They Used to Call It Price Fixing

19 Jun

It used to be that companies could not collude to fix prices and avoid competition.

In 2008, DeBeers settled a lawsuit about price fixing diamonds.

In 2010, DRAM makers settled a price fixing litigation with 33 states.

Even this month, Chocolate manufacturers in Canada were being sued for price fixing chocolate in that country.

Canada’s Competition Bureau said in a statement that Hershey Canada was expected to plead guilty later this month “for its role in the conspiracy to fix the price of chocolate confectionery products in Canada.”

This week the Supreme Court ruled that profit sharing between drug companies that hold patents and generic manufacturers can be legally challenged.

“Today’s ruling is a victory for millions of Americans who depend on generic drugs to treat illness and pain,” New York Attorney General Eric Schneiderman said. “Pay-for-delay drug settlements should receive serious scrutiny because they are frequently anti-competitive, unlawful, and harmful to health-care consumers across the country.”

In the Federal Trade Commission vs. Activis lawsuit, Solvay Pharmaceutical had negotiated an agreement to pay three generic manufacturers between $31M and $42M to withhold a generic version (and patent challenges) of the AndroGel product from the market until 2015. AndroGel is topical testosterone applied in gel form.

The FTC has fought such “pay-for-delay” settlements for a decade as their number has grown, from just three in 2005 to 40 last year. They were joined in this case by a coalition of 36 states that argued the deals should be subject to challenge.

It is suggested that generic manufacturers have to legally challenge a drug patent before they can bring a generic version to market. The “pay for delay” agreements are apparently put in place to avoid the litigation costs. An explanation of the duration, and types of drug patents can be found here.

Either way, the Supreme Court ruling should open the door for generic drugs to make their way to market earlier.

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