Appeals Court Looks Askance at Pay-for-Delay

Edward Wyatt in the New York Times--
http://www.nytimes.com/2012/07/27/health/policy/drug-makers-deals-with-generic-rivals-may-face-justices-review.html
--reports on a ruling of the U.S. Third Circuit Court of Appeals that brand-name drug companies paying generic companies to delay the entry of generic drugs into the market is anti-competitive. This ruling runs contrary to rulings by other courts that support these payments and makes it more likely that the U.S. Supreme Court will have to take up the issue.

Wyatt adds that a bill now stuck in the Senate to end these pay-for-delay arrangements has been estimated by the Congressional Budget Office to promise $4.8B in savings over a decade for the Federal government, and overall drug savings of $11B.

The industry point of view--which, for a change, both the brand-name and generic drug companies agree on-- is that pay-for-delay is good business and good for the consumer because it actually speeds the entries of generic drugs into the market. How so? The usual stimulus for such an agreement is a patent dispute between the two companies. The companies have two options--make a deal; or fight a lengthy court battle to resolve the patent dispute. It's more efficient and ultimately cheaper for all parties, they say, so go the out-of-court-settlement route.

As I explained in HOOKED, there might be some merit in this argument if the patent dispute were truly a serious matter. The problem is, that it usually is far from that. The U.S. Patent Office, and the FDA oversight of drug patents, have gotten so loosy-goosey over the whole business that a brand-name firm can patent all sorts of trivial features of the pill, including famously its color, and then drag out a court battle with the generic company for years. The ultimate solution to this problem is to do away not only with pay-for-delay, but also with senseless, trivial patents, and for judges to simply throw out all such lawsuits.