The Federal Trade Commission filed suit against Solvay and three generic manufacturers alleging Solvay paid its would-be competitors to delay marketing their versions of Solvay's testosterone-replacement drug AndroGel for nine years.

The complaint alleges that in an agreement between Solvay and Watson to settle a patent infringement suit, Solvay agreed to share its AndroGel profits through a co-promotion deal in return for Watson delaying the launch of its generic version of the drug until 2015. AndroGel is Solvay's top-selling product, with U.S. sales of more than $400 million in 2007.

Watson received FDA approval for its generic AndroGel in January 2006 and inked its agreement with Solvay in September 2006. The same day Solvay entered agreements with Par and Paddock, which are partnering on a generic AndroGel. The complaint says Par agreed to co-promote AndroGel to primary care doctors and receive $10 million annually for six years. Solvay also agreed to transfer $6 million up front to Paddock through a transfer of title of Paddock's ANDA to Par.

The agreements settled suits that Solvay brought alleging Watson and Paddock infringed its patent covering the use of a pharmaceutical gel formulation containing testosterone and other ingredients in certain amounts. The formulation patent, 6,503,893, expires in February 2021.

From a business point of view, firms like settlements because they provide certainlty to both sides, and the brand and generic companies argue they are in fact pro-competitive because they assign a value to the disputed patent and allow for generic entry before it might otherwise be possible. In the AndroGel case, generics will be able to launch at least six years before the patent expires.

The FTC announced its filing of the complaint in a Feb. 2 release. The suit was filed Jan. 27 in the U.S. District Court for the Central District of California. Large portions of the complaint are inked out, including details on the negotiations between the companies, details of the terms of Solvay's agreement with Watson, and why FTC believes the co-promotion deals depart from industry standards.

The complaint notes that Solvay plans to introduce a gel with more testosterone than AndroGel before 2015 and that Watson would not have accepted this line extension without a substantial sharing in AndroGel profis.

FTC forced to sharpen its tactics

The suit is the latest of several complaints the FTC has brought to block agreements between brand and generic companies to delay the launch of generic drugs. Last year the commission sued Cephalon for paying four generic manufacuturers $200 million in side deals to delay entry of generic Provigil (modafinil) (¹ Also see "FTC Sues Cephalon For Anticompetitive Side Deals In Reverse Settlements" - Pink Sheet, 18 February, 2008., p. 3).

In contrast to that case, the FTC's AndroGel complaint also targets the generic manufacturers involved in the settlement.

Thus far, the FTC has been unsuccessful in such actions as appellate courts have consistently ruled in favor of reverse settlements. FTC's Michale Kades, advisor to Commissioner Jon Leibowitz, acknowledged that the commission is fighting an uphill battle. At the New York State Bar Association's annual meeting in New York City last week, Kades said case law was "moving toward functional per se legality" of reverse settlements.

Kades also commented that the government is eight steps behind companies in tracking their settlement agreements. He cited the use of an "acceleration clause" in which the brand name compay agrees to accelerate the entry of the generic manufacturer's product if another company challenges its patent. Kades said that clause is now "virtually ubiquitous."

Indeed, the Solvay complaint notes that under Solvay's settlements with Watson and Parr, the companies could launch prior to Aug. 31, 2015 if anoother generic company launches a generic version of AndroGel before that date.

Commissioner Leibowitz indicated that the FTC will continue to go after brand-generic agreements that seek to block generic entry. "Eliminating these pay-for-delay settlements is one of the most important objectives for antitrust enforcement in America today," he said in a concurring statement. "Generic entry prior to patent expiration, which had been a common occurrence until the past few years, is at risk of becoming a rare exception."

-Brenda Sandburg (b.sandburg@elsevier.com)

FTC Sues Solvay, Watson, Parr, Paddock for Settlements to Delay Generic AndroGel

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