Jan Perry to endorse Eric Garcetti in mayoral race

Jan Perry, the strong favorite of African Americans in the March 5 primary for Los Angeles mayor, plans to announce Thursday that she is backing her ex-rival Eric Garcetti in the May runoff, her spokeswoman said.

Perry's endorsement is one of the most prized in the May 21 contest between Garcetti and City Controller Wendy Greuel. Perry has been a colleague of Garcetti's on the City Council for almost 12 years

Neither Garcetti nor Greuel emerged from the primary with significant backing among black voters, one of the biggest blocs up for grabs in the runoff. For weeks, the two have been competing fiercely to line up support from high-profile African Americans.

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Greuel, who often reminisces about working as an aide to the city's first black mayor, Tom Bradley, scored endorsements this week from Los Angeles County Supervisor Mark Ridley-Thomas and former President Bill Clinton, a popular figure among African Americans.

Those announcements deflected attention from turmoil in Greuel's campaign. She hired a new campaign manager, Janelle Erickson, to take charge of day-to-day operations last week, removing those duties from another top advisor, Rose Kapolczynski.

In addition, Greuel's field director and three others quit the campaign. All four had worked in the get-out-the-vote operation of President Obama's reelection campaign. The shake-up came after Greuel finished second in the primary, in which she and her allies far outspent Garcetti.

FULL COVERAGE: L.A.'s race for mayor 

The final tally for the primary, released by the city clerk's office Tuesday, confirmed that Garcetti led with 33%, followed by Greuel at 29%. Talk radio personality Kevin James came in third with 16%. Perry finished fourth, also with 16%. Emanuel Pleitez, a former aide to Mayor Antonio Villaraigosa, won 4%.

With all the ballots counted, turnout was 21% of the city's 1.8 million registered voters, up from a preliminary turnout rate of 16% based on ballots counted on election night.

The results confirmed that Perry swept the most heavily African American neighborhoods of South Los Angeles and the Pacoima area of the San Fernando Valley, underscoring the value of her support in the Greuel-Garcetti runoff.

Spokeswoman Helen Sanchez said Perry "examined both of their records very carefully and felt that Garcetti had a very solid record and was the best candidate to move the city forward."

There was a personal dimension to Perry's decision. In her campaign's closing days, Perry was deeply offended by Greuel attacking her for a 1994 personal bankruptcy tied to the failure of her ex-husband's law practice. Greuel, who lives in Studio City, served on the council with Perry for seven years.

But Perry's endorsement of Garcetti was no sure thing.

She felt betrayed by Garcetti last year when he voted for new council district boundaries that took away nearly all of Perry's cherished downtown turf, leaving her mainly with impoverished neighborhoods along the Harbor Freeway. Perry's role in downtown's economic comeback was a key focus of her campaign. She lives on Bunker Hill, outside her new district.

Greuel stayed on the attack Wednesday. Speaking from a lectern outside City Hall, she blamed Garcetti for the city's surge in unemployment during his watch as council president.

"Eric Garcetti has also left Los Angeles with huge budget deficits," Greuel said.

Like Garcetti, Greuel voted on the council in 2007 for raises of up to 25% over five years for thousands of city workers, despite the budget shortfall that the city was facing as the economy was turning downward. Speaking privately to union audiences during the mayoral campaign, Greuel has criticized Garcetti for backing layoffs and furloughs of city workers to balance the budget.

Unions representing the bulk of the city workforce have lined up behind Greuel and spent heavily to get her elected. Also backing her is the powerful Los Angeles County Federation of Labor.

Garcetti sought to highlight his own labor support Wednesday at a rally of more than 100 workers at a union hall south of downtown.

"He is ready to fight for us," said Mike Perez, president of SEIU's United Service Workers West, which represents more than 40,000 janitors, airport workers, security officers and others. Perez was interrupted by chants of "Si se puede!" and "Garcetti!"

After the rally, Garcetti dismissed Greuel's contention that he was to blame for the city's high unemployment. "There was a countrywide recession happening," he said. "That's what I read in the newspapers."

michael.finnegan@latimes.com

james.rainey@latimes.com

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Mandela hospitalized with lung infection

JOHANNESBURG -- Nelson Mandela, the anti-apartheid leader who became South Africa's first black president, has been admitted to a hospital with a recurring lung infection, South Africa said Thursday.

Mandela, 94, has become increasingly frail in recent years and has been hospitalized several times since last year, most recently this month when he received what a presidential spokesman described as a "successful" medical test.

Mandela was admitted to a hospital just before midnight Wedesday "due to the recurrence of his lung infection," the office of President Jacob Zuma said in a statement.

"Doctors are attending to him, ensuring that he has the best possible expert medical treatment and comfort," the statement said. It appealed "for understanding and privacy in order to allow space to the doctors to do their work."

Zuma wished Mandela a speedy recovery, referring to him affectionately by his clan name, "Madiba."

"We appeal to the people of South Africa and the world to pray for our beloved Madiba and his family and to keep them in their thoughts. We have full confidence in the medical team and know that they will do everything possible to ensure recovery," the presidential statement quoted Zuma as saying.

Mandela spent a night in a hospital and was released on March 10 following a medical test. At that time, presidential spokesman Mac Maharaj said Mandela was "well."

In December, Mandela spent three weeks in a hospital, where he was treated for a lung infection and had a procedure to remove gallstones. A year ago, Mandela was admitted to a Johannesburg hospital for what officials initially described as tests but what turned out to be an acute respiratory infection. He was discharged days later. He also had surgery for an enlarged prostate gland in 1985.

Under South Africa's white-minority apartheid regime, Mandela served 27 years in prison, where he contracted tuberculosis, before being released in 1990. He later became the nation's first democratically elected president in 1994 under the banner of the African National Congress, helping to negotiate a relatively peaceful end to apartheid despite fears of much greater bloodshed. He served one five-year term as president before retiring.

Perceived successes during Mandela's tenure include the introduction of a constitution with robust protections for individual rights and the Truth and Reconciliation Commission, a panel that heard testimony about apartheid-era violations of human rights as a kind of national therapy session. South Africa still struggles with crime, economic inequality and other social ills.

Mandela last made a public appearance on a major stage when South Africa hosted the 2010 World Cup soccer tournament.

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Cyprus banks reopen with restrictions

ATHENS -- Amid draconian security, Cyprus on Thursday braced for a stampede of customers and a potential drain in deposits as the tiny island opened its banks for the first time in nearly two weeks, after shutting them down to avert massive outflows of cash while a controversial bailout was negotiated.

Banks opened at noon, operating for six hours under strict controls ordered by the country's central bank to contain fears of a flight of capital that could reach $30 billion.

A ubiquitous police presence underscored those fears. From daybreak, scores of armed guards were seen fanning across the capital, Nicosia, keeping watch on anxious depositors who calmly stood in long lines outside banks hours before the midday opening.

To meet depositors' demands and to be sure that enough cash was on hand, the European Central Bank sent a special transport aircraft to Cyprus with a cargo of $6.3 billion, according to local media.

Television images showed a convoy of red, green and white container trucks pulling up inside the compound of the central bank in Nicosia, to prepare for the bank openings. Helicopters hovered overhead, and elite guards armed with submachine guns kept watch.

Although the Frankfurt-based European Central Bank did not comment on reports that it had sent money to the Mediterranean island, officials said privately that the institution would keep stocking Cyprus with cash.

Fears of a potential run on banks and a renewed economic crisis in Europe stoked investors' concerns, with shares dropping in Asian markets and the euro currency sagging in early Thursday trading.

Strict capital controls decreed by Cyprus' Finance Ministry late Wednesday limit cash withdrawals to $383 per person each day. A cap of $6,300 was imposed on transactions with other countries, as was a ban on cashing checks and terminating fixed-term cash deposits before their maturity date.

Cypriot finance officials insisted that the controls will be in force for seven days. Economists were skeptical.

"This is a typical set of exchange-control measures, more reminiscent of Latin America or Africa," said Bob Lyddon, general secretary of the international banking association IBOS.

"There is no way these will only last seven days," he said. "These are permanent controls until the economy recovers."

With fewer than 1 million people and an economy about the size of Vermont, Cyprus has about $88 billion in its banks -- a vastly out-sized financial system, eight times that of its economic output. The sector took a major hit after bond investments in Greece went sour because of that country's own financial crisis.

Earlier this week and after weeklong talks, Cyprus agreed on a $20.5-billion bailout from its European peers and the International Monetary Fund, provided savers chipped in with a $7.5-billion bail-in from levies on bank accounts over $130,000.

Under the same deal, the island's two biggest and most indebted lenders will face a rigorous restructuring scheme that will shrink the island's banking sector and cost thousands of jobs, pushing Cyprus deeper into recession.

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Don Payne dies at 48; 'Simpsons' writer and producer

Don Payne, an award-winning writer and producer of "The Simpsons" and screenwriter of the 2011 blockbuster "Thor" as well as "My Super Ex-Girlfriend" and "Fantastic Four: Rise of the Silver Surfer," died Tuesday at his home in Los Angeles, said his friend and former writing partner John Frink. He was 48 and had bone cancer.

Payne was most recently a consulting producer on "The Simpsons," Fox's long-running animated series. Two episodes he wrote are in production and will air in the fall: "Labor Pains" and the Christmas installment, "White Christmas Blues."

Payne won four Emmys for his work on the series and also received the Writers Guild of America's  Paul Selvin Award in 2005 for the "Fraudcast News" episode.

PHOTOS: Notable deaths of 2013

He made the transition to screenwriting with "My Super Ex-Girlfriend," the 2006 comedy starring Uma Thurman and Luke Wilson about a bachelor who discovers his girlfriend is a superhero.

"Much to my wife's chagrin, I am a superhero geek," Payne told The Times that year. "Definitely growing up I was into comics and became a comedy writer as an adult, so I put the two things together."

Born May 5, 1964, in Wilmington, N.C., Payne received his bachelor's degree in film and television and a master's in screenwriting from UCLA. He intended to write movies until he began collaborating with Frink out of college. "I wanted to do films, he wanted to do television," Payne told The Times in the 2006 interview.

They decided to work in whatever medium they first got a job. So they ended up writing for "Hope & Gloria," "The Brian Benben Show" and other sitcoms. The two joined the writing staff of "The Simpsons" in 1998 and became part of the producing team in 2000. Among the nine episodes they wrote together were "Insane Clown Puppy," "The Bart Wants What It Wants" and "Old Yeller-Belly."

Payne is survived by his wife, Julie; their sons, Nathaniel and Joshua; their daughter, Lila; his mother, Barbara Payne; a brother, John Payne, and a sister, Suzanne Fanning.

A memorial service is planned for 1 p.m. Friday at Hillside Memorial Park, 6001 W. Centinela Ave., Los Angeles.

susan.king@latimes.com

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Lancaster City Council prayers again ruled constitutional

Since the Lancaster City Council began opening its meetings with a prayer from local religious leaders, people have become more tolerant of unfamiliar beliefs, according to Mayor Rex Parris.

The invocations have come from Muslims, Sikhs and Wiccans as well as from Christians. Parris says the exposure has had a "unifying effect," with people in the High Desert city no longer flinching at mentions of Allah.

But to Shelley Rubin and Maureen Feller, a prayer at an April 2010 council meeting crossed the line, amounting to a government endorsement of Christianity.

"Bring our minds to know you and in the precious, holy and righteous and matchless name of Jesus I pray this prayer," said Henry Hearns, senior pastor at Living Stone Cathedral of Worship and a former mayor of the city, according to court documents.

The two women sued, enlisting Roger Jon Diamond, known for representing strip clubs in 1st Amendment cases, as their attorney.

On Tuesday, a three-judge panel of the U.S. 9th Circuit Court of Appeals affirmed a lower court decision, ruling that the prayers were constitutional because the city had invited people of all faiths to lead them.

Sectarian prayers are not prohibited at government meetings, the court said, and the city has not endorsed one religion over another, even though a majority of the prayers are Christian. Eliminating the word "Jesus" would not work as a practical matter, since the city would have to edit every prayer for similar references, the court said.

"Jesus is not a dirty word," said Parris, a Baptist. "Really what this lawsuit was about was making it one."

The case law for prayer at government meetings is somewhat unsettled and is considered separate from school prayer cases, where students are a more vulnerable and captive audience than adults in city council chambers.

Diamond plans to appeal to the U.S. Supreme Court after seeking a rehearing with the 9th Circuit.

The decision does not square with those from other circuit courts, which could prompt the Supreme Court to jump in, said Peter Eliasberg, legal director of the American Civil Liberties Union of Southern California.

Aaron Caplan, who teaches constitutional law at Loyola Law School in Los Angeles, agreed that the justices might take the case, or a similar case, if they want to make a uniform national rule.

"That said, they might not be in the mood for controversy. They might be controversied out for the next few years," Caplan said, referring to this week's gay marriage cases and other closely watched issues on the docket this term.

Rubin is the widow of longtime Jewish Defense League Chairman Irv Rubin, whom Diamond represented in a similar lawsuit against Burbank. She lives in Arcadia and came to the 2010 council meeting after Lancaster voters approved a ballot measure endorsing the prayers. Feller is a Christian who lives in Lancaster.

"It's offensive, and it makes you feel like an outsider," Diamond said. "If it's that important to do this prayer, there's nothing that prevents them from having a private session before the meeting."

cindy.chang@latimes.com

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Toxic waste site near Kettleman City to pay $311,000 in fines

A toxic waste dump near the San Joaquin Valley farming community of Kettleman City has agreed to pay $311,000 in fines for failing to report 72 hazardous materials spills over the last four years, the California Department of Toxic Substances Control announced Wednesday.

Brian Johnson, the department's deputy director of enforcement, described the fines as "a substantial and aggressive penalty."

The penalties were part of a settlement that capped an investigation into the Chemical Waste Management facility, the only one in California licensed to accept polychlorinated biphenyls, or PCBs, a carcinogen.

A review of company documents and monitoring records revealed "no sign of health risks to the local community" from the spills of lead contaminated soil, herbicides and other chemicals, Johnson said. Most of the spills were about a pint in volume, he said. The landfill's operating permit requires the company to notify the state so that spill cleanup is documented.

The violations will be taken into account when the department rules later this year on the proposed expansion of the facility, which is running out of room. The company also wants to renew its 10-year operating permit, which ends in June.

"When that permit expires, the facility will continue to operate under the old permit conditions until a final decision is made," Johnson said.

In an interview, Chemical Waste Management spokeswoman Jennifer Andrews said the spills were "not reported to the state because they were small spills, which were immediately cleaned up. In addition, we believed we were operating within our permit conditions."

The action came four years after activists petitioned state and federal health agencies to investigate whether the 31-year-old landfill might be linked to severe birth defects in residents of Kettleman City, about three miles away.

A survey by state health investigators ruled out the dump as the reason 11 babies were born with cleft palates and other physical deformities in Kettleman City between September 2007 and March 2010. Three of the babies died.

The activist groups People for Clean Air and Water and Greenaction for Health and Environmental Justice criticized the fines as weak and renewed their call on state regulators to deny the facility's permit applications.

"It's absurd for the state to claim with a straight face that 72 spills of hazardous substances do not pose a health threat," Greenaction spokesman Bradley Angel said. "It didn't even know the spills had gone on for four years until it stumbled upon the problem in a company log."

The landfill has a long history of violations.

In 1985, the Environmental Protection Agency fined the company $2.1 million for violations that included operating additional landfills and waste ponds without authorization.

In 2005, the company was fined $10,000 for violating federal PCB monitoring requirements. It was cited again in 2007 for failing to properly analyze incoming wastes, storm water runoff and leachate for PCBs.

In 2010, the EPA levied a $302,100 fine for failing to manage PCBs properly. A year later, the facility agreed to pay $400,000 in fines and spend $600,000 on laboratory upgrades needed to manage hazardous materials.

louis.sahagun@latimes.com

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British teen sells mobile news app to Yahoo for $30 million

SAN FRANCISCO — Meet Nick D'Aloisio, the 17-year-old British entrepreneur who just sold his popular news-reading app to Yahoo Inc. for close to $30 million, instantly becoming one of the world's youngest self-made millionaires.

It's the classic Silicon Valley success story of a young software prodigy striking it ridiculously and improbably big. But this time the spotlight is shining on the other side of the pond.

D'Aloisio, who taught himself to write software at age 12, built the free iPhone app Summly — which automatically summarizes news stories for small screens — in his London bedroom in 2011. He was just 15 years old.

Soon he had backing from Horizons Ventures, the venture capital arm of Hong Kong billionaire Li Ka-shing and big names such as Zynga Inc.'s Mark Pincus and actor Ashton Kutcher.

Before it was pulled from the app store Monday after the announcement of the Yahoo deal, D'Aloisio's app Summly had been downloaded nearly 1 million times. It had deals with 250 online publishers, including News Corp., and 10 employees in London. Not bad for a high school student.

"To me, Yahoo is the best company to be joining right now because it's one of these classic Internet companies," D'Aloisio said in an interview. "With new leadership from Marissa Mayer, Yahoo has a strong focus on mobile and product, and that's the perfect fit for Summly."

Mayer, the former Google Inc. executive who took over the Sunnyvale, Calif., company last summer, has focused on mobile technology to revive Yahoo's lagging fortunes. She has snapped up a number of promising mobile start-ups as much for their personnel as for the innovation.

In D'Aloisio, Yahoo is getting someone who truly thinks and lives in the mobile world.

Rather than browsing the Web by clicking a mouse, more people are connecting to the Internet with their smartphone or tablet, changing what kind and how much information they consume, Yahoo mobile chief Adam Cahan said. Silicon Valley companies such as Facebook and Yahoo are looking to adapt their Internet businesses to hold on to consumers who want easier, faster ways to find what matters to them.

"Summly solves this by delivering snapshots of stories, giving you a simple and elegant way to find the news you want, faster than ever before," Cahan said.

D'Aloisio, who took a break from school for six months to focus full time on Summly, will join Yahoo's London office while continuing his studies in the evenings and living at home with his parents. He says Yahoo plans to integrate Summly into all sorts of mobile experiences.

"The real idea is to take the core of the technology and find different fits for it and make it as ubiquitous as possible on the Web," he said. "We want to take summarization and build beautiful content experiences around it."

He says his parents — his dad is an energy financier, his mother is a lawyer — will help him manage the financial windfall (he says all he wants is a new computer and pair of Nike trainers). But he says he was not driven to the deal by dollar signs.

"Technology has really been the driver behind this whole deal," D'Aloisio said. "I can't wait to see how it plays out at Yahoo."

D'Aloisio is just one of a number of under-21 entrepreneurs who have made millions at a very young age.

Patrick Collison, who took his first computer class at age 8 and entered young scientist competitions as a teen in Ireland, was just 19 when he and his brother John sold their Silicon Valley start-up Auctomatic to Canadian company Live Current Media Inc., a deal that made them overnight millionaires.

"It was helpful perspective to have something like that happen very early on," said Collison, who is now co-founder and chief executive of San Francisco payments start-up Stripe. "It shows you that it's not all that big a deal. Yes, it's wonderful to create something that someone is interested in acquiring, and it's nice to have more money than you had before, but really nothing changes. Enjoying what you do on a day-to-day basis is what's important."

The sudden flash of worldwide media attention has been a bit overwhelming, D'Aloisio said. But not in a bad way.

"It's been an absolutely awesome experience," D'Aloisio said. "I'd love to do it again someday with another company."

Spoken like a true entrepreneur.

jessica.guynn@latimes.com

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President Obama lauds Kings and the Galaxy at the White House

WASHINGTON – President Obama celebrated with the champion Los Angeles Kings and the Galaxy in the White House on Tuesday and then looped some of the players into an event for First Lady Michelle Obama's favorite cause: her campaign against childhood obesity.

Obama praised the hockey and soccer teams for their 2012 championship seasons, noting that, besides sharing a hometown, "they share a pretty good comeback story."

The president noted that the Kings beat the Chicago Blackhawks on Monday, but pointed out that Coach Darryl Sutter "got good training" when he was playing for and later coaching Obama's hometown hockey team.

The teams and their coaches stood behind Obama in the East Room and smiled as the president accepted jerseys from both -- #1 from the Galaxy and #44 for the Kings (Obama is the nation's 44^th president) – and then tossed and headed a soccer ball handed to him by Landon Donovan.

Hosting winning sports teams is one of Obama's favorite pastimes as president. The events rarely turn political, with the exception of last year's visit by the Stanley Cup-winning Boston Bruins. Goaltender Tim Thomas refused to make the trip, explaining it was because the "government has grown out of control."

Sutter, however, had planned to press Obama to allow the construction of the Keystone oil pipeline from Canada through the U.S.

The owner of a ranch in Alberta, Sutter told the paper he supports the controversial project to transport oil to the Gulf Coast. The Obama administration so far has withheld approval of the project.

It was unclear whether the coach brought the issue up with the president. He did not speak to the media and the White House was not saying. But the two made nice, at least during the public ceremony.

After meeting with the president, a handful of players talked fitness, sports and food with some Washington schoolchildren at a forum hosted by Assistant White House Chef Sam Kass, who is the director of Michelle Obama's "Let's Move" program to promote exercise and healthy eating.

Donovan revealed that his favorite healthy snack is avocado and his favorite exercise is running. Midfielder Mike Magee emphasized the importance of training and practice to winning games. Defender Todd Dunivant put it plainly, if team members get out of shape, "We lose our jobs and that's not a good thing."

Kings players were put on the spot when asked by the one child if they'd ever been in a fight.

"I have," admitted right wing Dustin Brown sheepishly. "It happens."

"But they regret every second of it," Kass interjected.

christi.parsons@latimes.com

Twitter: @cparsons

kathleen.hennessey@latimes.com

Twitter: @khennessey

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Southland ports could see more tax revenue

WASHINGTON — The ports of Los Angeles and Long Beach are in an unusual position in today's era of Washington austerity: They could soon receive more federal money.

A bill sent to the Senate by a committee chaired by Sen. Barbara Boxer (D-Calif.) seeks to address a long-standing California gripe: Its ports receive pennies back for every dollar raised by a tax on cargo.

The measure would nearly double, to about $1.6 billion a year, funding for harbor maintenance nationwide, give priority to the busiest ports and expand the use of the money to include work that the Los Angeles and Long Beach ports are eager to undertake.

It's too early to say how much the ports could receive. But the Port of Los Angeles, which received none of the money in the last three years, hopes to snag $2 million to $5 million a year initially and $10 million to $20 million a year eventually. The Port of Long Beach could not provide a figure.

Despite the arcane subject of port funding, the legislation shows how a committee chair can tailor a measure to benefit his or her state even after Congress has put an end to the controversial practice of lawmakers earmarking funds for pet projects.

Boxer included the language in the broader Water Resources Development Act, describing the changes as a more equitable way to distribute funds generated by the shippers' tax.

California ports generated $430 million from the tax in fiscal 2011 but received only $54 million back for harbor maintenance. Los Angeles and Long Beach received nothing in 2011. A Congressional Research Service report listed Los Angeles and Long Beach as ports whose customers generate a substantial amount of the tax revenue that is mostly spent on the maintenance of other harbors.

The legislation doesn't explicitly refer to the Los Angeles and Long Beach ports but will "potentially have a huge benefit" to them, said Steve Ellis of the watchdog group Taxpayers for Common Sense.

"We see this as a big plus," said Michael R. Christensen, Port of Los Angeles deputy executive director for development — "if it can just make it through" Congress.

The measure could face pushback from senators whose states now receive a larger share of the harbor maintenance funds. Christensen said Sen. Dianne Feinstein (D-Calif.) told him during a meeting that any change to how the funds are distributed could run into opposition from other senators "because they get the benefit of all of this tax collected on goods coming into California."

Funds are now allocated based on ports' needs for maintaining the depths and widths of harbors, as recommended by the Army Corps of Engineers. A large chunk of the money has gone in recent years to Gulf Coast ports, which are "relatively expensive to maintain," according to a Congressional Research Service report.

The Los Angeles and Long Beach ports have not needed money in recent years to maintain their naturally deep harbors. But they would benefit from the legislation because it would expand the use of funds to cover eagerly sought maintenance of channels up to the docks.

Though the legislation is important to California, Boxer said she intended to "make the case that it's not just about [her] state" and that ports generating cargo taxes should receive an "equitable" share.

Officials at the Los Angeles and Long Beach ports, which handle about 40% of the cargo containers entering the U.S., have argued that port users have a "reasonable expectation" that the money they pay in taxes will return to maintain the harbors they use.

Ultimately, the funding would be subject to Army Corps of Engineers' recommendations and the annual congressional appropriations process. But California could receive a boost when the issue comes before the Senate Appropriations subcommittee that oversees the port spending, because it is chaired by Feinstein.

The water bill passed the Senate Environment and Public Works Committee unanimously last week. The overall bill, which its supporters portray as a jobs measure, would authorize water projects, including nearly $1 billion to shore up flood protection in the Sacramento area.

richard.simon@latimes.com

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Supreme Court weighs deals to delay generic drugs

WASHINGTON — A government attorney urged the Supreme Court to allow authorities to crack down on cash deals among prescription drug makers that delay the introduction of generic drugs and keep consumer prices high.

The so-called pay-for-delay deals, which allow brand-name drug companies to keep cheaper generic drugs off the market for a time, violate antitrust laws, the Federal Trade Commission argued Monday.

"It's unlawful to buy off the competition," said Malcolm Stewart, the deputy solicitor general who represented the FTC and the Justice Department. "It's an agreement not to compete," he said, which is "presumptively illegal."

The FTC said that more than two dozen such deals cost consumers $3.5 billion last year. Companies such as CVS Caremark Corp., Rite Aid Corp., Walgreen Co., Albertson's and Safeway Inc. joined the FTC in urging the court to rein in the deals.

But the FTC's attorney ran into skeptical questions from several justices who said the government's argument ignored the patent rights of the brand-name drug makers. A patent gives a drug maker 20 years to sell a drug exclusively and to earn monopoly profits. So long as the patent it still valid, the brand maker is entitled to keep out competitors, they said.

Justice Antonin Scalia said he did not understand how the brand-name makers would be seen as violating the law if they were "acting within the scope of the patent."

The issue has become complicated because another federal law, known as the Hatch-Waxman Act, encourages generic makers to enter the market as soon as possible and, in some instances, to challenge the validity of patents. These suits sometimes lead to the settlements that the FTC sees as suspect.

The case before the court illustrates the issue. A company called Solvay Pharmaceuticals Inc. applied for a patent in 2000 for AndroGel, a topical gel which dispenses synthetic testosterone. The key ingredient — synthetic testosterone — was not covered by a patent, but the patent for the gel extended to 2020.

Watson Pharmaceuticals Inc., a generic drug maker, announced plans to market a generic version of the gel. Solvay feared that its profit would fall $125 million a year if a generic version of the gel were on the market, and it sued Watson for patent infringement.

That suit ended after nearly three years with a deal that kept a generic gel off the market until 2015 and paid Watson $19 million to $30 million a year, ostensibly for marketing assistance.

The FTC then sued Watson and Solvay on antitrust grounds, alleging that this was a deal to share monopoly profits and prevent generic competition. But a federal judge and the U.S. 11th Circuit Court of Appeals in Atlanta rejected the complaint, saying the brand-name firm had acted within its rights under the patent laws.

Jeffrey I. Weinberger, a Los Angeles attorney for Solvay and Watson successor firm Actavis Inc., urged the justices to reject the FTC's antitrust argument and uphold the validity of the settlement. A "good-faith settlement" of a lawsuit is not illegal, he said, so long as the patent itself was valid.

"What if it isn't in good faith?" asked Justice Elena Kagan. What if it's clear "they are splitting the monopoly profits and the person who is injured is the consumer out there?"

Weinberger countered that these settlements are rare and usually arise after an extended period of litigation. They are not automatic or routine, he said.

The justices spent the hour debating how to apply antitrust principles to patent law, and they did not give a strong hint about how they might rule on the issue. A decision is expected by late June.

A similar case is pending before the California Supreme Court. The state attorney general's office intervened in a lawsuit against Bayer over a deal to delay a generic version of its Cipro antibiotic.

"During its monopoly period, a single Cipro pill costs consumers upward of $5.30, while with generic competition, the same pill should have cost only $1.10," the state said.

That appeal is pending.

david.savage@latimes.com

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