The Supreme Court usually has a lot on its plate in any given year, but this year's term included a pretty big case for the pharmaceutical industry: the Federal Trade Commission v. Actavis, which concerned legal settlements between branded and generic drug makers that often occur when the latter attempts to market a generic drug before the former's patents have expired.
In a 5-3 ruling — Justice Samuel Alito did not take part in the case — the court ruled that courts reviewing what opponents call "pay-for-delay" settlements should take a "rule of reason" approach, examining them on a case-by-case basis, rather than a "quick look" approach that would deem settlements illegal by default.
In a typical case, a generic drug maker will file an application with the Food and Drug Administration challenging the patent on a branded drug. The branded drug's manufacturer will respond with a patent-infringement lawsuit that will put an automatic stay of final FDA approval for up to two-and-a-half years. Rather than going to court, however, most cases are settled.
For opponents of such settlements, like the FTC, the issue is the settlements that involve "consideration," meaning a payment of some sort, which can come in the form of money or a promise by the branded drug maker not to launch an authorized generic. Opponents say the deals keep drugs out of patients' hands for longer than they should, while generic drug makers say the deals get generics into the hands of consumers months or years ahead of patent expiration.
Now, they have a study to support their case.
A new study, conducted by the IMS Institute for Healthcare Informatics on behalf of generics industry trade group the Generic Pharmaceutical Association, found that the U.S. healthcare system has saved $25.5 billion over seven years from generic drugs launched under the settlements.
The study tracked 33 drugs subject to patent settlements between 2005 and 2012 and found that settlements allowed generic drugs to enter
the market an average of 81 months (about six-and-a-half years) ahead of patent expiry.
"For years, opponents of pharmaceutical patent settlements with consideration have stated that settlements create a cost for consumers, the government and others," GPhA president and CEO Ralph Neas said. "This new analysis provides the most current, complete and transparent estimate of the impact of patent settlements on health costs, and it shows that the opposite is true."
The drugs the study looked at included Novartis' hypertension treatment Lotrel (amlodipine/benazepril). IMS' study estimates that savings from the generic drug have totaled $237 million since 2011, and as of December 2012, 85% of sales of the drug were of the generic form. The IMS report estimated that patent settlements on the 33 drugs analyzed would save $61.7 billion, in addition to the $25.5 billion already saved, if the current level of savings continues through to the expiration of their patents.
The report also found that of the $25.5 billion saved, $8.3 billion of that went to the federal government. Without the settlements, the report estimated, the total $87 billion in realized-and projected-savings would be reduced by $45 billion. That estimate was based on a 2010 Royal Bank of Canada analysis of patent challenges mounted between 2000 and 2009 that found a 48% success rate for generic drug makers when cases went to trial, odds that Neas has called a "total crapshoot." The GPhA has frequently cited the RBC study to defend its position.