Congress Seeks to Ban Pay-For-Delay Deals

Both the House of Representatives and the Senate have recently proposed bills that would effectively ban pharmaceutical companies from engaging in “pay-for-delay” deals that block generic drug entry and harm consumers.  Pay-for-delay arises during the course of patent litigation settlement, when a brand pharmaceutical company pays off a generic pharmaceutical company to give up the patent fight.  This removes the risk of the patent(s) covering a brand drug being invalidated, and can thereby postpone launches of less expensive generic drugs. These are called “reverse payments” because they flow from the brand pharmaceutical company (the plaintiff) to the generic pharmaceutical company (the defendant).  Typically, a defendant pays a plaintiff to settle litigation. 

The FTC estimates that pay-for-delay deals cost consumers and taxpayers $3.5 billion every year in the form of higher drug prices.  The Supreme Court has already held that these types of settlements can sometimes violate the antitrust laws, and now Congress seeks to take a further step by banning them in most instances.  The Senate bill was introduced on January 9th by Senator Amy Klobuchar, while the House bill was introduced by Representative Jerrold Nadler on April 29th.  Both bills are titled the “Preserve Access to Affordable Generics and Biosimilars Act” and have advanced into committees for further consideration. If enacted, the bills hold that pharmaceutical patent litigation settlements “shall be presumed to have anticompetitive effects” if the generic company “receives anything of value.”   In February, California became the first state to introduce a similar bill at the state level. 

It remains to be seen whether these bills will become law.  Similar bills have previously been introduced in Congress but have failed to pass.

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Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, personal injury and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Delaware, Georgia and Pennsylvania.

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About David Calvello

David Calvello is an Associate in Faruqi & Faruqi, LLP's New York office. He mainly practices in the area of antitrust litigation with a focus on competition in the pharmaceutical industry. He has worked on multiple cases that resulted in significant settlements, including In re Lidoderm Antitrust Litigation, 14-md-02521 (N.D. Cal.) ($166M settlement) and In re Solodyn Antitrust Litigation, 14-md-02503 (D. Mass.) ($76M settlement).

Tags: FTC, Pay-for-Delay, reverse payments David Calvello David Calvello
Associate at Faruqi & Faruqi, LLP

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