The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 requires that brand-name and generic drug companies notify the Federal Trade Commission (FTC) and Department of Justice (DOJ) of certain pharmaceutical patent settlements. On May 21, the FTC released a summary of the agreements that it received in fiscal year 2007. (See Issue 3 at pp. 12- 13 for a discussion of the MMA requirements.)

According to the summary (To view the chart from the FTC report please see the original document), the FTC received 45 agreements under the MMA, 33 of which were final settlements of patent litigation brought by a brand name manufacturer against a generic company. Of these 33, 14 included consideration flowing from the brand name manufacturer to the generic company and a restriction on the generic’s ability to market its product. In three cases, the consideration consisted of payments made as part of a “side deal” and in 11 cases the “consideration” was the brand name manufacturer’s commitment not to launch an authorized generic.

The FTC has expressed significant concerns with settlements such as these that include so-called “reverse payments.” In addition, the FTC has challenged a number of these reverse payment settlements as anticompetitive, and, despite some litigation losses, its interest in this topic does not appear to be waning. This report is not likely to quell the agency’s concerns. According to FTC Chairman Kovacic, “[t]his report confirms that settlements with potentially anticompetitive arrangements continue to be prevalent. The Commission remains committed to ensuring that brand and generic companies do not use these settlements as a way to deny consumers the benefits of competition.” Echoing this sentiment, FTC Commissioner Leibowitz added, “[a]s our report today sadly demonstrates, pay-for-delay settlements continue to proliferate. That’s good news for the pharmaceutical industry . . . . But it’s bad news for consumers.”