Teva, FTC reach $1.2 billion settlement over patent ‘pay for delay’
Faced with an expiring patent, drug companies can make any number of moves, including expanding through M&A and investing in biosimilars. But of course, there is another potential move, although it carries big risks: paying generic-producing competitors to stay away from a certain product. Teva Pharmaceutical Industries, the parent company of Cephalon, is now experiencing the downside of that risk.
The Federal Trade Commission (FTC) announced on May 28 that it has reached a $1.2 billion settlement with Teva, the largest ever settlement with the FTC. The agency alleged that Cephalon, which was later purchased by Teva in 2011, chose to buy off the competition after the patent for Provigil expired.
Provigil is a drug that treats sleep disorders, and as of 2011, it made more than $1 billion in sales. When the drug’s patent expired in 2005, the government alleges, Cephalon paid generic drug manufacturers $300 million to not produce the drug until 2012.
Cephalon is not the only pharmaceutical company that participated in this practice; a similar case between Actavis and the FTC reached the Supreme Court in 2013. However, following increased enforcement efforts by the FTC, as well as pro-government court decisions such as Actavis v. FTC, Teva and Cephalon held a weaker case than it did when the government’s prosecution started in 2008.
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