WASHINGTON — Just about anyone who has gone to a pharmacy and paid for a prescription knows that a generic copy costs much less than the brand-name drug. The makers of those two versions of a drug, therefore, usually compete fiercely for market share and profits.
But at the Supreme Court on Monday, the generic and the brand-name drug companies will be on the same side, arguing against the federal government in the legal equivalent of a heavyweight title bout.
The case, Federal Trade Commission v. Actavis, No. 12-416, centers on whether the maker of a brand-name drug can pay a generic-drug company to keep the generic version off the market. Based on antitrust law, the obvious answer would seem to be no, the view voiced by the government and most recently upheld by a federal appeals court.
At least three other federal appeals courts have previously said those payments are legal, however, when made under the settlement of a patent infringement lawsuit. Those courts sided with drug company arguments that the payments are what Congress intended in setting up guidelines to encourage the production of generic drugs.
The question before the justices pits a company's constitutional right to protect its intellectual property — through reliance on a patent that excludes competitors — against antitrust law, which holds that a company cannot unfairly exclude others from legitimately entering a business with a rival product.
When the court rules later this year, its answer could have a sweeping effect on one of the largest segments of the nation's economy and an industry that touches the wallets of nearly every American.
"Everybody wants to believe that the big drug companies are bad, that they're giving us these piles of money to stay off the market," said Paul M. Bisaro, chief executive of Actavis, whose generic version of AndroGel, a testosterone replacement therapy, is the subject of the case. "But these payments have saved consumers billions and billions of dollars."
The agency says in its court briefs that the opposite is true: the payment "allows the brand-name manufacturer to co-opt its rival by sharing the monopoly profits that result from an artificially prolonged period of market exclusivity."
The stakes in the dispute are huge. Pharmaceutical sales in the United States totaled roughly $320 billion in 2011, according to IMS Health, a research company whose statistics the agency cites in its arguments.
Brand-name drugs accounted for only 18 percent of the total prescriptions written by doctors in 2011 but 73 percent of consumer spending, IMS reported. When a generic version of a brand-name drug comes onto the market, the F.T.C. said, it costs about 15 percent of the original, causing the brand-name drug maker to quickly lose about 90 percent of its market share.
Congress saw the difference that generic drugs could make in health care spending when in 1984 it passed the Drug Price Competition and Patent Term Restoration Act, also known as the Hatch-Waxman Act.
That law, together with amendments passed roughly 20 years later, encouraged generic drug makers to challenge the patents protecting lucrative brand-name drugs.
But a loophole in the law has turned the theory of patent infringement on its head, allowing a brand-name company to pay the generic drug maker to keep its low-price version off the market for a given number of years. That is the opposite of how a patent-infringement case is usually settled, with the generic infringer paying the brand-name patent holder. Thus, the deals are known as "reverse payment" settlements.
In 2000, Solvay Pharmaceuticals received approval from the Food and Drug Administration to sell AndroGel to treat age-related testosterone deficiency. In January 2003, it received a patent on the formulation and method of using AndroGel. The patent expires in 2020.
In May 2003, Actavis, formerly known as Watson Pharmaceuticals, sought F.D.A. approval to sell a generic version of AndroGel. Solvay filed a patent infringement suit against Actavis in August 2003, and the two companies began preparing for litigation.
In January 2006, the F.D.A. approved Actavis's generic version for marketing, but the patent lawsuit was still pending. Had Actavis begun selling its copy and later been judged in court to have infringed Solvay's patent, Actavis could be liable for significant monetary damages.
So in September 2006, the two companies settled the dispute. Actavis agreed to provide some marketing help to Solvay in exchange for an annual payment of about $20 million to $30 million and an agreement to keep the generic version off the market until 2015.
Does that mean that Solvay was buying its continued monopoly on the drug? The F.T.C. says yes: Actavis could have begun selling its generic version in 2006 rather than 2015, which would have significantly lowered the price to consumers much sooner. The agreement between the companies was what the agency calls a "pay for delay" deal.
But the drug companies argued that the agreement actually allows the generic version to come to market five years earlier than it otherwise would — in 2015 rather than 2020, when the Solvay patent expires. That, they say, gives consumers five years more of lower generic pricing than they would otherwise have.
The drug companies' approach is known as the "scope of the patent" method because, as some courts have held, the brand-name company gets nothing from the agreement beyond what it would have if its patent were valid and upheld — which is what the law requires courts to assume would happen if an infringement case were litigated.
But the courts have not agreed on whether the reverse payments are legal. The Supreme Court, therefore, might try to consider what Congress intended.
Representative Henry A. Waxman, a California Democrat who was one of the two principal sponsors of the drug act, weighed in with his own friend-of-the-court brief, saying the decisions upholding reverse payments turn the legislation "on its head."
The purpose, Mr. Waxman wrote, was to empower generic drug companies and "to encourage them to enter the market, not to authorize them to use their increased leverage to exact a share of brand-name drug owners' monopoly profits in return for staying out of the market."
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