By Diane Bartz
WASHINGTON, July 23 (Reuters) - A U.S. Supreme Court ruling giving regulators the right to sue drugmakers for agreements that delay sale of cheaper generic pharmaceuticals should deter some of the most egregious deals and allow the agency to better fight others, Federal Trade Commission Chairwoman Edith Ramirez told lawmakers on Tuesday.
At issue are deals - often called "pay for delay" - where brand-name drugmakers settle patent infringement lawsuits by paying generic companies to postpone marketing their cheaper versions of the products.
The FTC says the deals cost consumers and the U.S. government an additional $3.5 billion on drug costs each year by keeping cheaper generic drugs off the market for longer.
Despite this, defenders of the practice say a generic version of a drug usually comes to market before its patent expires and, as a result, consumers still enjoy savings on drug costs.
Senator Amy Klobuchar, who chairs the Judiciary Committee's antitrust panel, is a critic of the deals and of the argument that they make it easier to end court fights.
"Pharmaceutical litigation can be settled without these cash sweeteners," she said at a hearing to discuss them.
The Supreme Court recently ruled that regulators could challenge the deals but declined the FTC's request to declare them illegal. The agency has fought the practice for more than a decade.
Following the June 17 Supreme Court decision, the FTC plans to pursue pay for delay cases that it is already litigating and investigate new settlements to determine if they are legal, Ramirez said.
"The vast majority of patent settlements do not involve (pay for delay)," said Ramirez. "What we are trying to stop are anti-competitive settlements."
Ramirez stopped short of indicating whether any cases now being considered would likely end in litigation. The FTC identified 40 settlements in the 2012 fiscal year that it considered pay-for-delay deals.
Speaking for the Pharmaceutical Research and Manufacturers of America trade group, Diane Bieri said it took drug companies $1 billion and 10 to 15 years to bring an innovative product to market.
She said the deals generally allow generic drugs to hit pharmacy shelves before the patent expires.
One of the cases that the FTC is litigating - and the one the Supreme Court weighed in on - involves AndroGel, a gel used to treat men with low testosterone.
In that case, brand-name drugmaker Solvay Pharmaceuticals Inc, now owned by AbbVie, agreed to pay as much as $30 million annually to generic makers Actavis Inc, previously Watson Pharmaceuticals; Paddock Laboratories Inc, now part of Perrigo Co ; and Par Pharmaceutical Cos .
Under the deal, the three would keep their generic versions off the market until 2015. The patent expires in 2020.
A second involves Cephalon Inc, now owned by Teva . In 2008, the FTC accused Cephalon of paying four companies to not sell a generic version of its wakefulness drug Provigil. That case was put on hold pending the Supreme Court decision.
Senators Klobuchar, a Minnesota Democrat, and Chuck Grassley, an Iowa Republican, have introduced legislation this year to make the deals illegal unless a judge determines otherwise.
Ralph Neas, chief executive of the Generic Pharmaceutical Association industry group, said that the Supreme Court's decision to refrain from declaring the deals illegal would lead lawmakers to be wary of Klobuchar's bill.
"I believe that we now have a bipartisan consensus against the bill in the Senate," said Neas, who supports pay-for-delay deals. "It would put in jeopardy the entire business model that brings generic medicines to the market on average 81 months before patent expiration."
Senators Al Franken, a Minnesota Democrat, and David Vitter, a Louisiana Republican, have a second bill which would strip a generic company of its exclusive right to challenge a patented drug if it makes a "pay for delay" deal.