FTC Is Slammed In Pay-For-Delay Case

Ed Sliverman

Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for the past 15 years. In addition to editing Pharmalot, he is currently an editor-at-large for Med Ad News and R&D Directions. During his 13-year tenure, he closely followed a variety of topics of concern to those who work for, and with, drug makers - drug development; mergers and acquisitions; regulatory oversight; safety and pricing controversies, and marketing issues. He has a master’s degree in journalism from New York University and a bachelor’s degree in accounting from Binghamton University.

Two months ago, Paul Bisaro, the ceo of Watson Pharmaceuticals, made a sensational charge against the Federal Trade Commission – in court papers, he accused the agency of abusing its power in attempting to stop pay-for-delay deals. Bisaro claimed the FTC harassed his company and used confidential FDA info to force Watson to strike a deal with Apotex, another generic drugmaker, to sell a version of Cephalon’s Provigil, a sleep-disorder drug.

The FTC is challenging a 2005 deal between Cephalon and several generic drugmakers that were paid $300 million by arguing the payments bought market exclusivity. The FTC issued a subpoena last year and sought to compel Bisaro to respond to questions in connection with an investigation into that deal, although he refused to testify. Bisaro claims the FTC improperly tried to broker a deal between Watson and Apotex to “improve” the market, rather than legitimately fulfill its antitrust mission (back story).

And now, a federal judge suggests Bisaro may be right. In an order, US District Court Judge Alan Kay writes there is a “strong possibility” the FTC crossed a line and shared confidential info. He adds that the agency may have attempted to broker a deal between Apotex and Watson, and initiated its investigation “to pressure Watson” to relinquish its ‘first filer’ rights and also harassed the company when it refused to cooperate. Watson has an exclusive right to produce a generic version of Provigil, and retains that right even if the company chooses not to market one.

“The facts before us suggest that the FTC sought to place Watson between a rock and a hard place, where the only way Watson could clear its name and escape further FTC scrutiny was to give in to the pressure the FTC was placing on Watson to enter into the business deal with Apotex,” Kay writes. “This court finds that the facts presented here are extraordinary enough to grant very limited discovery.” And so Kay ruled the FTC must respond to Bisaro’s move to gain more info, but Markus Meier, assistant director of the FTC Bureau of Competition’s Health Care Division, does not have to be deposed.

Richard Feinstein, the FTC’s competition director, tells The Financial Times the agency will comply with the order and very much wants to tell its side of the story. “We think it is important that people don’t conflate something we view as a sideshow that has been ginned up by Watson with the underlying policy questions that are far more important,” he tells the paper.

“Given that the FTC and its chairman, Jon Leibowitz, have been the primary architects and supporters of the legislation, this court ruling could deal a serious blow to the credibility of the FTC in matters of patent settlement law,” Jefferies & Co. analyst Corey Davis wrote in an investor note, Reuters writes.

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FTC Is Slammed In Pay-For-Delay Case