Corporate & Securities Law

FTC Report on Generic and Branded Drug Manufacturer Settlements

By David Fischer

Yesterday, the FTC released its annual report on generic and branded drug manufacturers patent settlements.  According to the FTC:

In fiscal year 2007, there were 33 final settlements, nearly half of which (14, or 42%) included both compensation to the generic company and a restriction on the generic?s ability to market its product. Of those 14 settlements, seventy-nine percent involved agreements with first-filer generic companies. Unlike FY 2006, however, most of the FY 2007 agreements involving restrictions on generic entry did not include a side deal involving elements not directly related to the resolution of the patent dispute. Instead, the majority involved compensation to the generic firm through an agreement by the branded firm not to sponsor or compete with an authorized generic product for some period of time.

The FTC further reports that:

In the 14 final settlement agreements received in FY 2007 that involved both a restriction on generic entry and compensation to the generic, the compensation took two forms: 1) In 11 of the final settlements, the branded company agreed not to launch or sponsor an authorized generic drug for some period of time after the entry of the generic drug company?s product; and 2) In three of the final settlements, the compensation flowed to the generic firm in the form of a side deal.

In six of the 14 agreements, both the brand and generic firm received compensation. In three of these six agreements, the branded company received a royalty in exchange for granting the generic firm a license to the patent at issue in three cases. In one case, the brand received a royalty payment on the generic firm?s sales of an authorized generic product. In another case, the brand received a royalty on the generic company?s sales of a particular dosage of the drug at issue in the litigation. And in the final case, the branded company could receive a percentage of the generic company?s sales of the drugs at issue in the litigation, as well as of some unrelated products.

The report also states that 11 of the settlements reported included a restriction on the generic drug?s ability to enter the market, with no compensation to the generic firm. In six of these cases, the generic withdrew its patent challenge, agreeing not to enter the market until the patent expired.

Eight settlements included no explicit restriction on the generic?s ability to market its product. In five of these cases, the generic was already on the market. Six of the eight settlements included no compensation to either firm; the two remaining settlements involved the generic paying the branded company a fixed sum.

In 16 of the 33 final settlements reported, the generic manufacturer was the first-filer with the FDA. Eleven of those agreements resulted in both a restriction on generic entry and compensation to the generic manufacturer. In addition, in FY 2007, nine interim agreements between branded and generic firms were reported. Seven of these involved either: 1) an agreement to stay the litigation and be bound by the results of litigation involving the same patents; 2) an agreement by the generic firm to provide the branded firm with advance notice of an ?at risk? generic launch, to provide the branded firm with the opportunity to seek a preliminary injunction; or 3) an agreement by the generic firm not to introduce its generic product until the court ruled on a preliminary injunction motion.

Finally, the report states that in FY 2007, only one agreement was reported between generic drug manufacturers. Under the terms of the agreement, the first filer agreed to give up its 180-day marketing exclusivity period, thereby allowing the subsequent filer to receive FDA approval for its product.

The full report is available online.

Full post as published by Antitrust Review on May 22, 2008 (boomark / email).