Supreme Court to hear pay-for-delay drug case Fri Dec 7, 2012 4:28pm EST (Reuters) - The U.S. Supreme Court agreed on Friday to decide whether brand-name drug companies may pay money to generic drug rivals to keep their lower-priced products off the market, a practice estimated to cost consumers and the government billions of dollars each year. The arrangements, known as "pay-for-delay" or "reverse payments," have for more than a decade vexed antitrust enforcers, including the Federal Trade Commission (FTC), which have been stung until recently by a series of court decisions allowing such practices. In a typical case, a generic rival challenges the patent of a brand-name competitor, which then pays the rival a sum of money to drop its challenge. Defenders of the practice call it a legitimate means to resolve patent litigation. The court accepted an appeal by the FTC, which had challenged annual payments of $31 million to $42 million by Solvay Pharmaceuticals Inc, now owned by Abbott Laboratories, to stop generic versions of AndroGel, a treatment for the underproduction of testosterone, until 2015. These payments went to rivals such as Watson Pharmaceuticals Inc, Paddock Laboratories Inc and Par Pharmaceutical Cos, and were intended to help Solvay preserve annual profits estimated at $125 million. The 11th U.S. Circuit Court of Appeals in Atlanta ruled against the FTC and upheld the arrangement in April. Two other circuit courts have also upheld such arrangements. But the federal appeals court struck down a similar arrangement in July involving Merck & Co Inc. The Supreme Court often steps in to resolve such splits. "This will be one of the most important business decisions that the court will have issued in quite some time," said Michael Carrier, a professor at Rutgers Law School in Camden, New Jersey. These agreements cost consumers billions of dollars a year. According to the FTC, 127 reverse payment arrangements were struck between 2005 and 2011, at an annual cost to consumers of $3.5 billion. The agency calls the arrangements a "win-win" for drug companies that can share the benefits of high prices, while consumers, pharmacies and insurers miss out on generic drug prices that could be as much as 90 percent lower. And in November 2011, the nonpartisan Congressional Budget Office said a U.S. Senate bill to ban reverse payments would save the government $4.79 billion and lower U.S. spending on prescription drugs by $11 billion over a decade.