US judge: FTC did not abuse power in Watson case

* FTC probing deals between brand name, generic makers

* Judge: Agency can ask Watson CEO to testify

By Kim Dixon

WASHINGTON, Aug 17 (Reuters) - The U.S. Federal Trade Commission did not overstep its authority when it sought to subpoena Watson Pharmaceutical's (WPI.N) chief executive in an antitrust case, a judge said on Tuesday.

He also recommended that Paul Bisaro, Watson's CEO, be forced to testify in the FTC's case.

The same judge -- U.S. Magistrate Judge Alan Kay -- had suggested in a July order that antitrust enforcers might have crossed the line in probing allegations that Cephalon Inc CEPH.O settled patent disputes with Watson and others by paying them not to bring out a cheaper version of Provigil, a lucrative sleep-disorder drug made by Cephalon.

"The facts before this court now do not establish a direct attempt by the FTC to misuse the court's process for it has not been shown that the subpoena itself was issued to harass Mr. Bisaro or that the investigation has been conducted for an improper purpose," Kay said.

The FTC filed suit against Cephalon in the case in 2008 and has sought to subpoena Bisaro since then.

"To the extent that the FTC still believes that Mr. Bisaro may have information relevant to its investigation and not already in the FTC's possession, it is proper for it to take Mr. Bisaro's testimony," the court wrote.

Watson, which would not comment on the ruling, can appeal the decision.

Under complicated rules governing the sale of generic drugs, Watson has the exclusive right to produce a generic version of Provigil, also known as modafinil, and retained that right even if it did not market the generic.

The FTC has been battling what it calls "pay-for-delay" settlements in court, with mixed success. The agency has pushed for legislation to ban the deals but has failed thus far.

The case is U.S. District Court for the District of Columbia, the Federal Trade Commission v Paul M. Bisaro. No. 01:10-mc-00289-CKK-AK (Reporting by Kim Dixon and Diane Bartz; Editing by Steve Orlofsky)