Today, the U.S. Supreme Court heard oral arguments in a lawsuit about a drug company’s ability to pay a competitor to keep a generic drug off the market—so-called “pay-for-delay” settlements. Unfortunately, most of the arguments dealt with how corporations do business, and not how these deals affect consumers. Nevertheless, Justices Elena Kagan and Sonia Sotomayor both acknowledged the potential for consumer harm. We at Community Catalyst think this decision will affect the affordability of prescription drugs for millions of Americans.

What is the lawsuit about?

The lawsuit, Federal Trade Commission (FTC) v. Actavis (informally referred to as “The Androgel Case”), is the government’s challenge to what former FTC Chairman Jon Leibowitz has called “an epidemic” of brand name drug companies paying competitors to delay launching a new generic version of a brand name drug. According to annual reports by the FTC, 165 of these secret deals have blocked generic versions of 140 different brand name drugs.

Delaying competition from generics is the highest priority for brand name drug makers trying to hold on to their profits. A decade ago, brand name drug makers would file one patent infringement lawsuit after another, to delay a generic as long as possible. But Congress put a stop to this in late 2003, requiring all patent challenges be brought at the same time.

So the brand name drug industry shifted to a new tactic – paying their competitors to delay generics. Under anti-trust law, paying off your competitors is clearly prohibited. But the drug companies have muddied the waters by dragging patent litigation into their dealings.

Unfortunately, the incentive for drug companies to collude is enormous because these pay-for-delay agreements are a win-win for brand name and generic manufacturers. Brand name companies continue to charge high prices and make billions or hundreds of millions on their blockbuster drugs, while the generic company is paid from these high profits to put their generic drug aside and do nothing.

The all too clear losers are consumers, who miss out on the chance for lower-priced generics, or who are forced to pay higher premiums to cover all the health plan members who do take an affected drug.

Delaying generic versions of a drug has serious financial and health impacts on individual patients.

A 2010 FTC report estimates when a pay-for-delay agreement affects just one drug, it can cost each consumer, and his or her health insurer, an extra $4,500 over a year and a half. If the consumer takes more than one drug, the costs could be inflated by $9,000 during the same time period.

For instance, Provigil’s manufacturer, Cephalon Corporation, paid $136 million to four different generic drug companies, who then agreed not to sell a generic version of Provigil for six years. During that time, Cephalon made more than $3.1 billion on Provigil sales. While the drug companies profited, consumers were devastated as the price of Provigil skyrocketed from $300 a month in 2007 to more than $1,000 per month in 2010. As a result, Cephalon was sued by the FTC and class-action attorneys on behalf of consumers.

Indirectly, all our health care premiums and other health care costs have also gone up because pay-for-delay deals have forced our health plans to pay up to ten times as much for a brand-name drug that has no generic. For example, brand-name drugs like Lipitor and Plavix cost more than $200 a month, but their generics versions cost less than $20. Many suspect pay-for-delay deals blocked generic Lipitor and Plavix for several years, while consumers and health plans wasted billions on these two best-selling blockbuster drugs.

The FTC, the U.S. Department of Justice, Attorneys-General in 36 states and consumer advocates have all asked the court to end this practice and allow the nation’s antitrust laws to do their job to restore competition and help lower prices.

The Prescription Access Litigation project at Community Catalyst has helped consumers and insurers file class action lawsuits to challenge pay-for-delay deals that have blocked consumer’s access to affordable generic versions of the drugs Provigil, Cipro, Oxycontin, K-Dur, and Tamoxifen. We have also helped dozens of consumer advocacy, senior, labor and patient groups join legal briefs or support reforms in Congress.

For more information on Pay-for-delay agreements, go here. To tell us ‘Your Story’ about one of these drugs, or any other drug you cannot afford, go here.