FTC says drug patent settlements used to delay generics

The Federal Trade Commission building is seen in Washington on March 4, 2012.

(Reuters) - The Federal Trade Commission said makers of branded drugs that settle patent challenges by promising not to launch their own generic alternatives are using such agreements to delay generic competition.

In a friend-of-the-court brief, the regulatory agency said such patent settlements in which drug companies agree not to launch their own authorized generic versions are a way of paying a generic rival to delay their entry into the market.

The assessment came as a federal court in New Jersey that oversees many lawsuits against drug companies weighs a private antitrust challenge to such an agreement between Pfizer Inc's Wyeth unit and Teva Pharmaceutical Industries Ltd, the world's largest generic drug maker.

"Empirical evidence confirms what the pharmaceutical industry has long understood: that a no-(authorized generic) commitment provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry," the agency said in the proposed friend-of-the-court brief filed on Friday.

A court should "carefully consider the economic realities of no-AG commitments and their impact on consumers," it added.

The FTC comments were made in antitrust litigation by drugstore firms CVS Caremark Corp and Rite Aid Corp accusing Pfizer and Teva of conspiring to keep generic versions of the popular antidepressant Effexor XR off store shelves.

Pfizer's Wyeth subsidiary said in a statement its settlement agreement with Teva was proper, allowing the entry of generic Effexor XR seven years before its patent expired. The FTC did not express any concerns about the settlement when it originally reviewed the agreement, the company said.

Teva believes the lawsuit is without merit and has filed a motion to dismiss it, a Teva spokeswoman said.

Walgreen Co, Kroger Co, Safeway Inc, Supervalu Inc and HEB Grocery Co made similar claims in a lawsuit filed in the same court in December.

The judge presiding over the Effexor case had asked for briefings to assess how the case was affected by a recent ruling by the 3rd U.S. Circuit Court of Appeals that payments by a branded drugmaker to a potential generic rival can be "evidence of an unreasonable restraint of trade" if they keep generic drugs off the market.

(Reporting By Susan Kelly; Editing by Steve Orlofsky and Richard Pullin)