U.S. FTC publishes study on costs of reverse-payment settlements

On 13 January 2010 the U.S. Federal Trade Commission announcedstudy on settlements between brand and generic pharmaceutical companies. The study examines settlement agreements filed with the FTC in 2004 – 2009 pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (see below p. 6 for a similar mechanism recently introduced by the European Commission).

According to the study, a total of 218 final settlement agreements between brand and generic companies were filed during the examined period. Compensation from the brand company to the generic company was involved in 66 settlements. Out of these 66 agreements, 51 were with the first generic company to seek entry to the market.

On average, settlements involving compensation delayed entry 17 months in comparison to agreements without payments to generic companies. The study estimates that the settlements currently protect $20 billion in brand-name pharmaceutical sales and that they cost American consumers $3.5 billion per year.

While the FTC states it has investigations and litigation pending over reverse-payment settlements, it recommends that Congress pass legislation. The FTC also criticizes certain appeals courts for misapplying the antitrust laws to uphold reverse-payment settlement agreements. [Juha Vesala]