A “Pay-for-Delay” agreement is one in which a brand name pharmaceutical company delays a generic competitor from releasing its generic product to the market, by agreeing to pay the generic brand to hold its competing product off the market for a certain period of time. Typically, a brand name drug company challenges the generic drug company’s right to manufacture the generic form of the drug, and lawsuits are filed to determine whether the brand name drug company’s patent is valid and whether it was infringed by the generic drug company. Patent litigation between brand name pharmaceutical companies and generic drug companies is sometimes settled by agreements in which the brand name company agrees to pay the generic company to hold its competing product off the market. These types of Pay-for-Delay settlements are beneficial to both the brand name and the generic company, because the brand name drug prices stay high and the generic drug company shares the benefits of the brand name’s “monopoly” profits. The big losers, however, are consumers. They miss out on generic prices that can be as much as 90% less than brand names, and the United States Federal Trade Commission estimates that if Pay-for-Delay agreements were eliminated, American consumers would save $3.5 billion annually.
It can be argued that Pay- for-Delay agreements are in violation of antitrust laws. The Federal Trade Commission has in fact brought several law suits challenging Pay-for-Delay agreements, and one federal Appeals Court has determined that such agreements are automatically illegal. However, since approximately 2005, other federal Appeals Courts have upheld the legality of Pay-for-Delay agreements.
The Pay-for-Delay agreements are usually part of settlements of the patent lawsuits. Between 2004 and 2009, approximately 66 final settlement agreements involved some form of compensation from the brand name company to the generic company, with the generic company agreeing to delay its entry into the market in exchange for sharing in some of the profits that the brand name company makes from the drug.
Whatever lawmakers in Congress or judges in courts decide about the legality of Pay-for-Delay agreements, it is clear that American consumers are suffering at the hands of big pharmaceutical companies. Setting the legalities aside, it is simply unfair that consumers, particularly those who need medication and often cannot afford it, do not have access to less expensive generic drugs because the pharmaceutical companies collude.