High court hears case on drug firm's generics policy

The U.S. Supreme Court heard arguments this week

The U.S. Supreme Court heard arguments this week from the Justice Department and drug companies on what is called pay-for-delay deals. The government says the deals keep cheaper forms of medicine off the American market for longer periods of time. The drug companies say it allows them to recoup the cost of development. (March 26, 2013) (Credit: Getty Images)

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The Supreme Court struggled Monday with whether it should allow federal officials to challenge deals between pharmaceutical corporations and their generic drug competitors.

Justices heard arguments from the Justice Department against what they call "pay-for-delay" deals. The government says the deals keep cheaper forms of medicine off the American market for longer periods of time.

Generic drugmakers play an important and growing role in Long Island's economy, employing at least 5,000 people in Nassau and Suffolk. In the past years, seven companies have announced plans to hire more than 800 people.

One of the companies involved in the case before the Supreme Court, generic drugmaker Watson Pharmaceuticals, employs about 100 people at a nicotine gum factory in Copiague.

Pay-for-delay deals such as the one before the justices arise when generic companies file a challenge at the Food and Drug Administration to the patents that give brand-name drugs a 20-year monopoly. The generic drugmakers aim to prove the patent is flawed or otherwise invalid, so they can launch a generic version well before the patent ends.

Brand-name drugmakers then usually sue the generic companies, which sets up what could be years of expensive litigation.

The two sides often reach a compromise deal that allows the generic company to sell its cheaper copycat drug in a few years -- but years before the drug's patent would expire. Often, that settlement comes with a sizable payment from the brand-name company to the generic drugmaker.

Brand-name and generic drugmakers say the settlements protect their interests but also benefit consumers by bringing inexpensive copycat medicines to market years earlier than they would arrive in any case generic drugmakers took to trial and lost.

The Obama administration, backed by consumer groups and the American Medical Association, says these pay-for- delay deals profit the drug companies but harm consumers by adding $3.5 billion annually to their drug bills.

Generic drugs account for about 80 percent of all American prescriptions for medicines and vaccines but a far smaller percentage of the $325 billion spent by U.S. consumers on drugs each year. Generics saved American patients, taxpayers and the health care system an estimated $193 billion in 2011 alone, according to health data firm IMS Health.

In the case before the court, Brussels-based Solvay -- now part of a new company called AbbVie Inc. -- reached a deal with Watson allowing it to launch a cheaper version of Solvay's male hormone drug AndroGel in August 2015. Solvay agreed to pay Watson, now called Actavis Inc., an estimated $19 million to $30 million annually, government officials said. The patent runs until August 2020.

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