The U.S Supreme Court is ready to take a multi-billion dollar challenge of introducing low price generic medicine to enter into the market, a fight between the drug industry and Federal antitrust enforcers.

The case study: “pay for delay”:

The justices are dealing with the case of ABBOTT LABORATORIES COM STK NPV (LON: ABT)  to scrutinize the “pay for delay” agreement, which costs the brand-name drug-makers pay other companies $ 3.5 billion annually to hold off the selling of generic versions. According to the pharmaceutical industry the agreements are legal settlement of patent dispute.

Since 2005 the court has come across with many such deals. The medicine made by Bayer AG (FRA: BAYN), Merck & Co., Inc. (NYSE: MRK), Bristol Myers Squibb Co. (NYSE: BMY), Watson Pharmaceuticals, Inc. (NYSE: WPI) and Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA) are subject to go through a legal process.

Thus backed by justice Department, FTC is appealing a ruling that rejected its legal suit aligned with Solvay Pharmaceuticals Inc. The court said the issues as reverse payment and generally permissible.

Delaying Competition :

In 2007 the price of the drugs was supposed to decline by 75%. FTC cleared the way of introducing a generic version of drugs by sacrificing a $ 125 million annual gain. But Solvay in return paid $ 42 million annually to delay the arrangement by 2015 according to FTC.

The agreement made an economic sense only in the part of Solvay to earn profit, who have a patent which would have protected the generic version until 2020.

Less Exclusion :

Abbott argued for its lawful acquisition of the patent right and said the money they are giving annually to the generic drug makers are the compensation for the services to be provided.

Under the Hatch-Waxman Act, a company files an application to sale the generic medicine exclusively for six months, which is claimed as a patent infringement lawsuit by the brand-name companies.