Antiretroviral drugs have revolutionized the treatment of HIV/AIDS, but their high costs continue to be a barrier for many patients. One factor contributing to these high prices is the exclusion of generic competition through “pay for delay” agreements. Brand-name drug companies pay other companies to delay the introduction of generic equivalents, allowing them to maintain monopolistic pricing.
This practice is frustrating and raises questions about antitrust laws. The Sherman Act, a federal antitrust law, prohibits any contract or conspiracy that restrains trade. Pay-for-delay agreements should qualify as antitrust violations, according to a lawsuit filed against Gilead Sciences, a leading marketer of antiretrovirals, in 2019. Gilead denies the allegations, but the case is currently in trial.
Although the plaintiffs seem to have a strong legal argument, winning antitrust cases has become increasingly difficult due to the watering down of antitrust law. Drug companies have a clear motive to prevent generic competition as it would significantly lower prices. The introduction of even one generic competitor can reduce drug prices by over 30%. This has led to a strategy where brand-name drug companies sue generic manufacturers for patent infringement and settle by paying them not to release the generic version, also known as “reverse-payment settlements.”
Gilead’s alleged actions in response to Teva Pharmaceuticals entering the market for Truvada, one of Gilead’s top antiretrovirals, exemplifies this strategy. Gilead sued Teva for patent infringement but ultimately settled, with Teva receiving $1.5 billion in exchange for staying out of the market for over five years.
This approach to protecting patents appears to undermine intellectual-property law. Rather than facing the consequences for patent infringement, Gilead opted to pay Teva. The antitrust lawsuit argues that Gilead used these settlements to maintain its patent monopoly, potentially knowing that its patents may not hold up in court.
Under traditional antitrust principles, such practices should be illegal. However, courts have delivered mixed rulings on pay-for-delay agreements. Some courts consider these agreements as collusion and illegal, while others do not. In 2013, the Supreme Court weighed in on the matter in Federal Trade Commission v. Actavis, stating that these agreements should be evaluated using the “rule of reason.” This means that courts assess whether the agreements harmed consumers and whether there were legitimate justifications for them.
The Actavis decision opened the door for businesses to develop complex agreements that can be excused by the courts. Pharmaceutical companies now understand that embedding pay-for-delay agreements within larger arrangements makes them more likely to withstand legal scrutiny. This is the case with Gilead, which allegedly refrained from licensing other generic firms in exchange for temporary monopolies for Teva and other rivals.
Due to the Actavis ruling, the plaintiffs in the Gilead lawsuit face uncertain chances of success. While their allegations resemble a classic noncompete agreement among rivals, the rule of reason standard complicates the outcome. This shift in antitrust law has made it increasingly difficult to challenge unfair competitive practices, benefiting powerful corporations.
In conclusion, the issue of pay-for-delay agreements and their impact on drug prices highlights the need for stronger antitrust enforcement. While antiretroviral drugs have transformed HIV/AIDS treatment, their affordability remains a significant challenge. Addressing the exclusion of generic competition is crucial to ensuring accessible and affordable healthcare for all.
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