FTC Critical of Recent “Pay-For-Delay” Settlement Tactics in Hatch-Waxman Patent Litigations; Proposed Senate Bill Would Limit Them

The Federal Trade Commission (FTC), in a statement made by Commissioner Jon Leibowitz before the Senate Judiciary Committee on January 17, expressed its concern over recent court decisions allowing cash or other incentive payments as part of patent settlements between branded and generic drug companies. Meanwhile, a Senate bill was introduced that would prohibit settlements using exclusionary payments aimed at preventing early market entry of competing generic drugs.

In his comments, Commissioner Leibowitz stressed that it was critical to eliminate the “pay-for-delay settlement tactics” employed by both brand and generic pharmaceutical companies. He cautioned that such settlements would not only burden the individual consumer but also the federal government, particularly the new Medicare drug program, state governments, and American businesses, which spend vast amounts of money on healthcare costs. Commissioner Leibowitz remarked that the HatchWaxman Act itself would be at risk if brand and generic drug companies were allowed to settle patent litigations by paying generic drugs manufacturers to keep their products off the market. “No longer will generic companies vie to be the first to bring a drug to market”—an incentive created by HatchWaxman—“instead, they will vie to be the first to be paid not to compete.”

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