The Federal Trade Commission announced that its seven year lawsuit against Cephalon, now owned by Teva Pharmaceutical Industries, has ended with a $1.2 billion settlement. The suit alleged that Cephalon, in an effort to protect sales of its narcolepsy drug Provigil, paid generic companies more than $300 million not to manufacture a generic equivalent until 2012 in a so-called reverse payment agreement. Provigil lost its patent protection in 2006.

According to the agency, domestic sales of the drug exceeded $1 billion in 2011.

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

Later, in a news conference, Ramirez said, “The FTC has been very committed to putting a stop to these kinds of deals. There’s no question that pharmaceutical companies have gotten very creative in the way they try to get around the antitrust laws. We’re going to continue our fight.”

The $1.2 billion will be used for a fund to pay drug wholesalers, pharmacies and insurers who overpaid because of Cephalon’s actions. The fund will include a previous settlement with the FTC for $512 million in April over the same issue. Details of the payment timetable have yet to be worked out.

Our Take: In 2013, the Supreme Court ruled in FTC v Actavis that the FTC can sue pharmaceutical companies for such reverse payment agreements. That ruling did not affect a more common practice of a branded firm offering an exclusive license to a generic company near the end of its patent life. 

The government wants more generics to curb health care spending. If a branded pharmaceutical company’s actions appear to get in the way of making that happen, look for aggressive FTC action.

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