Back in 2006, Philadelphia drug-company Cephalon made payments totaling almost $300 million to a group of four other drug makers — including Philadelphia-based Teva Pharmaceuticals — in order to keep a generic version of a popular drug off pharmacy shelves for a few years. This kind of transaction was common in the industry at the time.
Those deals are still common today, but the Federal Trade Commission is working to change that. Teva now owns Cephalon, and on Thursday it settled a case with the FTC by agreeing to return $1.2 billion dollars worth of profits Cephalon made during its pay-to-delay scheme.
The landmark case is the first of its kind since the U.S. Supreme Court ruled in 2013 that deals like this could violate antitrust laws.
Rutgers-Camden law professor Michael Carrier has been following the case and says it will serve as a wake-up call to other companies.
“The FTC got a settlement of more than a billion dollars of profits that Teva had to give up, and that’s something other companies really need to think about going forward,” said Carrier.
During a four-year stretch as the exclusive producer of the sleep-disorder drug Provigil, it’s estimated that Cephalon made an extra four-to-six billion dollars in profits.
Carrier says that overall, these types of pay-to-delay deals cost the American Consumer about $3.5 billion a year.
As part of its agreement with the FTC, Teva is not allowed to take part in any reverse-payment schemes like this in the future.
“This is outstanding news for the consumer,” said Carrier. “The fewer pay-for-delay settlements there are out there, the lower the price is going to be for the consumer.”
Teva’s payment will refund some drug wholesalers, pharmacies and insurance companies who overpaid for the sleep-disorder drug.