●    Brand-name pharmaceutical companies can delay generic competition that lowers prices by agreeing to pay a generic competitor to hold its competing product off the market for a certain period of time. These so-called “pay-for-delay” agreements have arisen as part of patent litigation settlement agreements between brand-name and generic pharmaceutical companies.

●    “Pay-for-delay” agreements are “win-win” for the companies: brand-name pharmaceutical prices stay high, and the brand and generic share the benefits of the brand’s monopoly profits. Consumers lose, however: they miss out on generic prices that can be as much as 90 percent less than brand prices. For example, brand-name medication that costs $300 per month might be sold as a generic for as little as $30 per month.

●    The Federal Trade Commission’s (FTC) investigations and enforcement actions against pay-for-delay agreements deterred their use from April 1999 through 2004.1    In 2003, an appellate court held that such agreements were automatically (or per se) illegal.2

●    Since 2005, however, a few appellate courts have misapplied the antitrust law to uphold these agreements.3    Following those court decisions, patent settlements that combine restrictions on generic entry with compensation from the brand to the generic have re- emerged.

Full FTC Pay-for-Delay Report - Jan. 2010 (1,074 KB PDF)