'Pay-for-delay': U.S. sues Endo for drug market rigging

The Federal Trade Commission sued Endo in federal court in Philadelphia, alleging the company and some of its partners in the past "violated antitrust laws by using pay-for-delay settlements to block consumers' access to lower-cost generic versions of Opana ER [slow-release opiod painkiller] and Lidoderm [skin anesthetic]. Shares fell 10% in early trading but mostly recovered later in the day (Updated).

"FTC just filed (its) most important lawsuit since the Supreme Court's Actavis decision," says Rutgers Law School Prof. Michael A. Carrier, author of an antitrust textbook. "Consumers overpaid hundreds of millions for opioid Opana and shingles-treating Lidoderm when generics were delayed entry," for a year in Lidoderm's case, two and a half years for Opana, Carrier added. It's not just about cash, but also the partners' promise not to sell competing drugs. "It's a strong complaint; case law is on the FTC's side," Carrier concluded.

In a statment, FTC called this its first enforcement action challenging drugmaker deals to make and accept payments "not to market an authorized generic" in order to prevent competition and keep prices high. FTC said it has been challenging other kinds of "pay-for-delay" drug-marketing arrangements since the early 2000s. No immediate statement from Endo.

FTC says Endo "paid the first generic companies that filed for FDA approval – Impax Laboratories, Inc. and Watson Laboratories, Inc. – to eliminate the risk of competition for Opana ER and Lidoderm, in violation of the Federal Trade Commission Act."

U.S. law gives six months exclusive sales rights to the first drugmaker to challenge a name-brand drugmaker's product patent, in competition with the drug developer's own generic version. By cutting deals to keep those in-house generics off the market, companies arrange to "capture all generic sales and be able to charge higher prices during the exclusivity period." FTC wants the court to rule Endo and its partners have violated antitrust laws, make them pay back "ill-gotten gains," and order them not to do it again.

According to an FTC summary of the complaint, "In 2010, Endo and Impax illegally agreed that until January 2013, Endo would not compete by marketing an authorized generic version of Endo's Opana ER. In exchange, Endo paid Impax more than $112 million, including $10 million under a development and co-promotion agreement signed during the same time period. Endo used this period of delay to transition patients to a new formulation of Opana ER, thereby maintaining its monopoly power even after Impax's generic entry. In 2010, Opana ER sales in the United States exceeded $250 million.

"In May 2012, Endo and its partners, Teikoku Seiyaku Co. Ltd. and Teikoku Pharma USA, Inc., illegally agreed with Watson Laboratories, Inc. that until September 2013, Watson would not compete with Endo and Teikoku by marketing a generic version of Endo's Lidoderm patch. In exchange, Endo paid Watson hundreds of millions... As a result, Endo illegally maintained its monopoly over Lidoderm. In 2012, Lidoderm sales in the United States approached $1 billion.

"Endo and Watson illegally agreed that, for 7½ months after September 2013... Endo would not compete by marketing an authorized generic version of Lidoderm. This agreement left Watson as the only generic version of Lidoderm on the market, substantially reducing competition and increasing prices for generic lidocaine patches. As a result, Watson made hundreds of millions of dollars more in generic Lidoderm sales. The complaint also names Allergan plc, the parent company of Watson, and Endo International plc, the parent company of Endo Pharmaceuticals Inc."