Reintroduced Bill Would Prohibit Pay-for-Delay Settlements

Washington, DC (Feb. 3)-Senior Senate Judiciary Committee members Herb Kohl (D-WI) and Chuck Grassley (R-IA) reintroduced the Preserve Access to Affordable Generics Act to prohibit patent settlements under which manufacturers of branded pharmaceuticals pay generic-drug companies to delay the introduction of generic products to the market. The act would amend Section 5 of the Federal Trade Commission (FTC) Act to designate such agreements as unfair competition.

Two appellate court decisions permitted these patent settlements in 2005 despite FTC’s objections. In the two years following those decisions, nearly half of all patent settlements included payments from the innovator company to the generic manufacturer in exchange for the latter’s agreement to keep its medicine off the market, according to FTC. No patent settlement reported to the FTC contained such an agreement during the year before those decisions.

FTC filed an antitrust case on Feb. 2, 2009, challenging a recent “pay-for-delay” settlement that the Preserve Access to Affordable Generics Act would render illegal. The complaint charges that Solvay (Brussels) entered into an agreement with two generic-drug companies to delay the entry of its generic version of the company’s hormone-boosting drug for nine years. FTC says that Solvay agreed in 2006 to share its profits with the generic competitors if they did not launch their generic versions until 2015.

The European Commission identified pay-for-delay settlements as anticompetitive in a preliminary report it published on Nov. 28, 2008.

Health plans and consumers could save $26.4 billion during the next five years by using the generic versions of 14 popular drugs that are scheduled to lose their patent protections before 2010, according to a recent study by the Pharmaceutical Care Management Association, the national association representing America’s pharmacy benefit managers.

“It’s time to stop these drug company pay-for-delay deals that only serve the profits of the companies involved and deny consumers access to affordable generic drugs. With this legislation, we can end a practice seriously impeding generic drug competition-competition that could save American families and taxpayers billions of dollars in healthcare costs,” Kohl said in a press release.

“These agreements between generic and brand-name pharmaceutical manufacturers appear to simply line the pockets of the companies and leave the bill to the consumer. In a time when our federal healthcare programs such as Medicare and Medicaid are facing extraordinary fiscal strains, this wheeling and dealing only delays the entry of lower priced medicines in the marketplace,” Grassley said in a press release.

The Preserve Access to Affordable Generics Act is cosponsored by Senators Russ Feingold (D-WI), Dick Durbin (D-IL), and Sherrod Brown (D-OH). The text of the bill is available here.