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FTC Launches First-Ever Attack on “No-AG Commitment” Pay-for-Delay Settlements

Today the FTC filed a complaint in the U.S. District Court for the Eastern District of Pennsylvania against Endo Pharmaceuticals for entering into “pay-for-delay” agreements with two different generic manufacturers that restricted generic competition for two of its patented drugs, Opana ER and Lidoderm.  The FTC alleges that Endo paid Impax, a generic drug manufacturer, $40 million to keep a generic version of Opana ER off the market for over 2 years, and that Endo and its partner Teikoku gave Watson (now Allergan) Lidoderm patches worth hundreds of millions of dollars “at no cost” for Watson to sell through its distribution subsidiary in exchange for abandoning its patent challenge.

According to the FTC, both settlements had a second component that violated antitrust laws: an agreement by the branded manufacturer to not market an “authorized generic” during the first filers’ 180-day window of exclusivity.  Under federal law, the first generic manufacturer to challenge a patent is entitled to a 180-day window of exclusivity after gaining FDA approval.  During this exclusivity period, however, the branded manufacturer may market an authorized generic version of the branded drug.  The FTC alleges that Endo’s so-called “no-AG [authorized generic] commitments” were illicit reverse payments because they allowed the generics to charge supracompetitive prices during the 180-day window.

This complaint marks the first time the FTC has specifically targeted a “no-AG commitment” as a form of reverse payment.  “Settlements between drug firms that include ‘no-AG commitments’ harm consumers twice – first by delaying the entry of generic drugs and then by preventing additional generic competition in the market following generic entry,” said FTC Chairwoman Edith Ramirez. “This lawsuit reflects the FTC’s commitment to stopping pay-for-delay agreements that inflate the prices of prescription drugs and harm competition, regardless of the form they take.”  We will continue monitoring this case for further developments.