By Tracy Staton
The Federal Trade Commission did it. After pursuing a pay-for-delay case against Teva’s ($TEVA) Cephalon unit for years, the agency has forced the drugmaker to hand over $1.2 billion in past profits. That hefty sum will reimburse buyers that had to fork over brand-level prices for Provigil, after a patent settlement kept generics off the market.
As part of the deal, Teva agreed to abstain from “the type of anticompetitive patent settlements” that Cephalon used to delay Provigil knockoffs and keep branded revenues coming.
It’s the first high-dollar pay-for-delay settlement, and the first settlement, period, since the Supreme Court ruled in a fight over an Androgel patent deal. That FTC v. Actavis ruling was a victory for the FTC because it backed the agency’s contention that patent infringement settlements could be anticompetitive under certain circumstances.
One important feature of this case is that Cephalon didn’t hand over cash to induce generics makers to keep their versions of Provigil off the market. Instead, the company promised generics makers payment for active ingredients and intellectual property–and those deals “made no economic sense” to Cephalon except as “reverse payments” to keep generics at bay.
“Today’s landmark settlement is an important step in the FTC’s ongoing effort to protect consumers from anticompetitive pay for delay settlements, which burden patients, American businesses, and taxpayers with billions of dollars in higher prescription drug costs,” said FTC Chairwoman Edith Ramirez in a statement. “Requiring wrongdoers to give up their ill-gotten gains is an important deterrent.”
The FTC has doggedly pursued pay-for-delay cases, and officials pledged repeatedly that they’d soon win a $1 billion concession from pharma. The agency had alleged that Cephalon collected $3.5 billion to $5.6 billion in additional profits thanks to its deals with generics makers.
The $1.2 billion settlement will be parcelled out to wholesalers, pharmacies, insurers and other buyers that purchased Provigil after the generics should have hit the market. Last month, Teva agreed to pay one group of those purchasers $512 million to settle their claims. The FTC says Teva’s payments under “related litigation” can be credited against the amount it owes under the FTC settlement.