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Shows Substantial Increase in the Number of Settlements Involving a Payment to the Generic and a Restriction on Generic Entry

The Federal Trade Commission’s Bureau of Competition today issued a summary of agreements filed with the Commission in fiscal year 2006 (ending September 30, 2006) by generic and branded drug manufacturers. The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 requires drug companies to file certain agreements with the FTC and the U.S. Department of Justice.

The summary provides information regarding the agreements that were filed with the FTC in FY 2006. It also compares FY 2006 data with those received in FY 2005 and FY 2004.

In fiscal year 2006, there were 28 final settlements, and in half of those – 14 – the generic both received compensation and agreed not to market its product for a period of time. In contrast, only three of the eleven settlements in 2005 and none of the fourteen settlements in 2004 had both provisions.

The compensation to the generic took different forms, including: 1) payments for co-promoting the brand product, 2) payments for supplying, or being available to supply, the brand with raw material or finished drug product; 3) an agreement by the brand not to compete with an authorized generic, 4) payments for intellectual property to the brand, and 5) payments as part of a co-development project between the brand and the generic.

Nine of the 11 settlements involving first-filers contained both a payment to the generic and a restriction on generic entry. The first-filer is the first generic company to file an abbreviated new drug application that claims the patent (or patents) protecting the brand drug are invalid or will not be infringed by the generic’s product. The first-filer receives 180 days of market exclusivity, which means the Food and Drug Administration may not, with limited exceptions, approve another generic filer’s product until 180 days after the first-filer goes to market.

Further, for the first time since the Federal Trade Commission’s investigation into pharmaceutical patent settlements became public, there were settlements that restricted thegeneric from marketing products that were not the subject of the litigation. This restriction appeared in five of the settlements, and, in all them, the generic received compensation.

The report notes that all of the agreements reported in FY 2006 occurred after the 11th Circuit Court’s decision in Schering-Plough v. Federal Trade Commission, reversing the FTC decision that two settlements involving a restriction on generic entry and compensation to the generic manufacturers violated the FTC Act.

The other highlights of the summary are that: 1) overall there were 45 agreements reported; 2) eight were interim agreements that occurred during patent litigation between a brand and a generic company, but did not resolve the litigation; and 3) one agreement was between a first-filer generic and a subsequent generic filer.

The FTC will be testifying today on drug competition and the study at a hearing before the Senate Judiciary Committee.

Copies of the Bureau’s summary of agreements filed in FY 2006 are available on the FTC’s Web site at The FTC’s Bureau of Competition, in coordination with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail:; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at


Mitchell J. Katz,
Office of Public Affairs


Bradley S. Albert,
Bureau of Competition