Deals that delay generics decried

NEW YORK — The Federal Trade Commission says drug-company deals that delayed the introduction of cheaper generic medicines rose 63 percent last year as the agency presses Congress and the courts to limit the settlements.

The settlements are known as reverse-payment or pay-for- delay deals because the brand-name company compensates the generic-drug maker with cash or marketing or sales deals in return for dropping challenges to patents.

The number of deals increased to 31 from 19 in 2009, the FTC said. The agency said there were no such settlements in 2004. The cases involved 22 products and $9.3 billion in sales.

The deals "are outrageous, and they harm consumers," FTC chairman Jon Leibowitz said Wednesday in an interview. "Either the courts or Congress needs to stop them."

He added: "It's only getting worse."

Lobbyists for the drugmakers defended the settlements as a way to cut legal costs and avoid long-running court battles. The drug industry so far has fended off the FTC's attempts to restrict the deals through the courts and legislation.

"Without settlements, these generics may not be available to patients for years," said Diana Bieri, executive vice president and general counsel of the Pharmaceutical Research and Manufacturers of America, a Washington-based trade group.

Prices of generic drugs are generally 20 to 30 percent below those of brand-name drugs and in some cases as much as 90 percent cheaper, the FTC said in a statement.

The agency has contended in court that the deals are anticompetitive and violate antitrust law. The FTC also has supported legislation in Congress that would prohibit settlements that increase the cost of prescription drugs.

Leibowitz said the settlements add $3.5 billion to drug costs for consumers annually.

That figure is disputed by Jonathan Orszag, senior managing director at the economic consulting firm Compass Lexecon in Washington, and Robert Willig, a Princeton University economics professor.

In some cases, a settlement may avoid years of patent litigation and bring a generic drug to the market sooner that it would otherwise arrive, they said in a 2009 paper. The writers said Leibowitz's estimate that such deals cost consumers $3.5 billion a year is too high.