The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) requires all drug companies, including brand-name companies and generic makers, to file certain agreements with the FTC and DOJ. Under the Act, whose filing requirements began on January 7, 2004, drug companies must file all brand-generic settlement agreements with the antitrust regulators within 10 days of their execution. Typically, these settlement agreements involve resolutions of patent disputes between brand-name companies and their generic competitors, and, in some instances, disputes between two generic competitors over issues that typically relate to exclusivity for first-to-file generic products.

On January 7, 2005, the Commission released a summary of the settlement agreements filed during fiscal year 2004 (ending September 30, 2004). It is the first report publicly issued by the Commission since the law became effective. The summary identifies 22 agreements filed by generic and branded drug manufacturers. The summary provides information about the settlements using criteria similar to those employed by the Commission in its earlier Generic Drug Study, including whether the agreements:

  • were between brand-generic or generic-generic manufacturers;
  • resolved patent litigation;
  • restricted generic entry;
  • involved any payments between the parties; and
  • involved first-to-file or subsequent generic file issues.

According to the FTC summary, 19 of the 22 agreements filed in fiscal year 2004 involved agreements between brand and generic manufacturers, with the remaining three occurring between two generic manufacturers. The summary data show that 14 of those 19 agreements resolved patent infringement litigation between brand and generic manufacturers. No settlement included a payment from the brand to the generic manufacturer in exchange for the generic’s agreement not to market its product.

In particular, the summary noted, among other things, that 9 of the 14 settlements “did not restrict generic entry either because (a) the generic was already on the market and the settlements did not require the generic to withdraw its product (three agreements), (b) the agreements allowed the generic to market its product upon receiving FDA approval (five agreements), or (c) the brand agreed to supply the generic with product within three months of the agreement (one agreement).” Moreover, of these 9 agreements, three had no payments between the parties, two required a royalty from the generic to the brand, and four had payments from the brand to the generic.

The Medicare Prescription Drug filing program appears to be successful in its first year of operation. It provides the FTC/DOJ with an effective mechanism for early review and detection of potentially anticompetitive agreements between brand and/or generic manufacturers, an area that has been of great interest to the FTC for a long time.

Authored by:
Robert W. Doyle, Jr.