The so-called "pay-for-delay" agreements (also known as "reverse payments") are settlements of patent litigation in which a brand-name company pays a potential generic competitor to abandon a patent challenge and delay entering the market with a generic.
Brand-name companies "can delay generic competition that lowers prices by agreeing to pay a generic competitor to hold its competing product off the market for a certain period of time," the FTC explained in a January 2010 report titled, "Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions," which summarized the savings lost to US consumers through such deals during the previous six years.
The FTC found the number of pay-for-delay agreements had increased from none in 2004, to a record 19 in the fiscal year of 2009. On average, these agreements precluded generic entry for 48 months, the agency reports.
Most of the deals reached since 2005 were still in effect, and were protecting at least $20 billion in brand-name sales from generic competition. "These sweetheart deals are being done on the backs of consumers," FTC chairman, Jon Leibowitz, told the New York Times in January 2010. "From the perspective of the Federal Trade Commission, these deals are one of the worst abuses across the board in health care and should be stopped."