The FTC and certain key members of Congress are calling for legislation to end so-called “pay-for-delay” agreements between brand-name and generic pharmaceutical companies that arise in the settlement of patent litigation. In a “pay-for-delay” agreement, the brand-name pharmaceutical company pays a generic competitor to keep its competing product off of the market for a certain period of time.

FTC investigations and enforcement actions against “pay-for-delay” agreements deterred their use from April 1999 through 2004. Notwithstanding a Sixth Circuit decision in 2003 holding “pay-for-delay” agreements to be per se antitrust violations, a few appellate courts have ruled to the contrary. Since the Eleventh Circuit’s 2005 ruling in Schering-Plough Corp. v. Fed. Trade Comm’n, upholding “pay-for-delay” agreements, “pay-for-delay” settlements have reemerged.

“Pay-for-delay” agreements allow a brandname company to keep its prices high while its generic competitor shares in the benefits of the brandname’s alleged monopoly profits. As a result, according to the FTC, consumers miss out on generic prices that are up to 90 percent lower than brandname prices. An FTC study found that “pay-for-delay” agreements cost consumers approximately US$3.5 billion per year. Another study by the FTC found that these settlements keep generics off the market for an average of 17 months longer than settlements that do not include a payment.