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AMA urges Supreme Court to ban pay-for-delay deals

The Association says the agreements extend patent monopolies on drugs and inflate health care costs.

By Alicia Gallegos — Posted Feb. 11, 2013

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The American Medical Association is among those weighing in on a U.S. Supreme Court case that could set an important precedent for how quickly patients can access generic versions of medications. The high court will hear arguments March 25 about so-called pay-for-delay deals, in which brand-name drugmakers pay generic companies to end patent litigation and delay the introduction of equivalent generics.

In a Jan. 29 friend-of-the-court brief, the AMA urged the Supreme Court to overturn a ruling by the 11th U.S. Circuit Court of Appeals upholding such agreements. Pay-for-delay deals extend patent monopolies excessively, artificially inflate health care costs and obstruct physicians’ ability to treat patients with necessary medications, the Association said.

“The AMA believes that pay-for-delay agreements undermine the balance between spurring innovation through the patent system and fostering competition through the development of generic drugs,” AMA President Jeremy A. Lazarus, MD, said in a statement. “Pay-for-delay must stop to ensure the most cost-effective treatment options are available to patients.”

At its Interim Meeting in November 2012, the AMA House of Delegates adopted policy calling for legislation that would make the pay-for-delay practice illegal.

The Supreme Court’s review follows a split in appeals courts over the legality of such negotiations. Since 2003, four circuit courts have upheld the agreements as legal, while two circuit courts have ruled them unlawful. The Supreme Court will hear the case of Federal Trade Commission v. Watson Pharmaceuticals, in which the FTC challenged a multimillion-dollar agreement between Watson Pharmaceuticals and Solvay Pharmaceuticals to hold off on releasing generic versions of AndroGel, a treatment for the underproduction of testosterone.

A spokesman for Actavis, which now owns Watson, said in an email that patent settlements that avoid litigation actually enable generic companies to bring products to consumers — at significant savings — years before patent expiration.

“The ability to settle patent cases provides date-certain launches of generic competition, and creates savings,” said Actavis spokesman Charlie Mayr. “Without the ability to settle patents, we believe that the ability to assure savings to consumers would be unnecessarily restricted. We are confident that we can present arguments that demonstrate the settlements, which are encouraged in nearly all litigation, [create] competition and are a benefit for consumers.”

The FTC, which long has denounced pay-for-delay deals as anti-competitive, declined to comment specifically on the Supreme Court case. In general, the agreements lead to generic drug delays that cost consumers an estimated $3.5 billion a year, said Markus H. Meier, assistant director of the Health Care Division for the FTC Bureau of Competition.

“Instead of getting the benefit of the exact same therapy at a lower price, consumers have to pay the higher brand price,” he said. “Consumers are losing the benefit of the lower price — and by consumers, we’re talking about health plans, insurers, patients and the government, which pays a large portion of health care bills in America.”

Brand-name labeling errors

In another recent legal case involving drug manufacturers, a state court has ruled that a brand-name drugmaker can be held liable for injuries to a patient caused by its generic equivalent. The Supreme Court of Alabama in January said patients can sue a brand-name drug manufacturer for fraud or misrepresentation, based on brand-name labeling errors that are found to lead to patient harm from a generic drug. Under a federal sameness requirement, generic labeling must be identical to brand-name language because the original labeling is the basis for the generic’s approval by the Food and Drug Administration.

The Alabama ruling was affected by a 2011 U.S. Supreme Court decision. That decision prevented generic drugmakers from being sued for labeling errors made by companies that manufactured the original versions of the medications. In Pliva v. Mensing, justices said federal law requires that generic labels match those of brand-name labels and need not include additional warnings or updates.

“I think the Mensing case was the linchpin for how the [Alabama] Supreme Court reached their decision,” said attorney Michael D. Ermert, first vice president for the Alabama Assn. for Justice, which represents trial lawyers. He was not involved in the case. “Without the Mensing case recognizing the limited flexibility that generic manufacturers have, I doubt that the Alabama Supreme Court would have adopted this opinion.”

In the Alabama case, Danny Weeks sued generic manufacturers Actavis Elizabeth LLC and Teva Pharmaceuticals USA, as well as Wyeth LLC and Schwartz Pharma Inc., the brand-name manufacturers of Reglan (metoclopramide). Weeks said he developed tardive dyskinesia, a movement disorder, after taking generic versions of the heartburn medication. Wyeth and Schwartz moved to dismiss, arguing that they could not be held liable for injuries caused by another company’s product. A federal court certified the question to the state Supreme Court.

In its Jan. 11 decision, the Supreme Court of Alabama cited Mensing in saying that it would be impossible for generic drug manufacturers to change their warning labels without violating the federal requirement that the labeling on a generic drug match the labeling on the brand-name version.

The ruling was a long-awaited victory for Weeks, said his attorney, Lew Garrison.

Pfizer, which now owns Wyeth, said in a statement that the Alabama decision conflicts with most other court decisions on the question. The company said it “will look at further appellate options.”

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