High Court allows 'pay for delay' drug suits

Drugmakers can be sued for paying rivals to delay low-cost versions of popular medicines, the U.S. Supreme Court said Monday, in a decision that rewrites the rules governing the release of generic drugs.

The 5-3 ruling is largely a victory for the Federal Trade Commission and the Obama administration, reversing a lower-court decision that had effectively insulated pharmaceutical companies from liability. The FTC says those "pay for delay" accords, known in the industry as "reverse payment settlements," cost drug purchasers as much as $3.5 billion a year.

Long Island has a sizable generic drug industry, which has expanded in recent years.

Bill Peters, chief financial officer of Amityville-based Hi-Tech Pharmacal Co., which manufactures both generic and branded pharmaceuticals, said the ruling had taken away an important option for settling patent litigation.

"As we look to challenge patents in the future I think this is bad for the generic industry, because it lessens the incentives to challenge patents," Peters said.

He added the ruling had no immediate impact on the company. Shares of Hi-Tech Pharmacal Co. closed up 9 cents Monday at $32.80.

Reverse payment settlements 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 can 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.

Drugmakers say the settlements benefit consumers by bringing inexpensive copycat medicines to market years earlier than they would arrive if generic drugmakers took the issues to trial and lost. But federal officials counter that such deals add billions to the drug bills of American patients and taxpayers, compared with what would happen if the generic companies won the lawsuits and could begin marketing right away.

With Ted Phillips