Consumer advocates have long been outraged by the phenomenon of "pay for delay" in the prescription drug business, whereby brand-name drug companies pay off potential generic competitors to stay out of the market. In return for the payments, the generics drop their challenges to the brand name companies' patents, and the brand name and generic companies essentially split the monopoly profits earned by the brand name drug. Today the Supreme Court ruled that these kinds of arrangements are subject to challenge under the antitrust laws, overruling decisions of a number of lower courts that had held these anticompetitive deals immune from antitrust challenge.
Under today's ruling in FTC v. Actavis, pay-for-delay deals will not necessarily be found illegal. The Court did not hold them illegal per se, or even presumptively illegal. Instead, it said that challengers have to prove they are antitrust violations under what is called the "rule of reason" test, meaning that their anticompetitive impact outweighs any pro-competitive benefits. But the majority's opinion made clear that these deals can have significant anticompetitive effects and that the reasons given by some lower courts for upholding them (such as the policy of encouraging settlement of legal disputes) don't hold water.
This looks like a victory for consumers, though there will likely be a lot more litigation before any one of these deals actually is held to be unlawful. Even so, companies may be less likely to enter into them now that the Court has held they can be the subject of antitrust challenges, which if nothing else involve substantial legal expenses that will eat into the monopolists' profits.