TAKE ACTION FOR LOWER DRUG COSTS! HELP SPREAD THE WORD

Consumer Catalyst has launched a social media campaign to raise awareness about how sketchy ‘Pay-for-Delay’ deals hurt consumer health! Join the discussion on twitter and share your story, using the hashtag:

Stop the #RxRacket!

Pharmaceutical companies are colluding to keep drug prices high – and taking that money right out of your pocket.

Did you know drug companies have made more than 160 secret, back-room deals that

• Have kept 100 generic drugs or more off the market for years
• Drive up the cost of each drug by an average of $3,000 a year
• Keep all of our prescription costs high, while divvying up the spoils!

Right now, the Supreme Court is currently deliberating over whether these back-room deals are legal – but we know they’re wrong. Since 2005, as many as 142 different generic drugs have been unfairly kept from consumers, according to government reports. Delaying the launch of a generic drug lets the drug companies make bigger and bigger profits, while patients are stuck footing the bill, or going without the medicines they need.

The Supreme Court heard arguments by the drug companies, and fortunately Justices Kagan and Sotomayor raised consumer concerns – but the Court did not hear the perspective of the thousands of Americans unable to afford their medications. That’s because most people don’t even know that these deals are costing consumers thousands, and our health system billions of extra dollars, each year!

Help us raise awareness of this #RxRacket. The public deserves to know how this decision will affect us all – how thousands of Americans are being forced to choose between skipping their medications or going into credit card debt, just so that drug companies can make even more profit. Not to mention, how health care costs for everyone have gone up, because insurers pay most of these higher costs!

Whatever the Supreme Court decides, help spread the word, so we can help make sure that these deals come to an end, once and for all.

Target drugs: 
If you have taken Cipro, Provigil, or Androgel, you have definitely paid more because of a pay-for-delay settlement. And according to legal experts, it is very probable that many drugs including blockbuster drugs like Lipitor, Plavix and Nexium — have been delayed by pay-for-delay deals.*

We need you to tell everyone you know that this is happening, and help gather and share the stories of people you know that have been negatively impacted.

What you can do:

1. Read the stories shared by two women, Tanna and Karen, who were unable to afford their medications due to pay-for-delay deals that kept generic Provigil off the market for six years. Also, read how the companies’ legal arguments make no sense.
2. Share these posts on Twitter, using the hashtag #RxRacket, and ask others to share their stories too. And follow us at @postscriptrx.
3. Join our community on Facebook to keep up with the campaign and join our email list of impacted consumers by sharing your story.

You can find all the information you would ever need about this issue on our Pay-for-Delay info page. Please also feel free to add your thoughts on this #RxRacket in the comments, below.

Thank you for helping us protect your right to affordable medicine!

*The Full List – Drugs Likely to Have High Prices from ‘Pay-for-Delay’ Deals:
Adderall XR, Aggrenox, Altace, Arthrotec, Caduet, Carbatrol, Clarinex, Comtan, Duac, Effexor XR, Eloxatin, Ethyol, Femcon Fe, Fentora, Flomax, Lipitor, Lamictal, Levaquin, Lexapro, Loestrin-24 Fe, Loprox, Lotrel, Lybrel, Namenda, Naprelan, Nexium, Niaspan, Niravam, Olux, Opana ER, Ortho Tri Cyclen Lo, Oxytrol, Plavix, Propecia, Razadyne, Razadyne ER, Rythmol SR, Sinemet CR, Skelaxin, Solodyn, Stalevo, Tricor 145mg, Vanos, Vfend, Wellbutrin XL (150 mg), Xopenex, and Zantac!

Reposted from the Community Catalyst blog Health Policy Hub ….

As we discussed here last week, the U.S. Supreme Court is currently deliberating over whether pharmaceutical companies can collude to reap $3.5 billion a year in excess profits from American patients. Named FTC v. Actavis (and informally referred to as “The Androgel Case”), this case addresses whether it was legal for a brand name company to pay its generic competitor to delay generic Androgel from coming to the market. Why does this matter to you? Because the generic is up to 10 times cheaper than the brand name drug and Androgel is not the only brand name drug where a generic has been delayed. As Columbia University professor Scott Hemphill puts it, “[A] pay-for-delay settlement transfers wealth from consumers to drug makers, in the form of continued high pharmaceutical prices, with brand name firms sharing a portion of that transfer with the generic firm.”

The decision in this case would have far-reaching impact on the price of at least 140 different drugs whose costs have remained high because of such back-room deals. Since the Court heard oral arguments in the case last Monday, the Washington Post, Boston Globe, and smaller newspapers such as Sonoma County’s Press Democrat have all come out in agreement with us: these payments have to stop. Why?

The financial burden of monthly out-of-pocket drug costs has forced millions of Americans without drug coverage to cut back on taking their drugs or delay other health care. Even if you have insurance, co-pays for a brand name drug whose generics have been blocked can be a significant hardship—and your insurance company pays more, too. For example, the price of the drug Provigil skyrocketed from $300 a month in 2007 to over $1,000 per month in 2010 because in 2005 and 2006, Provigil’s manufacturer, Cephalon Corp. paid $136 million to four different generic drug companies to delay generic Provigil for 6 years—while Cephalon made more than $3 billion on U.S. sales of Provigil. In response, many insurers stopped covering the drug, forcing consumers onto Cephalon’s new drug “Nuvigil,”which many consumers reported to be less effective.

Meet two patients whose lives were turned upside down by the pay-for-delay deals that kept generic Provigil off the market:

Tanna

A state librarian in Fayetteville, MI, Tanna has been taking Provigil for more than ten years to treat idiopathic hypersomnia, a disease causing excessive sleep. Her son has narcolepsy, a related disease. When Tanna’s son first received his diagnosis, he was on Provigil as well, but Tanna’s insurance company forced them both to switch to Nuvigil. Neither of them could tolerate the drug and her son successfully switched to an ADHD drug for his symptoms, but Tanna has tried everything and Provigil is the only drug that works for her.

Much of Tanna’s suffering ended after she was diagnosed and prescribed Provigil. She has obtained her Master’s in Library Science and is able to work – as long as she takes her medicine.

While Tanna says Provigil has given her life back, its high price exacted a toll in return. Instead of decreasing with time, Tanna’s copay more than doubled from $35 a month in 2005 to $75 a month in 2009.

“If ten years ago, someone told me the percentage of my salary I’d be paying a month in health-related costs now, I’d say they were crazy,” Tanna said.” We’ve managed to pay our bills, but I have no savings, no safety net. We’ve done what families do – we’ve used credit cards. There’s no way I can ever think of retiring, but I always wanted to work, so I guess I’m getting my wish.”

While her doctor promised there would be a generic version of Provigil in2008, she has only seen the price reduced in the past three months (her copay is now down to $12 a month).

Tanna knows the Supreme Court decision will greatly affect everyone who relies on prescription drugs.

“If they [the drug companies] win this case then they can do whatever they want. Forever,” she said. “We’re screwed.”

Karen

Prior to Karen’s diagnosis with multiple sclerosis (MS), she barely took an aspirin. In the eight years since her diagnosis, Karen, a busy mother of three, has relied on Provigil. Unfortunately, while Provigil gives Karen the energy she needs to function, it is prohibitively expensive. A resident of Clarkston, MI, she served as a worker’s compensation administrator at a major automobile company until her MS forced her to stop working in 2005. When Karen stopped working, she had two mortgages and three young children. As she discussed with Ed Silverman on Pharmalot, between 2007 and 2010 the price Karen paid for Provigil more than doubled, from $7.26 a pill to $16.87 a pill (with her insurance company paying half). During this time, she was unable to afford her prescription in addition to her normal household expenses, either skipping doses or splitting pills to reduce costs.

In 2011, Karen had a major MS relapse. While crippled by fatigue, she was overwhelmed by the price of Provigil – she could not afford to continue paying for her medicine out-of-pocket, so she had to stop taking it, despite her doctor’s recommendation.

Since a generic version of the drug was released in October of last year, Karen has been able to take her full dose and pays only $16 every three months. The release of generic Provigil and its lower cost has enabled Karen to lead an active life, spending more time with her family, volunteering at church and even hosting a Japanese exchange student.

The Rest of Us

Tanna and Karen are not alone – if you’ve paid for Androgel, Augmentin, BuSpar, Cardizem, Cipro, K-Dur, Nolvadex (tamoxifen), or Provigil, it is almost certain you’ve paid too much because of pay-for-delay deals based on records from the FTC and other lawsuits. Legal scholars and experts also suspect (the documents are secret) that pay-for-delay agreements have delayed generic versions of nearly fifty more drugs, including Lipitor, Plavix, Nexium, Zantac, Effexor XR, Lamictal Cipro, Adderall XR*, Wellbutrin XL (150 mg), Provigil*, Altace, Niaspan, Nolvadex (tamoxifen), Caduet, Zantac and many others (see full list in box).

If you have paid for one of these drugs in the last few years, you too might have been fleeced by a pay-for-delay agreement that kept a generic off the market. Please share your story with us, like Tanna and Karen did, and join them in the fight to stop these unfair deals, once and for all.

Khadijah M. Britton, JD, Program and Policy Associate

Today, the U.S. Supreme Court heard oral arguments in a lawsuit about a drug company’s ability to pay a competitor to keep a generic drug off the market—so-called “pay-for-delay” settlements. Unfortunately, most of the arguments dealt with how corporations do business, and not how these deals affect consumers. Nevertheless, Justices Elena Kagan and Sonia Sotomayor both acknowledged the potential for consumer harm. We at Community Catalyst think this decision will affect the affordability of prescription drugs for millions of Americans.

What is the lawsuit about?

The lawsuit, Federal Trade Commission (FTC) v. Actavis (informally referred to as “The Androgel Case”), is the government’s challenge to what former FTC Chairman Jon Leibowitz has called “an epidemic” of brand name drug companies paying competitors to delay launching a new generic version of a brand name drug. According to annual reports by the FTC, 165 of these secret deals have blocked generic versions of 140 different brand name drugs.

Delaying competition from generics is the highest priority for brand name drug makers trying to hold on to their profits. A decade ago, brand name drug makers would file one patent infringement lawsuit after another, to delay a generic as long as possible. But Congress put a stop to this in late 2003, requiring all patent challenges be brought at the same time.

So the brand name drug industry shifted to a new tactic – paying their competitors to delay generics. Under anti-trust law, paying off your competitors is clearly prohibited. But the drug companies have muddied the waters by dragging patent litigation into their dealings.

Unfortunately, the incentive for drug companies to collude is enormous because these pay-for-delay agreements are a win-win for brand name and generic manufacturers. Brand name companies continue to charge high prices and make billions or hundreds of millions on their blockbuster drugs, while the generic company is paid from these high profits to put their generic drug aside and do nothing.

The all too clear losers are consumers, who miss out on the chance for lower-priced generics, or who are forced to pay higher premiums to cover all the health plan members who do take an affected drug.

Delaying generic versions of a drug has serious financial and health impacts on individual patients.

A 2010 FTC report estimates when a pay-for-delay agreement affects just one drug, it can cost each consumer, and his or her health insurer, an extra $4,500 over a year and a half. If the consumer takes more than one drug, the costs could be inflated by $9,000 during the same time period.

For instance, Provigil’s manufacturer, Cephalon Corporation, paid $136 million to four different generic drug companies, who then agreed not to sell a generic version of Provigil for six years. During that time, Cephalon made more than $3.1 billion on Provigil sales. While the drug companies profited, consumers were devastated as the price of Provigil skyrocketed from $300 a month in 2007 to more than $1,000 per month in 2010. As a result, Cephalon was sued by the FTC and class-action attorneys on behalf of consumers.

Indirectly, all our health care premiums and other health care costs have also gone up because pay-for-delay deals have forced our health plans to pay up to ten times as much for a brand-name drug that has no generic. For example, brand-name drugs like Lipitor and Plavix cost more than $200 a month, but their generics versions cost less than $20. Many suspect pay-for-delay deals blocked generic Lipitor and Plavix for several years, while consumers and health plans wasted billions on these two best-selling blockbuster drugs.

The FTC, the U.S. Department of Justice, Attorneys-General in 36 states and consumer advocates have all asked the court to end this practice and allow the nation’s antitrust laws to do their job to restore competition and help lower prices.

The Prescription Access Litigation project at Community Catalyst has helped consumers and insurers file class action lawsuits to challenge pay-for-delay deals that have blocked consumer’s access to affordable generic versions of the drugs Provigil, Cipro, Oxycontin, K-Dur, and Tamoxifen. We have also helped dozens of consumer advocacy, senior, labor and patient groups join legal briefs or support reforms in Congress.

For more information on Pay-for-delay agreements, go here. To tell us ‘Your Story’ about one of these drugs, or any other drug you cannot afford, go here.

Second Circuit takes a pass on reviewing the legality of pay-for-delay settlements

A negative court decision before the Second Circuit this week underscores the importance of passing federal legislation to ban ‘pay-for-delay’ settlements in order to preserve access to affordable, quality prescription drug benefits. At issue is the drug industry practice of paying off generic competitors of expensive brand-name drugs to delay access to low-cost generics. See our earlier blogs here and here.

On Tuesday, the Second Circuit issued a decision on the legality of pay-for-delay settlements concerning the drug Cipro that dealt a blow to consumer advocates and consumer protection attorneys challenging these collusive agreements in court. The decision rebuffed the Federal Trade Commission, the Department of Justice, and a group of State Attorneys-General, all of whom asked the Court to re-evaluate an earlier precedent from 2005 that allowed such ‘pay-for-delay’ settlements.

While the attorneys ponder whether to appeal the case to the Supreme Court, the importance of a legislative solution to this problem becomes even more clear.

Current legislation before the U.S. Senate proposed by Senators Herb Kohl (D-WI) and Richard Durbin (D-IL) would create a presumption that any drug patent settlement that exchanges a payment in return for an agreement to delay bringing a generic to the market is a violation of anti-trust law. The bill gives the FTC the tools to challenge such settlements. However, it still allows the drug companies to prove that a settlement is not a collusive agreement, but a legitimate effort to avoid the time and costs of litigation.

Why is a ban on pay-for-delay settlements important? Since 2005, Congress has responded to concerns about potential collusion by requiring the drug industry to file any settlement of patent litigation concerning a generic drug under seal with the FTC. Since 2004, the FTC has reviewed these settlements, and found that an increasing number of ‘pay-for-delay’ sweetheart deals have been made since the courts started to allow them in 2005. Last fiscal year, a record 19 such pay-for-delay deals were made. By the nine month mark of this fiscal year on June 30, the record was broken, with 21 new pay-for-delay settlements.

These settlements have prevented billions of dollars in possible savings, by preventing generic drugs from being available. At a time when consumer advocacy groups like AARP are documenting exhorbitant price increases for brand-name drugs, generic drugs are the best solution. Another recent report found that every 2% increase in generic use saves Medicaid $1 billion a year.

The FTC, which reviews these agreements, reported in January 2010 that $20 billion dollars in annual brand-name drug spending was being insulated from generic competition by pay-for-delay sweetheart deals. Then, in July, the FTC reported that new pay-for-delay deals were shielding another $9 billion in drug spending from market competition.

How does this impact consumers? The FTC reports that pay-for-delay settlements keep a generic drug off the market for an average of 17 months. The FTC estimates that being forced to take a brand-name drug costing $300 per month, instead of a generic costing $30, would increase a consumer’s health cost by $4,590 over that 17-month period. Drugs that cost more, or that have longer delays, will cost even more.

If a robust, competitive market is to play a role in our new health care system, shielding nearly ten percent of all annual brand-name drug sales from market competition will only allow drug company price increases to continue depleting more and more of our health care resources, while putting more patient care at risk.

In a brief filed with the court, the AMA and AARP described having access to a generic drug improves the quality of patient care:

The price of a brand drug can be prohibitive for uninsured patients who do not have help covering the cost of their prescription drugs. Even for those patients who are insured but who are on fixed or limited incomes, having a generic option is often the difference between having access to a health care treatment and not having any treatment option at all.

And the lawsuit filed by PAL member AFSCME District Council 37in 2006 is challenging the pay-for-delay settlements concerning the drug Provigil, used to treat narcolepsy. This lawsuit has revealed how the lack of competition reduces patients’ quality of life or quality of care when an insurance company refuses to pay for a high-cost brand-name drug. A pastor from Ohio reports that after

paying almost $17,000 in annual premiums for my family [health insurance plan, l] ast year, I was paying around $650/month [for Provigil. I]t now costs me $852/month. That is out of pocket money I have to come up with until later in the year when I reach my deductable and I can enjoy a few months of only paying $60/month. I cannot describe to you how much stress and difficulty this has caused for me and my family the last several years. As you can imagine, with my income, I often cannot afford to refill my prescription. I often take 1/2 or 3/4 of my dosage on days I know I won’t be driving much so I can delay getting a refill. But I do a lot of driving for my work, so I am forced to spend lots of money I don’t have just so I can be safe driving.

To find out how you can support legislation to prevent these pay-for-delay settlements, please contact us!

The last year has been a roller coaster-ride of both successes and set-backs in the fight to eliminate pay-for delay settlements. These multi-million dollar sweetheart deals have been used more and more by brand-named drug makers to get their generic competitors to agree to delay bringing affordable generics to the market.

A bill to ban these agreements was included in the House’s health care reform proposal last fall, and a similar measure was supported by the White House and considered by the Senate. Unfortunately, the Senate’s procedural and jurisdictional rules kept the measure from being included in the national health reform bill enacted in March.

Undeterred, leaders in the House then included the measure in an appropriations bill approved on July 1^st. But the Senate passed one appropriations bill on July 22 without the provision. In the aftermath of this setback, consumer champion Senator Herb Kohl (D-WI) and others succeeded in including this vital reform as an amendment to the FTC’s budget authorization. Kohl and others then  overcame the next major hurdle yesterday, narrowly stopping  drug industry lobbyist efforts to strip the measure in the Senate Appropriations Committee.

Yesterday’s vote was a dramatic one.  Senator Arlen Specter (D-PA) introduced an amendment to remove the pay-for-delay provision from the Committee bill. When four Democrats voted with Specter  to strip away the pay-for-delay provision, the AP reports that:

“Drug company lobbyists in the audience thought they had the vote won, provided they could win over every panel Republican. But Sen. Richard Shelby, R-Ala., voted against the drug companies, helping give Kohl and Durbin [the author of the Appropriations Bill] a surprise win.”

Recent settlements shielding $9 Billion in drug spending from generic competition

The Federal Trade Commission (FTC), which has consistently challenged these anti-competitive agreements in the courts and through testimonies before Congress, called yesterday’s vote a significant victory. FTC chairman Jon Leibowitz testified before Congress earlier this week that these types of pay-for-delay agreements, which delay the entry of generic drugs, are becoming more common (see graph). Legal decisions permitting these agreements have led to their proliferation from none in 2004 to a former high of 19 such agreements in 2009. The FTC notes that in just the first 9 months, the number of pay-for-delay settlements in fiscal year 2010 has already topped last year’s record high.

Graph: Federal Trade Commission

The FTC’s preliminary analysis of the agreement filed this fiscal year concludes that 21 pay-for-delay agreements entered into this year are protecting $9 billion in prescription drug sales from generic competition. Combined with the earlier agreements in effect, this could mean that as much as $29 billion in annual spending on drugs are improperly shielded from generic challengers.  That is a significant loss of possible savings.  The FTC estimates (conservatively, in our opinion) that these settlements are costing consumers and our health system at least $3.5 billion a year.

FTC has continued to raise the alarm about these settlements, and their effect upon consumers. In a press release coinciding with testimony before Congress, FTC Chairman Jon Leibowitz summed it up:

“That’s almost an epidemic,” Chairman Leibowitz said, “and left untreated, these types of settlements will continue to insulate more and more drugs from competition. Every single FTC Commissioner, going back through the Bush and Clinton administrations, has supported stopping these unconscionable agreements.”

On the legal front, PAL continues to support efforts to do away will these settlements. PAL and AFSCME District Council 37 filed an amicus brief in May in support of the Second Circuit’s reconsideration of the legality of these agreements in the Cipro litigation. And the PAL-member lawsuit challenging the pay-for-delay settlements concerning Provigil continues.

FTC Chairman Leibowitz testified that some of these recent events, such as the Second Circuits Cipro decision and the fact that the House has already passed a ban on these settlements, gives him “reason to believe that the tide may be turning, both in the courts and in Congress.” Yet, Chairman Leibowitz wisely cautioned that bringing about such a reform through the Courts will take time, which means that  “legislation would be the most effective way to stop these deals.”

Thus the successful Senate Committee vote yesterday “means that consumers are one step closer to saving billions on their prescription drugs” according to Leibowitz.  And help can’t come too soon.  The bill’s Senate sponsor, Senator Herb Kohl, points out why:

“The cost of brand-named drugs rose nearly ten percent last year. In contrast, the cost of generic drugs fell by nearly ten percent. At this time of spiraling health care costs, we cannot turn a blind eye to these anticompetitive backroom deals that deny consumers access to affordable generic drugs.”

We view yesterday’s decision as a crucial step  to put legislation in place to end these agreements and foster consumer access to affordable generic drugs.

A surprising decision in the Second Circuit has breathed new life into legal efforts to prevent drug makers from paying to keep generics off the market.

Since 2005, the drug industry has increasingly used multi-million dollar ‘pay-for-delay’ settlements to prevent generic drugs from coming to the market. The PAL coalition has opposed this industry collusion with lawsuits on Provigil, Tamoxifen, and Cipro, and through our support for legislation (introduced by Rep. Rush and Sen. Kohl). The FTC has also been a steadfast opponent of these anti-competitive agreements and their negative impacts on consumers. Unfortunately, the ability of FTC or PAL members to challenge these settlements in the courts has been hampered by a number of unfavorable legal decisions.

The Second Circuit’s Cipro Decision

The Second Circuit’s April 29th ruling did dismiss the challenge to the ‘pay-for-delay’ settlements totaling $398 million that have prevented a generic version of Cipro from coming to the market. But the Court did so begrudgingly, and then invited the folks bringing the lawsuit to ask the Second Circuit to revisit the question of whether these settlements are legal under anti-trust protections. Even more surprising, the Court then spelled out why. 

In their decision, the three judge panel stated that a review of the binding precedent established under Tamoxifen by the full nine-judge panel for the Second Circuit (called an ‘en banc review’) may be appropriate for four reasons: First, the Court said that United States Department of Justice has urged a review of this decision saying that “Tamoxifen adopted an improper standard that fails to subject reverse exclusionary payment settlements to appropriate antitrust scrutiny.” Second, the Court found that “there is evidence that the practice of entering into reverse exclusionary payment settlements has increased since we decided Tamoxifen.” Third, the panel stated that “after Tamoxifenwas decided, a principal drafter of the Hatch-Waxman Act criticized the settlement practice at issue.” Finally, the Court noted that the Tamoxifen decision was based in no small part on the now erroneous understanding that a pay-for-delay settlement with the first generic competitor would not prevent other generic competitors from attempting to followand file suit.

The 2005 Tamoxifen decision by the Second Circuit Court of Appeals (which covers New York, Vermont, Connecticut) dismissed an FTC order challenging a pay-for-delay settlement. The Tamoxifen Court ruled the practice legal under anti-trust law, because the settlement provided drug maker AstraZeneca with no more protection from generic competition than their patent already did.

This Tamoxifen decision, along with the Eleventh Circuit’s Schering-Plough decision in 2005, and Federal Circuit’s 2008 Cipro decision, have been mounting obstacles to consumer and FTC efforts to oppose these settlements. Only the Sixth Circuit, in its 2002 Cardizem decision, has held that such agreements to “eliminate competition” are a “per se illegal restraint on trade.”

When the Appeals Courts from different US Circuits arrive at differing legal standards, the US Supreme Court should resolve this inconsistency, or ‘split’ between the Courts. Indeed, the PAL-member lawsuits concerning Cipro and Tamoxifen asked the Supreme Court to do just that, as has the FTC. So far, all of these requests have been denied. But a possible reversal in the Second Circuit might change things.

Consumers, legal and medical experts, and the Administration all file briefs in opposition to continued legality of pay-for-delay settlements

Amicus briefs in support of the request for a reconsideration of the Tamoxifen standard were filed by PAL and PAL coalition member AFSCME DC37; AARP, AMA, and the Public Patent Foundation; Consumers Union, US Pirg, Consumer Federation of America, and the National Legislative Associaton on Prescription Drug Prices. Also filing briefs were the American Antitrust Institute, the FTC, and the Department of Justice’s Anti-Trust division.

The amicus brief for the Department of Justice argues that ”by shielding most private reverse settlement agreements from antitrust liability, the Tamoxifen standard improperly undermines the balance Congress struck in the Patent Act between the public interest in encouraging innovation and the public interest in competition.”

The amicus brief from the Federal Trade Commission (FTC) added three additional reasons to those stated by the Second Circuit panel. FTC argued that the Tamoxifen standard gives drug companies an improper incentive to pay off generic drug manufacturers and protect even the weakest patents.

Next, FTC noted that the number of pay-for-delay settlements had grown since 2005, to now insulate “at least $20 billion in sales of branded drugs from generic competition.”

The FTC estimates (very conservatively in our opinion) that these settlements will continue to cost $3.5 billion a year by delaying competition from lower-priced generics, but warned that these costs may grow.

 The amicus brief submitted by PAL and PAL member AFSCME District Council 37pointed out that these settlements have cost consumers and health plans $12 billion or more each year in lost savings on generic drugs, and the costs are likely to increase as brand-name drug prices go up (as they did by 9.2 % in the year ending on March 31, 2010) while generic drug prices decline (as they did by 9.7 % during this time period.) Aside from the effect that higher costs have on reducing access to needed medicines, PAL pointed out how these settlements threaten to reduce the quality of care for consumers by limiting the drug options available to them. PAL pointed out that consumers of the drug Provigil, which is protected from generic competition by a pay-for-delay settlement, end up entering the donut hole faster and paying huge sums out of pocket when their health plans refuse to cover the drug due to its high cost.

AARP, the AMA, and the Public Patent Foundation filed a brief arguing that these settlements threaten our health care system because they undermine consumer access to generic drugs, which have, on the whole, “saved consumers over $734 billion in the last 10 years.” AARP noted that “[e]ven for those patients who are insured but who are on fixed or limited incomes, having a generic option is often the difference between having access to health care treatment and not having any treatment option at all.”

AARP’s brief warned that the Tamoxifen precedent will have long-term negative consequences on the well being of consumers because “when a generic pharmaceutical’s entry into the market is delayed, it limits treatment access to vulnerable patient populations and prolongs the difficulty that physicians have in prescribing affordable treatment options.”

An amicus brief filed by Consumers Union, Consumer Federation of America, U.S. PIRG and National Legislative Association of Prescription Drug Prices pointed out that the Tamoxifen decision allows the pay-for-delay settlements that “prevents patent challenges” which is contrary to the purpose of the Hatch-Waxman Act to “encourage[] patent challenges…..”

The American Antitrust Institute filed an amicus brief highlighting the anticompetitive nature of these settlements, and the Attorney Generals from 34 States filed an amicus noting that “the Cipro case is also of exceptional importance because the United States Supreme Court has refused to review the split between the Sixth and Eleventh Circuits.”

Industry use of these pay-for-delay settlements has driven up costs and prevented access to needed medicines for millions of consumers. This industry practice has prevented or delayed generic versions of the drugs Cipro, Provigil, Androgel, and many other drugs that amount to $20 billion of our nation’s current $278 billion in drug spending, according to the FTC.

PAL, Community Catalyst, and dozens of PAL coalition members have opposed these settlements through lawsuits and legislative advocacy. Please contact us if you would like to join in our work to oppose these anti-competitive settlements.

 — by Emily Cutrell and Wells Wilkinson

This week, the White House unveiled several policy proposals that it would like to see included in national Health Care reform.  See white house proposals here. Significantly, the White House strengthened the Senate’s earlier health reform bill by including a number of prescription drug provisions, including:

- an immediate $250 rebate for seniors that enter the ‘donut hole’ along with a plan to close the donut hole completely by 2020. The proposal notes that “Over 8 million seniors hit this gap in Medicare coverage, and for those who do not have other coverage, average drug costs are $340 per month, or $4,080 per year.”

- a provision giving FTC the authority to challenge ‘pay-for-delay’ or reverse-payment settlements that keep generic drugs off the market.  This reform is estimated to save $35 billion over the next decade, while making generic forms of some drugs more readily available. 

Even before these White House proposal were announced, the bill passed by the Senate and pending before the House included several significant reforms concerning prescription drugs, including:

- the expansion of prescription drug coverage to some 30 million newly covered people.

 - a reform to promote needed transparency and reduce doctor’s potential conflicts of interest, through the “full transparency [of] all drug companies, device, and medical supply manufacturers . . . gifts . . . or financial arrangements” with doctors. This proposal follows the current reform in the Senate bill.

- a transparency provision to require all pharmacy benefit managers (PBMs) under Medicare or the exchange to report “information regarding any rebates, discounts, or price concessions they negotiate for prescription drugs” to help health plans reduce waste and losses caused by PBMs. And health plans would also be told how often available generic drugs are used.”

- a 50% discount off branded drugs for seniors in the donut hole.

- billions of dollars in fees on drugs and devices to help pay for this historic expansion of coverage.

Pay-for-delay legislation needed now more than ever.

Also this week, a Court dismissed an FTC and consumer challenge to the legality of a pay-for-delay settlement concerning the drug Androgel. The Court dismissed the FTC’s complaint asserting that the agreement was anti-competitive, despite the fact that the generic competitor.

An article in Today’s BNA Pharmaceutical Law and Industry Report describes the decision, including the efforts by drum maker Solvay to transfer the case from California’s Ninth Circuit, to the less-favorable 11^th Circuit. The result of the case, following the precedent set in the 11^th Circuit in Shering-Plough, is not as surprising. But comments by the Generic Pharmaceutical Association’s were. This group asserted that the FTC’s loss somehow demonstrates that the FTC’s existing authority “adequately protects consumers” and that new legislation would be “anti-consumer.”

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Keep fighting the good fight

Yesterday’s White House summit illustrated how economic hard times and continuing insurance industry abuses leave consumers without protection without comprehensive reform.  (You can see highlight from CNN here, and Community Catalyst’s take on it here.) 

Advocates need to continue to make the case for comprehensive reform.  You can help by signing this online petition that is being sponsored by the American Cancer Society/ Cancer Action Network, Community Catalyst, and many other national organizations: www.healthcarepetition.org/10707_communitycatalyst

Last Wednesday, FTC and congressional leaders held a press conference highlighting a new FTC report on how drug companies have protected “$20 billion in sales of brand name drugs from generic competition” through collusive, anti-competitive ‘pay-for-delay’ settlements with generic manufacturers.

The FTC report, “Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions” explains how legal decisions starting in 2005 have led to 63 settlements which delay generic drugs for an average of 17 months. FTC  noted that “[m]ost of these agreements are in effect.”  The report estimates, using a very conservative analysis, that these settlements are costing “American consumers $3.5 billion per year — $35 billion over the next ten years.” Other legal experts have previously estimated that these agreements are costing $7.5 billion a year.  

FTC, and congressional advocates urged their colleagues to ban these pay-for-delay agreements, which harm consumers and drive up our health care costs overall.  FTC Chairman Jon Leibowitz was joined by Reps. Chris Van Hollen (D-Md.), Bobby L. Rush (D-Ill.), and Mary Jo Kilroy (D-Ohio) urging legislative action.  At the press conference, Sen. Herb Kohl (D-Wis.) highlighted how the settlements assessed in the report, such as 19 pay-for-delay settlements made in 2009 alone, had “robbed Americans of a competitive marketplace.”  The Report documented how Pharma and the generic manufacturers have increasingly used such ’pay-for-delay’ settlements since they were first upheld by the appellate courts starting in 2005. 

“Each of these backroom deals kept generics off the market, resulting in higher drug costs for millions of consumers and more federal spending in the form of drug reimbursement costs,” Sen. Kohl said.  “Today’s FTC report is proof that if we are serious about bringing down prescription drug costs, we must …  end these anti-consumer, anti-competitive backroom deals.” 

 The current health reform bill passed by the House bans ‘pay-for-delay’ settlements under federal anti-trust law, but the bill passed by the Senate does not. FTC Chairman Jon Leibowitz stated, “[w]e also must remember that behind the abstract numbers that show these deals increasing are real people with critical health care needs.  Many Americans struggle to pay for prescription drugs, especially the elderly and uninsured.”

FTC Commissioner J. Thomas Rosch noted that “[d]ecades ago our Supreme Court condemned as illegal per se an agreement by potential competitors stifling competition between them… [and] almost all, if not all, reverse payment agreements do that insofar as they delay generic competition longer than it might otherwise occur.”  While the FTC was successful in preventing the use of pay-for-delay agreements between April 1999 and 2004 and the U.S. Court of Appeals for the Sixth Circuit held these agreements per se illegal in 2003, the Report observed that beginning in 2005, “a few appellate courts have misapplied the antitrust law to uphold these agreements.” 

The Report also found that while pay-for-delay agreements benefit both the brand-name and generic pharmaceutical companies, they harm consumers.  Earlier last week, Community Catalyst and several other national consumer organizations, wrote to Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi in support of including a ban on pay-for-delay agreements in national health care reform.

This letter from national consumer groups also proposed to eliminate the ‘bottleneck’ that prevents competition between generic drug companies. Under the Hatch Waxman Act, the first generic company to file an application with FDA to start selling a generic drug is granted a half year (180 days) of exclusive marketing before another generic company can sell the same generic drug.  Unfortunately, current precedent allows this ‘first-filer’ to retain their right to a half-year of market exclusivity even if they sign a settlement deal agreeing to keep their generic off the market.  “Those agreements place a cork in the bottle that typically ensures the brand-name drug’s lock on the market,” the FTC analysis said. “This cork-in-the-bottle effect occurs because every subsequent generic entrant has to wait until the first generic has been marketed for 180 days.”

These settlements are at issue in the PAL member lawsuit promoting access to generic versions of Provigil, and such a pay-for-delay settlement could affect the current PAL-membel lawsuit promoting consumer access to a generic version of Protonix.

The White House, in its efforts to line up industry support for health reform, announced an agreement this spring with the Pharmaceutical Researchers and Manufacturers of America (PhRMA) to discount senior drug costs and save $80 billion over the next decade.  PhRMA has announced that it will finance new ads in support of health reform—it has helped advocates like Families USA with previous ad campaigns.  However, with House leaders now proposing to go further in reining in excessive drug costs, there is speculation that PhRMA might pull its support if the House drives too hard a bargain.  But PhRMA should be supporting health reform—it’s not only good for the country, but good for the industry when more patients are insured and become new customers for their products. 

While details are scant, a recently leaked memo describes the deal as including: $25 billion in savings through a half-price discount for seniors buying brand name drugs in the ‘donut hole’ under Medicare Part-D; $34 billion in increased rebates under Medicaid; $12 billion through an industry fee or tax, and some $9 billion in savings on biologics.  Any mechanisms to ensure oversight and reliable pre-discount drug pricing are not clear.  

Controversy has now erupted, however, over drug pricing issues that affect the cost of health reform.  House Speaker Nancy Pelosi has said that “the House was not bound by any industry deals with the Senate or the White House.”   House Energy and Commerce Committee Chairman Henry Waxman (D-CA) also said that the House would not be obligated to abide by the agreement.  On July 31^st House democrats added new drug provisions in the House Committee on Energy and Commerce mark-up of its bill,  America’s Affordable Health Choices Act of 2009, H.R. 3200.  

H.R. 3200 includes an amendment introduced by Representative Schakowsky (D-IL) which allows the federal government to negotiate lower drug prices on behalf of senior citizens and persons with disabilities covered under Medicare Part D.  PhRMA quickly cried ‘foul’ and claimed that part of their deal was the administration’s promise to not pursue any other cost-cutting proposals.  They claimed that Schakowsky’s amendment would be a ‘deal breaker.’  But proponents are quick to point out that the potential savings for consumers and government payors are significant, and could easily exceed the PhRMA deal’s $80 billion over-ten-years.  

In the days following the release of H.R. 3200, the White House seems to have pulled back on its previous description of the agreement with PhaRMA. Huffington Post   $8 million in annual savings on a yearly drug tab in excess of over $200 billion nationwide seems to leave a lot on the table that we hope will be up for negotiation over the course of hammering out a final health care agreement.  

Another important provision in the House health care reform bill was a successful amendment by Rep. Rush (D-IL) would prohibit the ‘pay-for-delay’ settlements that drug manufacturers have used to keep generic competitors off the market.  (See more info here). Thees anti-competitive agreements, also called reverse payment settlements, have kept generic versions of several drugs off the market since 2005. The FTC conservatively estimates that banning such ‘pay-for-delay’ or ‘reverse-payment’ settlements would save $35 billion dollars over the next decade.

In addition Rep. Baldwin (D-WI) successfully introduced an amendment that wouldrequire the disclosure of financial relationships between pharmacy benefit managers (PBMs) and drug manufacturers.  PBMs manage insurers’ prescription drug benefits, including creating formularies of preferred medicines, negotiating discounts with drug manufacturers, and negotiating reimbursement rates with retail pharmacies that fill prescriptions.  Under Rep. Baldwin’s amendment, all PBMs must provide, to both their client health plans and to the federal government, a confidential annual accounting of all payments and rebates they receive from drug manufacturers in relation to the prescriptions filled.  In addition, the PBM must report, in aggregate, how much they paid pharmacists to fill all prescriptions. 

These two classes of information are essential for health plans to ensure that their formularies are designed to lower costs and not to maximize rebates often alleged to be retained by the PBM.  It would help ensure that the conflict of interest that PBMs face is not working against the fundamental purpose of PBMs to manage formularies that reduce costs.  Similar disclosure provisions have been enacted under state law in Maine and the District of Columbia even withstanding legal challenges.  Maryland, Iowa, South Dakota, and Vermont have also enacted state PBM reform measures.  In South Dakota, the state saved more than $800,000 on health insurance costs in one year after enacting its law.  Kansas, Mississippi, North Dakota, Rhode Island, Tennessee, Connecticut, Georgia, Louisiana, and Arkansas have also taken steps towards PBM transparency.  For example, through an audit of the PBM which manages the state employee health program, Arkansas discovered that in a three-month period, the state was overcharged by nearly $500,000.  The experience of these states demonstrates that increased PBM transparency has the potential to yield significant savings for public and private insurers.  

An editorial in last week’s Washington Post recognized the significance of banning pay-for-delay settlements and the potential benefit to prescription drug consumers. As mentioned in the editorial, the current law’s intent to allow generic drugs to come to market sooner just isn’t working and the result is costing consumers billions of dollars a year.

For example, in one case involving the brand-name maker of the drug Provigil, Cephalon, Inc. allegedly paid off four generic companies up to $136 million to delay market entry of a generic version of Provigil for at least an additional 6 ½ years. The case against Cephalon, Inc. alleges that the brand-name manufacturer recognized the weakness of its patent and the unlikelihood that it would be the victor of a patent infringement lawsuit. That is why just about a month before its patent expired, Cephalon allegedly paid its potential generic counterparts to stay off of the market. Without these agreements consumers would have been able to purchase generic versions of Provigil at much lower costs as early as 2006. Instead, as one Cephalon executive exclaimed, Cephalon earned $4 billion in unanticipated sales. Meanwhile, consumers continue to pay high prices for Provigil and have to wait until at least 2011 or a verdict against Cephalon for a generic option. You can read more about this case on our website or in an earlier blog (New Judge and New Obama Administration Position Sparking Developments in the Provigil Lawsuit Case?)

Although there are currently several patent infringement lawsuits that may involve pay-for-delay settlements similar to the agreements in the Provigil case, including cases involving the drugs Oxycontin, Protonix, and Wellbutrin, litigation may not be the best way to solve the problem. Three out of four federal circuits to hear the case have not found a violation of anti-trust laws and the U.S. Supreme Court has twice declined to hear these cases.

There is a glimmer of hope that pay-for-delay settlements will not be able to increase prescription drug costs for American consumers much longer. The Washington Post editorial sums up need for change:

As Congress embarks on major health-care reform, it has a chance to fix the system. Banning all “pay-for-delay” settlements except where they can be proven to be pro-competitive would be a good start. True, some pay-for-delay settlements inadvertently benefit consumers by allowing generic products to enter markets sooner than they would have after litigation. But that is no excuse for failing to fix a system with fundamentally flawed incentives. The only difference between one company paying another not to produce a competing product and one company paying another not to produce a competing product yet is that the second is still, paradoxically, legal. This must change.

There are two bills pending in Congress to ban such settlements (H.R. 1706 & S. 369). You can read more about pay-for-delay settlements in PAL’s blogs. (See Obama Dept. of Justice Joins FTC in opposing pay-for-delay settlements, & House Subcommittee Approves “Protecting Consumer Access to Generic Drugs Act of 2009” H.R. 1706!) Continue to watch our blog for further updates on these very important bills!