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Why the FTC Is About to Lose Its Fight Over Sleep Disorder Pills

It's hard to see the FTC winning the gossipy sideshow that is its attempt to force the CEO of Watson Pharmaceutials (WPI) to testify over whether he struck an anti-competitive deal with Cephalon (CEPH) on the sleep drug Provigil: Watson said again in a court filing yesterday that there is no deal.

The FTC wants to figuratively drag Watson CEO Paul Bisaro to its Washington, D.C., HQ (pictured) sit him down in a grim conference room, and shine a lamp in his face while interrogating him about his intentions to market a generic version of Provigil, which Cephalon has the exclusive right to sell until 2012.

In a dramatic series of court filings, Bisaro has accused of the FTC of improperly attempting to force Watson to do a co-marketing deal with a third drugmaker, Apotex, in order to prove Cephalon has not paid Watson to stay out of the Provigil market. A judge agreed in mid-July that there was a "strong possibility" that the FTC had gone beyond its authority to broker such a deal. (Watson says it has made no deals with other companies is because it wants to keep rights to sell a generic to itself.)

The FTC argues that there's only two ways to prove whether Cephalon is paying Watson not to compete.

  1. If Watson does a deal with someone else that would prove there's no deal with Cephalon.
  2. If Bisaro raises his right hand and swears to tell the truth, so help him God.
The FTC's filing states:
Watson has, to this date, refused to give the Commission staff an unequivocal answer to
one simple question: has Watson agreed with Cephalon not to relinquish any exclusivity rights
that it might hold with respect to generic modafinil [Provigil]?
The judge allowed both sides to furnish him with more information about the spat before he starts slapping wrists. In yesterday's filing, Watson appears to have the drop on the FTC. The FTC already has its unequivocal answer, Watson says: There! Is! No! Deal!
... Watson has repeatedly told the FTC that no such agreement exists. In particular, at his investigational hearing Mr. Buchen provided sworn testimony that (i) there were no conversations between Watson and Cephalon ... and (ii) no one within Watson had had any conversations with Cephalon since then about whether the 2006 Settlement Agreement prevents Watson from relinquishing any 180-day marketing exclusivity rights it might have ...

... Further, when asked whether "Watson [had] had any communications with any [] pharmaceutical company [other than Apotex] regarding the relinquishment of any 180-day marketing exclusivity Watson may have related to the [Provigil] '346 Patent," Mr. Buchen responded with an unequivocal "No."

Given Watson's on-the-record denials, there doesn't seem to be a lot that could be learned by the judge chaning his mind and ordering that Bisaro sit for a deposition. (The flipside of that position, however, is to ask why, if there is no deal, Bisaro can't make a sworn statement saying so. But that would require the judge to becoe convinced that Watson's lawyers are essentially lying to him, and that's unlikely.)

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Image by Flickr user why_style, CC.
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