Cephalon Settles FTC’s Provigil Pay-For-Delay Lawsuit for $1.2B

Last week, a settlement agreement was proposed by drug maker Cephalon Inc. in the class action lawsuit accusing the company of entering into antitrust agreements with generic drug companies to delay the entrance of cheaper generic drugs into the market.

The Federal Trade Commission (FTC) accused Cephalon of making pay-for-delay agreements to stop the entrance of the generic version of Provigil, a treatment for narcolepsy, into the market. The case had been drawn out over decades and settlement represents a major victory for the federal agency.

According to documents filed with the court, the company will disgorge $1.2 billion to settle the long-running lawsuit. Teva Pharmaceutical Industries Ltd., who bought Cephalon, will pay out direct purchasers $512 million. After claims are made, any extra funds will be given to the federal treasury.

“Today’s landmark settlement is an important step in the FTC’s ongoing effort to protect consumers from anti-competitive pay-for-delay settlements, which burden patients, American businesses and taxpayers with billions of dollars in higher prescription drug costs,” said an FTC chairperson about the agreement. “Requiring wrongdoers to give up their ill-gotten gains is an important deterrent.”

The drug company also agreed to an injunction stopping them from entering into similar deals in the future. However, certain kinds of potentially anti-competitive settlements will be excluded from that injunction, including a branded drug maker’s agreement to give an exclusive license to the generic. According to a representative from the FTC, that kind of deal was not at issue in this situation, although the FTC also noted that those arrangements can sometimes work as a promise by the brand not to launch an authorized generic to compete with the generic-drug maker during its 180-day exclusivity window.

At the heart of the antitrust litigation is a series of “reverse payment” patent settlements amounting to about $300 million that Cephalon made with four generic-drug makers in 2005 and 2006 over an alleged patent infringement regarding the popular narcolepsy treatment Provigil. Eventually a judge ruled that the patent was invalid.

In the reverse payment agreements, however, the generics companies all sought approval to market their own versions of the drug on the same day, meaning that all four were eligible for the initial 180-day exclusivity window granted to first filers under the Hatch-Waxman Act. The federal agency monitoring the deal, the FTC, filed a lawsuit accusing Cephalon of antitrust behavior over the settlements in 2008. According to the FTC, even though they brought litigation, Cephalon still managed to delay the antitrust lawsuit long enough to get six extra years out of its Provigil monopoly based on an invalid patent.

The Provigil Pay-For-Delay Antitrust Lawsuit is Federal Trade Commission v. Cephalon Inc., Case No. 2:08-cv-02141, in the U.S. District Court for the Eastern District of Pennsylvania.