UK enters the fray on pay for delay

The UK Office of Fair Trading (OFT) is the latest competition enforcement agency to open an investigation into patent litigation settlement agreements, known also as ‘pay for delay’ or ‘reverse payment’ agreements.  The agreements at the centre of the OFT’s investigation, announced on 14 November 2011, relate to paroxetine, a drug used to treat depression and anxiety disorders.  The investigation is in its early stages, and the OFT emphasises that it should not be assumed that the parties involved have breached competition laws.

The news comes in the wake of similar investigations by the US Federal Trade Commission (FTC) and the European Commission (EC) into pay for delay agreements.  Agreements of this kind involve an originator drug company which pays off a generic competitor to delay its entry into the market.  The FTC and EC maintain that the agreements are anticompetitive because they unreasonably hamper the ability of generics to compete in the market. 

Controversially, the Californian Court of Appeal ruled last month that pay for delay agreements do not, in and of themselves, breach State antitrust laws.  The FTC nevertheless remains opposed to such agreements, having expressed concern in October that the practice is on the rise within the US pharmaceutical sector.  The Congressional Budget Office reported last week that a ban on reverse payment agreements would save US$4B for consumers.  In Europe, on the other hand, such agreements seem to be on the wane, with the EC reporting in July that the number of patent litigation settlement agreements which raise competition issues has declined significantly since 2010.  The courts here have not yet considered whether pay for delay agreements breach Australian competition law, but they do have the potential to do so.

 

Chris Beshara and Peta Stevenson

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