Thanks to the Supreme Court, it may soon become slightly easier to get the cheaper generic version of some medications. In the case of FTC v. Actavis, Inc. the Court decided 5-3 that the FTC has the power to try to stop “pay for delay” on anti-trust grounds. This is a practice in which drug companies pay generic drug makers not to bring the generic version to the market. Without the competition the price of brand name drug remains high and the two companies basically split the extra profits.
Justice Kennedy joined with the four liberals on the court to form the majority. Justice Alito recused himself. From the Syllabus:
Although the anticompetitive effects of the reverse settlement agreement might fall within the scope of the exclusionary potential of Solvay’s patent, this does not immunize the agreement from antitrust attack. For one thing, to refer simply to what the holder of a valid patent could do does not by itself answer the antitrust question. Here, the paragraph IV litigation put the patent’s validity and preclusive scope at issue, and the parties’ settlement—in which, the FTC alleges, the plaintiff agreed to pay the defendants millions to stay out of its market, even though the defendants had no monetary claim against the plaintiff—ended that litigation. That form of settlement is unusual, and there is reason for concern that such settlements tend to have significant adverse effects on competition. It would be incongruous to determine antitrust legality by measuring the settlement’s anticompetitive effects solely against patent law policy, and not against procompetitive antitrust policies as well.
This is a victory for the FTC, the Obama administration, consumers and tax payers. This will likely reduce the price of some drugs by bringing more generics to the market quicker. The FTC estimates this practice cost Americans roughly $3.5 billion a year.
This should not only help save people money but should modestly improve the deficit given that health care programs make up a large segment of the federal budget.
Photo by Bradley Johnson released under Creative Commons License