Global: Reverse payment collusion threatens pharma M&A

Pharmaceutical companies’ pay-for-delay agreements, often found to be anticompetitive and recently targeted by the US Federal Trade Commission, pose major threats to industry mergers, a point highlighted by reports amid a pharma M&A boom.

While advocates are calling for a global consensus on such pay-for-delay deals, the matter has recently been complicated in the US when a court tossed a reverse payment lawsuit on the grounds that the payments were not made in “cash” and therefore not valid as anticompetitive under the Supreme Court’s decision in Actavis, which allowed regulators to prosecute over the deals.

But as uncertainty mounts over the agreements, pharmaceutical companies are similarly facing struggles as the deals complicate mergers and acquisitions.

Reports point to the 2011 announcement that Teva would acquire Cephalon in a $6.8 billion deal – an acquisition the company praised as one that would change the company’s future for the better, without revealing that Cephalon was believed to have participated in a pay-for-delay conspiracy.

The FTC has reportedly suggested a $6.8 billion settlement ordered upon Cephalon, a proposal made last January at a court hearing for the case. Reports say the lawsuit could be headed to a jury trial.

The FTC’s lawsuit against Cephalon highlights the risks of major pharmaceutical mergers and the uncertainty facing pay-for-delay cases even after the Supreme Court’s ruling.

Full content: Forbes

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