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!

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

Our friends over at PostScript, the blog of the Prescription Project, got in to the holiday spirit last week with a Christmas Carol about the joys of drug sales people pitching their drugs to Doctors, with the aid of data and information sold to them by the American Medical Association (AMA). Here it is. Enjoy!

Here in PostScript country, we’re up to the shins in snow and to the gills with yuletide spirit, so we thought we’d turn all that merriment toward something else that’s on our minds…

[cues orchestra]

A Data-Mining Carol

[to the tune of Jingle Bells]

Dashing through the wards, with a briefcase in his hand,
The rep signs in and waits, then shakes the doctor’s hand
But this is no plain pitch,
He knows just what to say,
Because he knows just how much Doc wrote
Of Seroquel last May

Oh –

Data sells, the reps can tell
How well their free lunch pays
But docs don’t know how much is shown
On a rep’s handheld display, hey

Prescriptions filled, providers billed,
The rep calls it a day,
Oh how tough his job would be
Without the AMA!

An excellent op-ed ran this week in the San Francisco Chronicle, “Prescription mining raises millions for doctors’ group.” It highlights the American Medical Association’s sale of physician profiles and data to drug companies, to help those drug companies convince doctors to prescribe the most expensive brand-name drugs over cheaper and often equally effective older and generic drugs.

As the op-ed points out, most doctors aren’t even aware that their information is sold — not just by the AMA, but by pharmacies as well. When one of the 100,000 drug salespeople that blanket the country enters a doctor’s office, they know exactly how many prescriptions the doctor has written for their drug and for those of their competitors. And they know how the doctor’s prescribing habits changed since their last visit — so they can figure what messages worked, and didn’t work, with that particular doctor.

If most doctors aren’t aware of this, you can be sure that most patients aren’t aware of it either. Drug companies try to portray their salespeople as providing an “informational” and “educational” service, but that’s a red herring. The goal of the salesperson to sell their drug — not to educate the doctor on the most effective and cost-effective treatment.

It’s high time that doctors kicked the drug salespeople out of their offices and instead relied on independent information about drugs. Some doctors and medical centers have done just this. Getting Academic Medical Centers to adopt better policies about drug salespeople is one of the goals of the Prescription Project, whose director, Rob Restuccia, is one of the authors of this op-ed. (The Prescription Project is a project of Community Catalyst, which is also PAL’s parent organization)

No Free Lunch now has a directory of doctors who refuse to see drug salespeople — go here to check to see if your doctor’s name is in it. If he or she isn’t, why not ask them to take the no-drug-salespeople pledge at your next appointment?

Here’s the op-ed that ran this week:

Prescription mining raises millions for doctors’ group

Robert Restuccia and Lydia Vaias

Wednesday, July 25, 2007

Drug companies care about what your doctor prescribes just as much as you do – and they’re paying big money to find out. They are paying so much, in fact, that even though the vast majority of physicians disapprove of the sale of their personal prescribing data for marketing purposes, the American Medical Association persists in selling detailed physician information to the pharmaceutical industry. This data must be used for legitimate public health research – not brand promotion.

Drug ads cover doctors’ offices, coating everything from wall calendars and paperweights to stethoscopes and prescription pads. The numbers show that these advertisements work: doctors are prescribing more brand-name, higher-cost drugs than ever before.

One of the less obvious but more intrusive marketing tools is the drug rep’s hand-held computer, which contains a detailed profile of your doctor’s prescribing history. Armed with the knowledge of each doctor’s individual prescribing habits, pharmaceutical sales representatives tailor their pitches to each physician. This strategy has resulted in new, costlier drugs replacing established medications that have proven histories of safety and effectiveness. Industry profits swell, as do the nation’s health care costs.

Few people recognize the role the AMA plays in making physician information available to companies that use it for pharmaceutical marketing purposes. The AMA sells information from its physician “Masterfile” to health information organizations that pair the identifying information with prescribing records from pharmacies and sell the whole package to pharmaceutical companies, a practice commonly called “prescription data-mining.”

The AMA profits handsomely from this agreement. In 2005, the AMA made more than $44 million from the sale of database products, approximately 16 percent of its budget. It comes as no surprise, then, that the sale of prescriber information failed to make the formal agenda when AMA delegates met in Chicago last month.

Yet among physicians there is a growing and vigorous debate about the appropriateness of this practice and its enhancement of pharmaceutical marketing. Despite representing less than 30 percent of all U.S. doctors, the AMA keeps identifying information on all licensed physicians – and sells it all. Even so, only 60 percent of physicians surveyed by the Kaiser Family Foundation were aware of the sale of their information. Once told, 74 percent disapproved. Even a survey by the AMA itself found a 66 percent disapproval rate.

A number of policymakers, physician groups and medical societies have come out against this practice in recent years. Leaders include the National Physicians Alliance, the American Medical Student Association, the Vermont Medical Society and the New Hampshire Medical Society. Unfortunately, the AMA has a financial incentive to keep selling this information without regard to how it is being used or the impact it has on patient care and health-care costs.

A growing number of states have taken measures to end data mining because the AMA will not. Maine and Vermont recently passed legislation banning the sale of information detailing what drugs doctors are prescribing their patients while New Hampshire, the first state to pass such legislation, saw the data mining companies challenge the law. A federal court overturned the law banning the sale of prescription information “on free speech” grounds and the case in now being appealed by New Hampshire.

Last year, in response to this growing pressure, the AMA created an “opt-out” measure, called the Prescribing Data Restriction Program. Difficult to navigate, poorly publicized, with only a quarter of physicians are aware of it, and used by less than 1 percent of doctors, the opt-out program is a step toward reform, but a small and inadequate one. The program does not bar the sale of prescriber information to pharmaceutical companies; it merely requests and then relies on the industry to prevent the transmission of this data to its sales teams.

By continuing to profit from the sale of physician data, the AMA has shown itself to be at best, slow-to-act, and at worst, opportunistic at the expense of professional boundaries. The AMA should put medical ethics before profits and stop licensing its Physician Masterfile for pharmaceutical marketing purposes.

Robert Restuccia is the executive director of the Prescription Project, a national initiative supported by the Pew Charitable Trusts to end conflicts of interest created by the pharmaceutical industry’s marketing to physicians. Lydia Vaias serves as president of the National Physicians Alliance and is a board-certified general surgeon on staff at Kaiser Permanente Hospital in Bellflower (Los Angeles County).

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/07/25/EDPRR6D571.DTL

This article appeared on page B – 9 of the San Francisco Chronicle

Great article in today’s Washington Post: “Doctors, Legislators Resist Drugmakers’ Prying Eyes”. The article discusses the now-hot issue of whether the data of what drugs Doctors prescribe should be private, or whether drug companies should be able to purchase that data from pharmacies.

The article features the National Physicians Alliance, which has a new campaign on this issue (featured in our recent blog entry, “Doctors: Big Pharma is watching you!”)

In that entry, we raised the issue of whether doctors know that their prescribing data is being sold. All indications are that many if not most doctors are not aware of this. But how would most Doctors feel if they knew that the American Medical Association was selling their information to drug companies? As the article points out:

The American Medical Association, a larger and far more established group, makes millions of dollars each year by helping data-mining companies link prescribing data to individual physicians. It does so by licensing access to the AMA Physician Masterfile, a database containing names, birth dates, educational background, specialties and addresses for more than 800,000 doctors.

After complaints from some members, the AMA last year began allowing doctors to “opt out” and shield their individual prescribing information from salespeople, although drug companies can still get it. So far, 7,476 doctors have opted out, AMA officials said.

It’s not abundantly clear on the AMA website how physicians go about opting out, but this page appears to be a likely candidate.