Drug companies fight the tide, and may win

By Diane Bartz - Analysis

WASHINGTON (Reuters) - Governments on both sides of the Atlantic are fighting settlements between big pharmaceutical companies and generic firms that delay marketing of cheap versions of brand-name drugs.

But don't write off the chances of Big Pharma, which has already shown impressive clout in both the legal and political arenas.

The settlements are reached after generic companies indicate they plan to bring out cheaper copies of brand-name drugs, and the drugs' makers accuse the generics of infringement.

The U.S. Federal Trade Commission says the settlements are illegal if generic entrances are delayed in exchange for payment, but drug companies say the deals are no more than settlements of what could be expensive litigation.

EU Competition Commissioner Neelie Kroes said this week that she was determined to oppose such settlements, which she said had pushed up European consumers' bills by 20 percent between 2000 and 2007. The FTC puts the cost for U.S. consumers and insurers at an additional $3.5 billion a year.

Drug companies say the settlements can save consumers money by bringing generics to market before patents expire, while eliminating the uncertainties of court trials.

While the FTC was the first to challenge the so-called reverse payment settlements, the European Union has been increasingly active, said Chul Pak, an FTC veteran now with the law firm Wilson Sonsini Goodrich & Rosati.

"They're not so different any more. They used to be very different," he said.

The FTC was actively filing lawsuits to stop the cases even during the Bush administration, when the Justice Department was hostile to such lawsuits.

The EU, meanwhile, became much more vigorous in opposing the settlements during the Bush administration, Pak said. "It's fairly new to them."

Regulators from both sides of the Atlantic discuss the deals but have different traditions of patent and antitrust law.

"We can certainly talk to them and we do have some cross pollination, not about individual matters but about general approaches," said FTC Chairman Jon Leibowitz. "It's more like conscious parallelism, from our perspective."

It will be legal battles that will eventually determine if brand-name companies will be allowed to continue to make these settlements in Europe, said Nicola Holmes, a senior associate at international law firm Eversheds.

But the FTC so far has had little success in court.

In 2006, the FTC failed to convince the Supreme Court to hear its case against Schering-Plough Corp for a deal with Upsher-Smith.