Executives for Mylan Inc. (MYL) and Endo Pharmaceuticals Inc. (ENDP) faced a grilling on Capitol Hill Wednesday from lawmakers who support legislation to bar pharmaceutical patent settlements that delay the introduction of generic drugs.

Critics in Congress and at the U.S. Federal Trade Commission say the deals are anticompetitive because branded drug makers pay their generic counterparts to abandon patent challenges that could lead to early market entry of competing generic medicines.

"Generic companies are getting paid handsomely to sit on the sidelines," said Richard Feinstein, head of the FTC's Bureau of Competition.

Feinstein, speaking before a House subcommittee that examines antitrust issues, said the settlements are a "win-win for the drug companies" but "impose enormous costs on the health care system."

Guy Donatiello, Endo's vice president for intellectual property, took a very different view, saying the settlements often were good for consumers.

Donatiello, whose company makes branded and generic drugs, said the settlements often allow generic drugs on the market before a branded drug-maker's patent ends, while also removing the uncertainty of litigation.

"While it's a delicate balance, the current system works," he said.

Mylan's chief operating officer, Heather Bresch, said her company and other generic makers were sometimes forced into settlements by branded companies that exploit a loophole in the federal law Congress passed to encourage generic companies to challenge questionable drug patents.

That loophole, Bresch said, essentially allows a brand-name drug maker to re-label one of its medicines and market the very same product as an "authorized generic" version.

Branded drug makers threaten this preemptive move when a competing generic company mounts a legal challenge to one of their patented medicines, she said.

"It definitely serves as a huge detriment to the generic industry," Bresch said.

In written testimony, Bresch singled out Eli Lilly & Co. (LLY) and GlaxoSmithKline PLC (GSK) as advocates of this practice.

The FTC's Feinstein said the agency was studying the issue of authorized generics and planned on issuing preliminary findings soon.

Lawmakers voiced competing views on whether patent settlements that delay generic drugs should be banned.

"Look folks, drugs are too expensive," said House Judiciary Committee Chairman John Conyers, D-Mich. "Generics are cheaper. Settlements make drugs more expensive."

Rep. Bob Goodlatte, R-Va., said most courts to consider the issue have ruled that the settlements are not anticompetitive. Modern antitrust law, he said, has moved away from rules to make certain business practices automatically illegal.

The FTC has challenged some drug agreements in court but has had limited success.

Most recently, the agency sued three drug makers in February, alleging that Brussels-based Solvay Pharmaceuticals Inc. (SVYSY), 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.

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