FTC Gets $1.2 Billion From Drug Company Over 'Pay For Delay' Patent Scam

from the one-down dept

For many years now, we’ve been covering the pay for delay scam that many pharmaceutical companies have used to effectively pay generic drug makers not to compete with them, even though they are able to do so. The full details of how the scam works are complex, but involve abusing a ridiculous part of the Hatch Waxman Act that grants additional monopoly benefits to the first market entrant of a generic drug. The big pharma firms used that to their advantage, filing bogus lawsuits against those generic drug makers and then agreeing to “settle” the lawsuit they filed by paying the generic drug maker to not actually enter the market. The greater monopoly protection afforded to the big pharma company more than makes up for how much they have to pay the generic drug maker. In short, it’s taking advantage of the stupidity of giving drug companies massive monopolies.

The FTC started looking into these practices years ago, and two years ago the Supreme Court ruled that the FTC had every right to go after drug makers using antitrust laws over these “deals.” And the FTC has been filing lawsuits on an ongoing basis about these deals.

Teva has now settled one such case for a cool $1.2 billion — giving you a sense of just how valuable it has been to these pharma companies to extend their monopoly, keep out competition and keep drug prices artificially high. With Teva, it was the sleep disorder drug provigil (and, technically, the drugmaker was Cephalon, which Teva then bought). Teva had been fighting with the FTC for years over this, and the case was scheduled to go to trial next week — but the settlement ends that. The amount, $1.2 billion, by the way, is the largest ever settlement with the FTC. You have to imagine that there will be more of these coming considering the number of other lawsuits and the fact that “pay for delay” was a widespread practice in the pharma industry.

Of course, even with all of this abuse, some people still insist that giving monopoly rights to pharmaceutical companies is the best way to produce new medicines and to provide healthcare. Isn’t it about time we began to question those assumptions?

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Companies: cephalon, teva

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Comments on “FTC Gets $1.2 Billion From Drug Company Over 'Pay For Delay' Patent Scam”

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20 Comments
That One Guy (profile) says:

That'll show 'em

$1.2 billion, impressive. So that’s what, 5, 10% of the amount the drug company managed to make by keeping the generic version locked up and the price inflated as a result?

Yup, with fines like that, I’m sure drug companies will really think twice about abusing the system to keep generics locked up in the future, as clearly there’s just no money to be made from doing so.

Reality bites (profile) says:

FTC = Feral Traitor Corp

What else could be expected from a rogue agency of the Feral Government? I’m surprised the whores weren’t bought off with a bottle of two buck chuck and a big Mac. Its more in the line of what a crack whore should expect.

Close the rogue agency and either deport or execute the entire staff after a speedy trial.

Mason Wheeler (profile) says:

So what happens to that $1.2 billion? Seems to me the vast majority of it ought to be distributed as damages to the victims: provigil users who have been overcharged by Teva’s malfeasance.

(Disclosure: I’m not a provigil user and if I personally know anyone who is, I’m not aware of it. I just figure that would be the just thing to do.)

Mason Wheeler (profile) says:

Re: Re: Re:

I might agree, except for two points:

1) It’s very difficult to prove that someone died due to not having a treatment available, since for any number of reasons, they might have died even if they had gotten the treatment anyway.
2) It’s not like this is a cancer drug. Have you ever heard of someone who died due to lack of availability of an expensive prescription sleeping pill?

Mason Wheeler (profile) says:

Re: Re:

Also, I am more than sure the pharma companies accounted for this ‘government fee’ as part of doing business.

…and that right there is the real problem.

Want to fix this whole class of problems? Pass an Anti-Cost-Of-Doing-Business law that mandates that in any case in which a business is found to have violated the law in the pursuit of higher revenue, they must be assessed at minimum a fine of 100% of gross revenue derived from their lawbreaking.

In other words, make it so that crime truly does not pay.

FamilyManFirst says:

Re: Re: Re: Fine

The fine was 1.2 *billion*. I’m sure that this was taken into account somehow – that’s pretty much the only way you get a number that high.

Yet this was a settlement. There’s a natural tendency to assume that they settled for a fine lower than what they actually made. The only other alternative seems to be that they saw a slam-dunk case in the making, so they scrambled to settle before receiving a verdict that may be even worse. This case seems unlikely to be that clear-cut, at least in a courtroom.

Anonymous Coward says:

It was clearcut and the company began these things in 2006, so up to today, that is 9 years of getting the revenue from something they shouldn’t have. Oh, it was at least a billion dollar selling drug, so that is at least 9 billion in revenue.

Production costs are typically less than 1%, so year, the $1.2 billion fine is a cost of doing business.

Violynne (profile) says:

If I were a business whose sole purpose is to screw as many people as I can, I have one of two options:

1) Run a website and sell drugs, ID cards, and other illegal substances, but risk getting so many years behind bars, future laws may lock up my grandkids…

-OR-

2) Run a pharmaceutical company, bilk billions from the wares, and get a fine levied by the FTC that’s so laughably small, it affects nothing of the business.

The choice is obvious.

GEMont (profile) says:

Justice aint blind.

Well I’m just glad the FTC has finally managed to get back some of the money they lost.

I mean the total loss of cash by the FTC because of these awful drug company schemes is enormous, and its good to see that the FTC will not suffer so much as it has been, now that they got back some of their money.

Maybe they can use some of the returned money to help get back the rest of their lost capital from all the other FTC-scamming drug companies now.

Justice prevails once again, in the land of the free.

–/s

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