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

Help reverse the medical device “tort reform” by the Supreme Court that has left thousands of injured patients without the right to sue, and puts many more patients at risk! 

The following announcement and open letter to Congress was organized by the Campaign to Stop Corporate Immunity, a coalition of consumer and advocacy organizations (including PAL, Community Catalyst, AARP, Consumers Union, and many others) working to restore patient’s rights to sue manufacturers when they are harmed by dangerous or defective medical devices.

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Medical Device Patient Lobby Day

On March 31st, Medical Device Patients from around the country will travel to Washington, DC and ask Congress to pass the Medical Device Safety Act.  Please click here to learn more about the Faces of Preemption.  Following is the Patients’ Letter to Congress:

Dear Members of Congress,

Because we have had a defective medical device implanted in our bodies, we are here today asking Congress to support HR 1346/S 540, the Medical Device Safety Act.

In February of 2008, the Supreme Court decided that medical device manufacturers cannot be held accountable for producing dangerous and defective products. They felt that FDA’s approval of a medical device warranted this immunity. It should not. The Medical Device Safety Act will return our rights that have been taken away by fixing this problem and putting the law back the way it was just over a year ago.

Most of us here today have received a Medtronic Implanted Cardiac Defibrillator (ICD) that had a defective Sprint Fidelis lead attaching it to our hearts.   This lead has malfunctioned causing patients like us to suffer unnecessary shocks that can only be compared to getting kicked in the chest by a horse.

While these are meant to be life saving devices, some of us are here representing loved ones who lost their lives as a direct result of their defects. Medtronic knew this lead was faulty and failed to report problems to the FDA.  As a result, hundreds of the defective leads were implanted in heart patients across the country. This was all before they had immunity from lawsuits!  Imagine how reckless they will be with out the checks and balances of our civil justice system. 

If we cannot hold medical device manufacturers accountable for their actions, we cannot pay for our medical care, a cost that will fall to taxpayers. Why should Americans have to finance the medical device industry?

Please, consider us when it comes time to vote on the Medical Device Safety Act, and vote YES for patient safety.

SUPPORT HR 1346/S 540, THE MEDICAL DEVICE SAFETY ACT 

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Additional information:

This legislation is needed not only to restore the rights of current patients who have been harmed, but also to safeguard for the safety of future patients who use any prescription medical device. The right to sue manufacturers of faulty or dangerous medical devices helps ensure that manufacturers develop and produce safer devices. For instance, earlier this month, in the case Wyeth v Levine (related to the safety of prescription drugs) the Supreme Court noted that:

State tort suits uncover unknown drug hazards and provide incentives for drug manufacturers to disclose safety risks promptly. They also serve a distinct compensatory function that may motivate injured persons to come forward with information. Failure-to-warn actions, in particular, lend force to the FDCA’s premise that manufacturers, not the FDA, bear primary responsibility for their drug labeling at all times. Thus, the FDA long maintained that state law offers an additional, and important, layer of consumer protection that complements FDA regulation.

Unfortunately the regulation of medical devices by FDA involves some slightly different federal statutes than those related to prescription drugs. Back in the late 70′s, consumers were being harmed by newly available medical devices, and the states had started to regulate.  In this context, Congress enacted the Medical Device Amendments of 1976 in order to create a unified national system of device labeling under federal law. They did so by expressly preempting, or nullifying labeling requirements imposed under state law.

Gradually over the next twenty years, corporations starting broadly asserting federal regulatory law to get immunity from state law consumer protection and product liability statutes. Corporations exploited many such federal laws as a back-door method to achieve a judicial form of “tort reform” which Congress had long denied them.

You may wonder how federal labeling requirements could affect state laws related to product safety? The ‘reasoning’ goes like this. To win a lawsuit, oftentimes a consumer must prove to a jury that the manufacturer of a product failed to provide adequate warnings that would allow the product to be used safely. A jury verdict is a decision, as a matter of law, that a warning was not adequate. Nearly all warnings are contained in the labeling of the product’s packaging. So a jury decision on the adequacy of a warning is regulation of product labeling under state law. Therefore, such jury verdicts concerning medical devices must be preempted by the superior federal laws enacted in 1976.

So, despite a rather clear intent by Congress to preempt state regulation of what a medical device label must disclose, federal court judges started to buy these ‘preemption’ arguments over twenty years later. Then, in February of 2008, the Supreme Court agreed with this reasoning in the case Riegel v. Medtronic (see our blog here). The Court ruled that consumer claims addressing the adequacy of medical device labeling were preempted.

The current Medical Device Safety Act (HR 1346 in the House, S 540 in the Senate) would simply reverse the decision in Riegel v. Medtronic, and narrow, or limit the preemption under federal law to just the regulation of device labeling, and to restore the rights of patients to sue a device manufacturer when they are harmed.  

To help, follow the link below, and urge your Congressperson and both your U.S. Senators to vote for the Medical Device Safety Act, and reverse the tort reform decided by the Supreme Court in Riegel v Medtronic.

Contact your Congressperson here: https://writerep.house.gov/writerep/welcome.shtml

Contact your Senators here: http://www.senate.gov/general/contact_information/senators_cfm.cfm

To help your organization sign on in support of this legislation, please contact PAL at PAL@communitycatalyst.org.

For more information, go to the Campaign to Stop Corporate Immunity website.

The FDA Amendments Act of 2007, also known as FDAAA, as in “open wide and say FDAAA,” is a riveting 156-page read, and buried in its contents is a provision, known to its friends as 121 Stat. 890 Sec. 502(f)(1), that requires drugmakers to include a toll-free number in print advertisements for prescription drugs, for consumers to report adverse effects or negative side effects from those drugs.

(The FDA published a notice in the Federal Register on January 3, advising that the rule went into effect on January 1, 2008. Interestingly, although it says the rule goes into effect January 1, that doesn’t mean that all drug companies must comply with the rule by January 1 — the Federal Register notice says “In the preamble to the toll-free number proposed rule, the agency proposed that all manufacturers, dispensers and
pharmacies subject to the rule be in compliance not more than 1 year after the effective date of the final rule.” I guess only at the FDA does “in effect on Jan. 1, 2008″ really mean “in effect one year later than Congress required.”)

But what about TV ads? There’s no requirement that drugmakers include that toll-free number in their television ads. And no doubt drug companies wouldn’t want that requirement. Can you imagine a drug ad that said “Side effects may include bloat, foaming at the mouth, heart attack, hives, hallucinations, insomnia, excessive sleepiness, erections lasting longer than 4 hours, and compulsive gambling. Call 1-800-FDA-1088 if you experience any negative side effects while taking this drug.” That certainly would tend to, um, accentuate the negative, if you will.

But having these toll free numbers on TV ads is arguably far more important. It’s impossible to watch prime time TV without seeing several drugs an hour. People spend far more time watching TV than they do reading magazines. Drug companies spent twice as much on TV ads on Network and Cable TV in the first half of 2007 (nearly $1.6 billion) as they did on national magazines, sunday supplements and newspapers (just over $838 million). [Source: DTC Perspectives, "Spending Review," December 2007]

Consumers Union submitted a citizen petition to the FDA calling on the FDA to require that TV ads be required to include this toll free number as well. Here’s the press release about it.

Consumers Union is circulating an online petition, and asking consumers to sign it in support of this request. To sign the petition, go here.

And what’s that toll free number? 1-800-FDA-1088. You can also report a negative side effect through your doctor, or by going to www.fda.gov/medwatch