SMART NEWS

Supreme Court Hands Big Loss to Big Pharma

Today, the Supreme Court of the United States ruled against big pharmaceutical companies, saying that the Federal Trade Commission could indeed sue companies who engaged in “pay to play” deals

Rose Eveleth

Contributor

June 17, 2013

Image: ragesoss

For a pharmaceutical company, competition with generics can be killer. When a company has the monopoly on a brand name drug, without generic competition, it can name its price. As soon as a generic begins to compete, however, it now has to drop its prices and make less money. When a company that makes generic drugs would enter the market to compete with the brand name version, many big pharmaceutical firms would simply pay the generic competition a sum of money to stay off the market. But today, the Supreme Court of the United States ruled against big pharmaceutical companies, saying that the Federal Trade Commission could indeed sue companies who engaged in “pay to play” deals.

The winning opinion was written by Stephen Breyer, who was joined by Anthony Kennedy, Sonia Sotomayor, Ruth Bader Ginsburg and Elena Kagan. The dissenters were John Roberts Clarence Thomas and Antonin Scalia. Samuel Alito recused himself.

The case brought the “pay to play” issue to the Supreme Court involved a gel used to treat men with low testosterone. The Albany Herald reports:

In the case before the court, Solvay sued generic drugmakers in 2003 to stop cheaper versions of AndroGel, a gel used to treat men with low testosterone.

Solvay paid as much as $30 million annually to the three generic drug makers to help preserve annual profits estimated at $125 million from AndroGel.

The ruling of the Supreme Court states that it will not assume that all of these “pay to play” deals are illegal, but rather that any court that reviews these cases should consider them carefully. But the parties who do sign these deals will have to prove that they are not violating anti-trust laws. According to SCOTUS blog, “the ruling is likely to essentially put an end to such payments in the future.”