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Paying to delay release of generics may violate antitrust laws

The Supreme Court of the United States ruled this month that pharmaceutical companies who pay competing manufacturers to delay the release of a generic version of a drug for which they hold a patent might face antitrust charges. Some groups heralded the decision as a victory for end consumers and for government entities involved in health care.

Their hope is that the cost of medication will be reduced if generic versions of widely used pharmaceuticals can come more quickly to market. Some have estimated that consumers and health plans could save $3.5 billion annually if pay-for-delay deals were banned outright.

On the other hand, opponents of the decision point out that pharmaceutical companies invest billions of dollars in research and development. As such, they have a legitimate business law interest in protecting their current patents from infringement.

Drug development involves very carefully calculated risks. Many companies begin the patent process in the infancy of the research stage. If they begin the patent process early, they protect themselves from competitors investing in the development of the same type of product.

However, because research, clinical trials and FDA approval can take many years, early filing can leave a pharmaceutical company with few years during which their new drug is actually available to consumers. The drug patent 20-year clock starts ticking as soon as a manufacturer applies, so actual time a patented drug is on the market is much shorter than 20 years. When a rival brings a generic version of the drug quickly to market, the pharmaceutical company that originally developed the drug can face substantial financial losses.

Source: Los Angeles Times, "High court rules 'pay-for-delay' drug deals can face antitrust suits," David D. Savage, June 18, 2013 

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