The Wall Street Journal reported in June that according to Federal Trade Commission Chairman, Jon Leibowitz, originator pharma companies were costing consumers $3.5 billion annually through making contracts with generic companies that delay the market entry of generic versions of their drugs.

The way these contracts work is that pharma companies will pay a lump-sum of money to the generic manufacturers for their agreement to not challenge the patents surrounding a particular blockbuster product. In many cases a single generic company walks away from such deals with a huge pay-out and security in knowing they will eventually anyway be the first generic to market, granting them 6 month market exclusivity over other generic entrants.

The practice is described by Mr. Leibowitz as having “opened a Pandora’s box of settlements with generic firms competing to be the first to get paid-off to stay out of the market instead of competing to be the first to come to market”.

We can only agree with his assessment, these delay-contracts run counter to the spirit of the generics industry and should not be used by generic companies of high ethical standards.