From the beginning, Chairman Leibowitz understood the need to make antitrust law relevant. He believed the Commission’s primary goal was to identify and stop anticompetitive practices that directly harmed consumers. While he never shied away from an aggressive theory, he had little interest in pursuing cases simply to make a doctrinal point.
As chairman, he made the agency’s top competition priority stopping a practice that threatens most Americans and, if unchecked, could easily cost us tens of billions of dollars a year — pay-for-delay patent settlements. These are deals where a brand company pays a potential generic company to stay out of the market for a period of time up until the patent expires. Last year alone, these types of deals covered products with sales of roughly 8.3 billion dollars.
By the time Jon became chairman, however, three courts decided that such deals, except in the rarest of circumstances, are immune from the antitrust laws.
In light of those setbacks, it would have been easy enough for the agency to quietly shift its focus to other more manageable challenges. But Chairman Leibowitz understood that this would have been the wrong decision for American consumers. As he once explained, “if it is legal for a brand to pay the generic to sit it out, why wouldn’t it? And if a generic drug company is allowed to make more money by not competing than by going to market, isn’t that a good business deal for the company and its shareholders.” Unfortunately, American consumers will pay higher prices because of the delay in generic entry, or has he like to say, “foot the bill.”
Instead, under Chairman Leibowitz’s leadership, the agency redoubled its efforts. In 2010, the Commission issued a report detailing that settlements with payment delayed competition 17 months longer than settlements without payment. On average, such deals cost consumers $3.5 billion a year.
Last year, a federal court, at the urging of both the Federal Trade Commission and the Department of Justice, grasped the nature of the deals, rejected the virtual immunity that other courts had adopted, and, instead, required companies to justify their payments not to compete. Next month, the Supreme Court will resolve this dispute among the federal courts.
The agency also raised the awareness of the problem on the hill, with the Obama Administration, and with the public. Today, the administration and Members of congress (from both parties) support legislation. And, groups as far ranging as the American Medical Association to the American Health Insurance Plans to the National Association of Chain Drug Stores have weighed-in with the Supreme Court against this practice.
The point here is not that Chairman Leibowitz did all the work; he would be the first to say that FTC staff deserves the credit. Nor is it that his predecessors ignored the issue; to the contrary, every Commissioner since late 1990s, Democratic and Republican, both condemned pay-for-delay deals that harmed consumer, and all were committed to stopping them. Rather, the point is that Chairman Leibowitz was willing to make this the agency’s top priority and his legacy.
I have no doubt that the Commission’s position will be vindicated, more likely sooner than later. But, in some sense that is besides the point. Chairman Leibowitz did not look for the easy target nor the symbolic victory. He tackled an important and challenging problem, which is precisely what our public servants should do. And, that is a legacy to be proud of.
Kades is deputy chief trial counsel at the
Bureau of Competition
at the Federal Trade Commission.