Company illegally blocked generic competition of sleep disorder drug, and settlement terms tighten up rules on anticompetitive behaviour

Israeli firm Teva has reached a settlement with the US Federal Trade Commission (FTC) over allegations of cutting illegal deals with generic drugmakers to stifle competition for sleep disorder drug Provigil (modafinil). The company will pay $1.2 billion (£790 million) to the US Treasury, most of which will go towards compensation for buyers who overpaid for the drug as a result of the deals.

The settlement relates to a 2008 FTC case against Cephalon – a company that Teva acquired in 2012. It alleged that, in 2005–6, Cephalon struck deals with four generics manufacturers, including Teva, to drop patent challenge lawsuits and hold off generic competition for six years.

Teva has also agreed to a permanent injunction, prohibiting it from entering into certain kinds of business deals within 30 days of, or conditional on, settling any litigation that delays generic competition. The intention of this injunction is to prevent similar tactics to the ones used by Cephalon, in which the firm agreed to buy ingredients and intellectual property licences from its competitors, rather than directly paying them in cash.

The FTC maintains that there is room for companies to settle patent challenges legally, even including short delays to generic drug launches, as long as the value of such settlements doesn’t present concerns of anticompetitive behaviour – for example to cover savings in prospective litigation expenses (up to $7 million), since patent disputes can often be long and expensive.