Kaiser sues Merck over alleged ‘pay-for-delay’ deal
Kaiser Foundation Health Plan sued pharmaceutical giant Merck & Co., alleging it conspired with an Indian drug manufacturer to prevent a pair of generic drugs from entering the market.
Kenilworth, N.J.-based Merck did not immediately respond to an interview request. But Kaiser’s lawsuit accused Merck of engaging in “pay-for-delay” behavior.
Kaiser alleges the lack of competition caused it to overpay by “hundreds of millions” of dollars for cholesterol medications Vytorin and Zetia, according to a complaint filed in the U.S. District Court of Northern California on July 16. Kaiser initially sued Merck in the San Francisco Superior Court in June before transferring the case to federal court.
The Oakland, Calif.-based health plan has accused Merck of breaking antitrust laws in California, Washington D.C., Hawaii and Oregon. Kaiser has also accused both Merck and manufacturer Glenmark Pharmaceuticals of breaking state laws by conspiring to monopolize and restrict trade, as well as conducting unfair and deceptive trade practices that resulted in unjust enrichment. The complaint said the two drug companies entered a “quid pro quo” agreement, with Glenmark agreeing to drop a patent challenge against Merck. Tha pharma giant, in turn, allegedly promised not to launch a generic competitor during Glenmark’s 180-day drug exclusivity period.
Pay-for-delay deals entered public consciousness during Sen. Amy Klobuchar’s (D-Minn.) unsuccessful presidential run in 2019. During several debates, Klobuchar spoke out against pharmaceutical companies compensating generic competitors for holding off marketing their versions of cheaper, brand-name drugs, leaving patients no choice but to pay for the more expensive prescriptions.
Klobuchar has now co-sponsored a bipartisan Senate bill that aims to halt this practice, which is also known as reverse payment deals. The Federal Trade Commission has estimated that these agreements result in Americans paying $3.5 billion in higher drug costs each year.
In 2019, California became the nation’s first state to target pay-for-delay in the pharmaceutical industry, with lawmakers passing a law declaring drug companies’ reverse payments as “presumed to have anticompetitive effects.” An industry group representing generic drugmakers has fought this legislation since its inception, with the Association for Accessible Medicines most recently urging a California judge in late June to act on its refiled challenge to the law.
California’s legislation imposes a fine of up to $20 million per violation by drug companies. The state law asserts a more aggressive stance against reverse payments than the landmark 2013 U.S. Supreme Court decision on FTC vs. Actavis, which found that pay-for-delay can violate antitrust laws.
The FTC claims that its Actavis decision has led to a decline in federal pay-for-delay investigations in recent years, although the number of settlements between originator and generic companies remains high.
Because originator drugs are protected by patents, generic companies must certify that they will not market it until any related patents have expired, or challenge the manufacturer’s existing patents. If a generic challenges a brand-name manufacturer’s patents, the originator could, in turn, sue the generic company for patent infringement. In these cases, companies often settle—in fiscal 2017, there were 226 settlements between drug companies and their generic counterparts, a number essentially on par with the year before, according to the most recent federal data. The majority of these agreements, or 169, restricted a generic manufacturer’s ability to market its product, but contained no explicit or possible compensation.
Twenty of these agreements offered explicit compensation to generic companies for delaying their therapies’ entrance into the marketplace, along with a restriction on selling a generic product for a period of time. For the first time since fiscal 2004, none of these agreements contained agreements not to market authorized generic.