FTC Testimony: Stopping Pay-for-Delay Drug Settlement Agreements is a Top Competition Priority

In testimony today before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Courts and Competition Policy, the Federal Trade Commission details its work to promote competition and benefit consumers. According to the FTC testimony delivered by FTC Chairman Jon Leibowitz, a top competition priority at the Commission is to stop “pay-for-delay” agreements between branded and generic drug makers. The FTC estimates that these sweetheart deals cost consumers $3.5 billion a year.

According to newly released agency data, branded and generic drug companies entered into 21 suspect patent litigation settlements involving compensation in the first nine months of FY 2010 alone. This is more than the total for the entire previous fiscal year. Those settlements, the FTC testified, protect $9 billion in prescription drug sales from generic competition.

“That’s almost an epidemic,” Chairman Leibowitz said, “and left untreated, these types of settlements will continue to insulate more and more drugs from competition. Every single FTC Commissioner, going back through the Bush and Clinton administrations, has supported stopping these unconscionable agreements.”

At the same time, the new information illustrates that drug companies can and do settle patent litigation cases without branded companies paying generic firms not to compete. In the first nine months of FY 2010, seventy-five percent of all such settlements reported to the FTC did not involve a payment by the brand to the competing generic firm.

The FTC testimony also outlines other agency priorities. The FTC aggressively enforces the antitrust laws to protect consumers by removing obstacles to competition. With broad jurisdiction over the U.S. economy, the agency maximizes its impact by focusing on areas that directly affect consumers and businesses, such as health care, energy, emerging technologies, real estate, and retail. The FTC’s competition work falls into three broad categories: merger review, investigations of anticompetitive conduct, and competition policy analysis.

The testimony outlines the FTC’s recent work to stop anticompetitive mergers. The number of mergers requiring FTC review increased over the past year, and the agency continues to review transactions for potential anticompetitive effects, challenging mergers when appropriate. In fiscal year 2009, the FTC challenged 19 mergers, and during the first three-quarters of 2010, the FTC has brought 14 merger enforcement actions in industries throughout the economy, including pharmaceuticals, medical devices, funeral services, fertilizer, truck stops, and chemicals.

The testimony next describes a joint FTC/Department of Justice effort to update the agencies’ Horizontal Merger Guidelines, to increase transparency and clarify to courts, businesses and antitrust lawyers how the agencies analyze transactions and make enforcement decisions.

The testimony concludes by describing the FTC’s work in the energy sector and outlining the Commission’s efforts to protect consumers in financial distress and to protect consumer privacy.

The FTC vote approving the testimony and its inclusion in the formal record was 5-0.

Copies of the Commission’s testimony can be found on the FTC’s website at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.