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In its latest attack on pharmaceutical settlements that delay the entry of generic drugs, the U.S. Federal Trade Commission has filed a lawsuit charging three drug makers with conspiring to postpone generic competition for a leading testosterone-replacement drug.

The FTC alleges that Brussels-based Solvay Pharmaceuticals Inc., the maker of the testosterone drug AndroGel, entered into an illegal agreement with generic drug companies Watson Pharmaceuticals Inc. (WPI) and Par Pharmaceutical Cos. (PRX) to delay the introduction of a generic competitor.

The generic companies had sought U.S. Food and Drug Administration approval to market generic versions of AndroGel. They said in FDA filings that their generics wouldn't infringe Solvay's patent for the drug, and they argued that Solvay's patent was invalid.

The FTC said that Solvay, faced with the prospect of plummeting sales if the generics entered the market, paid Watson and Par a share of its AndroGel profits in exchange for a promise that the generics would not introduce a competing drug until 2015. The generic companies also agreed to drop their patent challenge.

"The evidence in this case will show that Watson and Par agreed to defer their generic entry for nine years, not out of respect for Solvay's patent, but due to the size of Solvay's payments to them," said David Wales, the chief competition enforcer at the FTC.

Promising a vigorous defense against the charges, Watson Chief Executive Paul Bisaro said, "We believe the agreement fully complies with both the spirit and letter of the antitrust and consumer protection laws."

The agreement, Bisaro said, promoted competition because it provided for a generic version of AndroGel five years before Solvay's patent expires in 2020.

Solvay promotes AndroGel as the top-selling testosterone-replacement therapy on the market. The FTC said the drug accounts for $400 million in annual sales.

The commission filed the lawsuit jointly with the California attorney general's office in a Riverside, Calif., federal court.

With the lawsuit, the FTC is now litigating two so-called "pay-for-delay" cases.

Last year, it sued Cephalon Inc. (CEPH), alleging that the company paid generic drug makers to delay competing versions of its best-selling narcolepsy drug Provigil.

The FTC has continued to attack such settlements even though some judicial circuits have ruled that the agreements are legal. The Supreme Court hasn't ruled on the issue.

In 2006, the high court refused to consider the FTC's challenge to an agreement between Schering-Plough (SGP) and generic companies that delayed competing versions of K-Dur 20, a potassium supplement.

In a widely noticed schism, the Bush administration refused to support the FTC's Supreme Court appeal in the Schering case.

The FTC likely will find more support from the Obama White House.

As a senator, Obama co-sponsored legislation that would have barred pharmaceutical agreements that delay competing generic drugs.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com

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