The 11th U.S. Circuit Court of Appeals in Atlanta rejected the government's objections, and the FTC appealed to the Supreme Court.
The federal district and appellate courts both ruled against the government, AbbVie, which is based in North Chicago, Ill., said. "We are confident that these decisions will be upheld by the Supreme Court."
The Generic Pharmaceutical Association's head, Ralph Neas, said the settlements are "pro-consumer, pro-competition and transparent." He said every patent settlement to date has brought a generic drug to market before the relevant patent ended, with two-thirds of the new generic drugs launched in 2010 and 2011 hitting the market early due to a settlement.
"By doing what the FTC wants, you're going to hurt consumers rather than help them," said Paul Bisaro, CEO of Actavis of Parsippany, N.J.
Bisaro said consumers will save an estimated $50 billion just from patent settlements involving Lipitor, the cholesterol-lowering drug made by Pfizer Inc. of New York that reigned for nearly a decade as the world's top-selling drug.
Lipitor's patent ran until 2017, but multiple generic companies challenged it. Pfizer reached a settlement that enabled Actavis and a second company to sell slightly cheaper generic versions starting Nov. 30, 2011 and several other generic drugmakers to begin selling generic Lipitor six months later. The price then plummeted from Pfizer's $375 to $530 for a three-month supply, depending on dosage, to $20 to $40 for generic versions.
Because generic companies tend to challenge patents of every successful drug, the FTC's position would impose onerous legal costs on brand-name drugmakers and limit their ability to fund expensive research to create new drugs, said the Pharmaceutical Research and Manufacturers of America, which represents brand-name drugmakers.
According to the 2010 RBC Capital Markets study, when trial victories, settlements between drugmakers and dropped cases are combined, generic companies were able to bring their product to market before the brand-name drug's patent expired in 76 percent of the 371 drug patent suits decided from 2000 through 2009.
Consumer, doctor and drugstore groups have lined up to support the Obama administration in this case.
"AARP believes it is in the interest of those fifty and older, and indeed the public at large, to hasten the entry of generic prescription drugs to the marketplace," said Ken Zeller, senior attorney with the AARP Foundation Litigation. "Pay-for-delay agreements such as those at issue in this case frustrate that public interest."
The American Medical Association, the giant doctors' group, believes pay-for-delay agreements undermine the balance between spurring innovation through patents and fostering competition through generics, AMA President Dr. Jeremy A., Lazarus said. "Pay for delay must stop to ensure the most cost-effective treatment options are available to patients."
Drugstores also believe pay-for-delay deals "pose considerable harm to patients because they postpone the availability of generic drugs which limits patient access to generic medications," said Chrissy Kopple of the National Association of Chain Drug Stores.
Eight justices will decide this case later this year. Justice Samuel Alito did not take part in considering whether to take this case and is not expected to take part in arguments.
The case is Federal Trade Commission vs. Actavis, Inc., 12-416.