California bans pharma’s infamous ‘pay-for-delay’ deals

By | October 8, 2019

When generic challengers come for a branded med’s patent, drugmakers have in the past chosen to pony up and stall their rivals with an anticompetitive pact better known as “pay for delay.” In an effort to keep drug prices down, California is looking to end the practice.

California Gov. Gavin Newsom signed a new bill Tuesday that will make California the first state to ban pay-for-delay deals in pharma.

The bill, AB 824, will make it unlawful for companies to exchange anything of value in return for a halt to patent challenges from generic drugmakers. That new measure could open the door to a range of civil suits against companies seeking to keep generic competitors off the market.

“California will use our market power and our moral power to take on big drug companies and prevent them from keeping affordable generic drugs out of the hands of people who need them,” Newsom said in a statement.

California’s ban is the most recent regulatory assault on pay-for-delay deals after the U.S. Supreme Court in 2013 freed the Federal Trade Commission (FTC) to challenge brand-name drugmakers’ patent settlements with generics companies. In that 5-3 vote, the court reversed a circuit court’s ruling that shielded the companies from most lawsuits challenging their patent deals. 

Soon after that ruling, European regulators rolled up their shirtsleeves in going after pay for delays. In July 2014, the EU fined six companies, including Teva, Mylan and Servier, more than a half-billion dollars for individual pay-for-deal infractions. 

With regulators cracking the whip, the FTC reported in 2016 that pay-for-delay deals began to decline in 2014 after a multi-year explosion of such pacts between 2005 and 2012. In 2014, the FTC reported 21 suspected settlements compared to 40 in 2012 and 29 in 2013. 

Despite the dip, pay for delays do still happen and often ensnare large-cap pharmas. 

In August, a federal judge approved a $ 65.8 million settlement between Teva’s Cephalon and five plaintiffs on charges the drugmaker incentivized challengers to keep narcolepsy drug Provigil imitators off the market to protect the now-generic drug’s sales.

The civil suit comes four years after Teva agreed to pay out $ 1.2 billion to settle a Federal Trade Commission probe into similar charges that the Israeli drugmaker promised competitors Mylan and Sun Pharmaceuticals payment for active ingredients and intellectual property—deals that made “no economic sense” for Cephalon beyond stopping competition.

RELATED: Impax in hot water for ‘pay-for-delay’ deal on Endo painkiller Opana ER, feds say

In April, the FTC knocked Impax, concluding the company entered a pay-for-delay deal with Endo to put off copies of opioid painkiller Opana ER. 

The agency said Endo controlled the market for the pain drug and gave Impax a “large and unjustified payment” to deter generic competition. Under the deal, Endo agreed to pay Impax more if Opana’s market shrank before the generic launch, the FTC said.

Endo also agreed to hold off on its authorized generic during Impax’s 180-day period of generic exclusivity. The FTC said Impax couldn’t reasonably justify the cash payment that changed hands.

The FTC previously alleged Endo paid Impax $ 112 million in 2010 to delay its generic until January 2013. In 2017, amid worries about Opana ER’s potential for abuse, Endo pulled the drug off the market at the FDA’s request.

FiercePharma: Pharma