FTC Sues Endo Pharmaceuticals and Generic Manufacturers over Pay-for-Delay Agreements | Practical Law

FTC Sues Endo Pharmaceuticals and Generic Manufacturers over Pay-for-Delay Agreements | Practical Law

The Federal Trade Commission (FTC) sued Endo Pharmaceuticals Inc. and several generic drug manufacturers over alleged pay-for-delay agreements for drugs Opana ER and Liboderm. The FTC argued that the agreements, which delayed consumer access to generic versions of the drugs, cost consumers hundreds of millions of dollars.

FTC Sues Endo Pharmaceuticals and Generic Manufacturers over Pay-for-Delay Agreements

by Practical Law Antitrust
Published on 31 Mar 2016 • USA (National/Federal)
The Federal Trade Commission (FTC) sued Endo Pharmaceuticals Inc. and several generic drug manufacturers over alleged pay-for-delay agreements for drugs Opana ER and Liboderm. The FTC argued that the agreements, which delayed consumer access to generic versions of the drugs, cost consumers hundreds of millions of dollars.
On March 30, 2016, the FTC filed a complaint against Endo Pharmaceuticals Inc. and several generic drug manufacturers alleging that the parties entered pay-for-delay agreements for drugs Opana ER and Liboderm. The charges allege that Endo paid manufacturers of generic versions of Opana ER (Impax Laboratories, Inc.) and Liboderm (Watson Laboratories, now Allergan) to:
  • Abandon their challenges to Endo's patents on the two drugs.
  • Delay launching generic versions of the drugs for a specific period of time.
In exchange, Endo agreed to:
  • Not introduce its own authorized generic version of the drugs for a specific period of time after Impax and Watson introduced their generic versions of the drugs (no-AG agreements), including:
    • 180 days for Opana ER; and
    • 7 1/2 months for Liboderm.
  • Pay Impax:
    • a cash amount if the no-AG agreement was devalued; and
    • up to $40 million for an alleged independent development and co-promotion agreement.
  • Provide Watson with branded Liboderm patches valued at between $96 and $240 million at no cost, which Watson could resell for profit.
The FTC stated that after the agreement with Impax, Endo created a new formulation of Opana ER and required patients to switch formulations, devaluing the no-AG agreement for the previous formulation. As a result, Endo paid Impax more than $102 million. The FTC alleged that to date, Endo has paid Impax over $112 million. The amount Endo paid Watson is redacted in the FTC's complaint.
The FTC alleged that Endo's payments to Impax and Watson were large and unjustified because the payments:
  • Exceeded any reasonable calculation of avoided litigation costs for the underlying patent litigation.
  • Made no business or economic sense.
  • Were not in exchange for any goods or services.
  • Had the sole purpose of agreeing not to compete in the market for generic versions of the drugs.
The FTC stated that as a result of the pay-for-delay agreements, Endo was able to enjoy a monopoly over Opana ER and Liboderm until the end of 2013. The FTC noted that:
  • No significant competitors exist for either Opana ER or Liboderm.
  • Opana ER and Liboderm are not reasonably interchangeable with any other medications.
  • There are substantial barriers to entry in both drug markets.
The FTC alleged that absent the pay-for-delay agreements, both Impax and Watson could have entered the market sooner, promoting competition in both markets and saving consumers hundreds of millions of dollars.
For more information on pay-for-delay agreements, see Practice Note, Reverse Payment Settlement Agreements. For more on post-Actavis pay-for-delay cases, see Practice Note: Overview, Actavis Case Tracker.