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.
Share these posts on Twitter, using the hashtag #RxRacket, and ask others to share their stories too. And follow us at @postscriptrx.
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!
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
Drugs Likely to Have High Prices from Pay-for-Delay
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 1st. 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.
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.”
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.
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 FTCreport 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.”
On October 15th, the Senate Judiciary Committee voted out S. 369 (here is the bill), the ban on pay-for-delay settlements between brand-name pharmaceutical manufacturers and generic-drug companies. The purpose and result of these settlements is that the generic drugs come to market later. This means that patients and insurers must wait to have access to the drugs they need at the much lower generic price. This bill would pave the way for cost savings, since generic drugs would come to market faster. The FTC has estimated the savings at $35 billion to consumers and $12 million to the federal government over ten years.
The House and the Senate each have a bill on this issue, but they differ slightly in terms of enforcement of the ban. The Senate version of the bill says that the agreements would be presumed illegal. However, the FTC would need to pursue legal action to challenge this agreement. The drug companies would then have the opportunity to go to court and argue that the agreement is ‘pro-competitive’. If the FTC wins the court case, they would have the authority to assess significant civil penalties on the drug companies.
The House version of this bill (here is the House version) is attached to the tri-committee health reform bill and came out of Energy and Commerce. The ban in the House modifies Section 505 of the Federal Food, Drug, and Cosmetic Act and puts enforcement directly in the hands of the FTC. This amendment does not provide for rebuttal by the parties in court, but instead would allow the FTC to exempt agreements where the value of the payments to the generic drug company do not exceed certain thresholds.
Both the Senate and the House versions include some parameters for the FTC to utilize when making their decisions about to enforce the ban on drug companies. The House language leaves the exception determinations to the FTC to resolve, while the Senate version specifically calls for judicial review in the D.C. Circuit Court.
This Senate version of the bill now moves to the full Senate.
On July 6, the Department of Justice (DOJ) filed a brief in the U.S. Court of Appeals for the 2nd Circuit expressing a new DOJ view on pay-for-delay settlements. The brief urges the 2nd Circuit to regard pay-for-delay settlements as “presumptively unlawful under Section 1 of the Sherman Act.” While the DOJ has not always supported a presumption against legality for these settlements, the Federal Trade Commission (FTC) has long been adamant that such settlements are unlawful. Now, more than ever before, the DOJ and the FTC seem to have a similar perspective on pay-for-delay settlements.
The July 6, 2009 brief filed by the DOJ signifies a stark departure from the Bush administration’s position. In 2006 and 2007, the DOJ urged the Supreme Court to refuse to hear two cases involving pay-for-delay settlements, involving the drugs K-Dur and Tamoxifen, because the DOJ felt these settlements were legal. In its latest brief, the DOJ states that “[r]everse payments are scarcely essential to the voluntary settlement of patent disputes.” The DOJ brief then goes on to discuss how such settlements have reduced the affordability of prescription drugs for consumers. The DOJ emphasized that it was not taking a stance on the specific settlement in the case at bar, involving the antibiotic drug Cipro, but made a more general statement about settlements including payments to the alleged patent infringer to keep the generic drug off of the market. The brief echoed earlier statements of Christine Varney, the new Assistant Attorney General, who announced during her confirmation hearings an intent to “align” the position of the DOJ with that of the FTC.
During a speech last month at the Center for American Progress, FTC Chairman Jon Leibowitz estimated that prohibiting pay-for-delay settlements would save consumers $3.5 billion per year. The anti-pay-for-delay sentiment in the FTC and DOJ has also reached Congress. Two bills in Congress, S.369 (introduced by Sens. Herb Kohl (D-WI.) and Chuck Grassley (R-IA)) and H.R. 1706 (introduced by Rep. Bobby Rush (D-IL-1.)) would help bring generic drugs to market sooner. These bills would prohibit brand name and generic drug companies from entering into agreements in which the brand name company pays off the generic company in return for the delay of the generic onto market. You can find out more about this legislation here.
The European Union also recently investigated the legality of pay-for-delay settlements. The EU study found that it took an average of seven months after expiration of the brand name company’s patent for a generic drug to come to market. This delay cost consumers about 3 billion euros (roughly U.S. $4.2 billion) from 2000 to 2007. You can read more about the EU investigation in the NY Times. http://www.nytimes.com/2009/07/09/business/global/09drug.html
Bill would ban the reverse payment settlements that are keeping new generics off the market!
Yesterday, a bill to ban the “pay-for-delay” settlements between brand-name drug companies and their generic competitors cleared its first legislative hurdle.
The House Subcommittee on Commerce, Trade, and Consumer Protection reported H.R. 1706, the “Protecting Consumer Access to Generic Drugs Act of 2009” out of subcommittee, sending it the House Committee on Energy and Commerce.
If passed, H.R. 1706 would ban the “pay-for-delay” settlements between brand name drug makers and generic drug makers that postpone the entry of generic drugs on the market. The measure has the potential to make a huge difference to consumers currently unable to afford their brand-name prescription drugs. Generic drugs usually cost 80-90% less than the equivalent brand name drug. During a hearing when the bill was introduced just over two months ago, testimony before the subcommittee suggested that these settlements have cost consumers about $12 billion per year since they became common in approximately 2005. [FN1] This is supported by an FTC estimate that early market entry of the generic form of only four brand name drugs (Zantac, Prozac, Taxol, and Platinol) has saved consumers and providers over $9 billion in health care costs. [FN2]
These settlements arise in part due to the laws governing the early entry of generic drugs to the market. Under current law (the Hatch-Waxman Act) the generic drug maker may apply to the FDA for approval to market and sell a generic version of a brand name drug if they feel the drug’s patent is invalid. The brand name drug maker nearly always responds by suing the generic company for patent infringement.
Since approximately 2005, brand name drug companies have been settling these patent disputes by buying-off the generic companies with multi-million dollar settlements. (See our cases on Provigil, Oxycontin, Cipro, Tamoxifen, and K-Dur.)
Current PAL member lawsuits on Provigil and Oxycontin are challenging these ‘pay-for-delay” settlements, and other PAL member lawsuits on Protonix and Wellbutrin will likely result in such a settlement. Past PAL-member lawsuits have lost challenges to these settlements in two of the three federal circuit courts to address the issue (K-Dur in the 11th Circuit and Tamoxifen in the 2nd Circuit) while only the 6th Circuit (in a non-PAL lawsuit, In re Cardizem CD Antitrust Litig., 332 F.3d 896, 908 (6th Cir. 2003)) and the FTC continue to reject these settlements as anti-competitive. H.R. 1706 would ultimately resolve the mixed results encountered by lawsuits.
H.R. 1706 would deem any payment between a brand name drug maker and a generic manufacturer to settle a patent infringement dispute to be an unfair and deceptive practice, and an unfair method of competition under the Section 5 of the FTC Act (15 USC § 45).
These “pay-for-delay” settlements also allow a loophole under the Hatch-Waxman Act to prevent any other generic manufacturer from subsequently applying to bring that generic drug to market until 6 months after the first generic company has done so. Therefore, if a brand name drug maker pays off the first generic company, which holds this 6 month period of exclusivity, no other generic company can bring that same generic to the market until after the original patent expires. For these reasons, these settlement agreements are highly anti-competitive and harmful to consumers.
Prescription Access Litigation’s parent organization, Community Catalyst, launched a new program this summer in conjunction with the Alosa Foundation called Generics are Powerful Medicine. Generics are Powerful Medicine (GPM) is a national project to educate consumers about the safety, value and effectiveness of generic drugs. In 11 states, community organizations partnering with GPM are actively conducting outreach to low-income and uninsured populations to provide information and education on generic drugs.
GPM just announced the launch of its website today, genericsarepowerful.org. The site features
All of GPM’s consumer education materials about generic drugs, in both English and Spanish.
GPM’s 8-minute consumer video on generics (see below)
A tool to look up 100 of the most common brand-name drugs, to find their generic equivalent
Here’s GPM’s video, featuring Dr. Jerry Avorn, a pharmacist and three consumers talking about how generic drugs have enabled them to afford their medications:
The site also allows visitors to see if their drug is available as a generic and to connect to various pharmacies offering discounted generics.
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Last Wednesday, FTC and congressional leaders held a press conference highlighting 
