The Federal Trade Commission has reached a settlement resolving the antitrust suit charging Cephalon, Inc. with illegally blocking generic competition to its sleep disorder drug Provigil. Teva Pharmaceutical Industries, Ltd. will make a total of $1.2B available to compensate purchasers, including drug wholesalers, pharmacies, and insurers, who overpaid because of Cephalon’s illegal conduct. The FTC’s pharmaceutical expert witness had previously estimated that the amount could be anywhere between $3.5B and $5.6B.
As part of the settlement, Teva also has agreed to a prohibition on the type of anticompetitive patent settlements that Cephalon used to artificially inflate the price of Provigil. Teva is the largest generic drug manufacturer in the world, and this prohibition applies to all of its U.S. operations.
The May 28th FTC.com press release states:
The settlement stems from a 2008 FTC lawsuit, which charged that Cephalon unlawfully protected its Provigil monopoly through a series of agreements with four generic drug manufacturers in late 2005 and early 2006. The FTC alleged that Cephalon sued the generic drug makers for patent infringement and later paid them over $300 million in total to drop their patent challenges and forgo marketing their generic products for six years, until April 2012.
This type of settlement, in which the generic drug firm agrees not to market its product for a period of time and the brand name drug manufacturer pays the generic- whether in monetary or non-monetary form – is commonly referred to as a “reverse-payment” patent settlement. In 2013, in FTC v. Actavis, the Supreme Court confirmed that reverse payments can violate the antitrust laws.
Trial in the case is scheduled to begin June 1 in the U.S. District Court for the Eastern District of Pennsylvania. If approved by the court, the settlement will resolve the FTC’s charges.