expiration more than 75 percent of the time.

If the Supreme Court determines that patent settlements with consideration are presumptively anti-competitive, this will force patients to needlessly spend more on name-brand drugs while access to lower-cost generic drugs is significantly delayed – driving up the nation’s health care costs without providing any benefit to consumers.  

The FTC and Department of Justice (DOJ) already have the tools they need to ensure settlements are competitive. The law requires generic and brand companies to submit all patent settlement data to the FTC and the DOJ within 10 days of settlement. If the FTC or DOJ believe that the terms of the agreement are anticompetitive, the law allows them to bring suit.

Settlements with consideration have saved patients billions of dollars, which is why so many federal courts have ruled them pro-consumer and pro-competitive. Restricting them would be a grave disservice to American consumers who depend on generic medicines as an essential component of their health care.


Neas is president and CEO of the Generic Pharmaceutical Association (GPhA).