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Generic drug payoff draws government interest

Brand-name drug makers have attracted renewed scrutiny from federal regulators by resuming to pay generic drug manufacturers to stay off the market under the terms of some legal settlements, trade officials said Monday.
/ Source: The Associated Press

Brand-name pharmaceutical companies have resumed paying generic drug manufacturers to stay off the market under the terms of some legal settlements, attracting renewed scrutiny from federal regulators, trade officials said Monday.

For the first time since 1999, brand-name and generic drug makers are entering patent challenge agreements under which the latter companies receive compensation in exchange for agreeing to restrictions on their ability to market generic versions of branded drugs.

Consumers usually save money if they can buy generic brands of drugs, which spark price competition. Keeping generic competitors off the market allows brand-name manufacturers to charge premium prices.

Three such settlements were reached in the 12 months ending Sept. 30, 2005, according to a Federal Trade Commission report issued Monday. Roughly six similar deals have been struck in the months since then, FTC Commissioner Jon Leibowitz said.

Pharmaceutical companies ceased striking such agreements in the late 1990s following several legal challenges mounted by the FTC, Leibowitz said.

Pharmaceutical companies have been emboldened by two recent court decisions that sanctioned those types of settlements, Leibowitz said in remarks prepared for a speech Monday in Philadelphia. The remarks were posted on the FTCs Web site.

"We are seeing far more settlements today that potentially raise competition concerns than before these decisions," Leibowitz said.

The FTC commissioner cited the recent example of Plavix, a blood-thinning drug made by Sanofi-Aventis and distributed in the United States by Bristol-Myers Squibb that has $3.8 billion in annual sales. The two companies recently settled with Apotex Corp., which sought to market a generic version of the drug.

Under the terms of that settlement, filed with the FTC, the two companies will pay Apotex an undisclosed sum. Apotex in turn agreed to defer launching its generic version of Plavix until 2011.

That deferral could cost consumers hundreds of millions of dollars, Leibowitz said.

"Our staff will take a good hard look at this — as we should — and the commission will decide what action to take, if any," he said.

The FTC has asked the Supreme Court to reverse an 11th Circuit Court of Appeals decision in a similar case involving the drug company Schering-Plough. If the Supreme Court doesn't, it could give brand-name and generic companies "carte blanche to avoid competition and share resulting profits," Leibowitz said.

A spokesman for the Pharmaceutical Research and Manufacturers of America declined to comment. A spokeswoman for the Generic Pharmaceutical Association said the group is reviewing the report.

The FTC said last month it planned to subpoena nearly 200 pharmaceutical companies as part of a probe of possible anticompetitive practices in the prescription drug industry.

The subpoenas, which require Office of Management and Budget approval, would form part of an investigation into whether pharmaceutical companies are stifling competition by releasing authorized generic copies of their own brand-name drugs to coincide with the debut of generic challengers made by competitors.