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:
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.”
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
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.”
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.
Prescription Access Litigation’s parent organization, Community Catalyst, has launched a new program 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. GPM recently announced the recipients of grants to undertake consumer education campaigns about generic drugs. The details are below:
Boston - Generics are Powerful Medicine (GPM), a program of Community Catalyst and the Alosa Foundation, is pleased announce grants to eleven nonprofit organizations to educate consumers about the value, safety and effectiveness of generic prescription drugs. The recipients will use consumer education materials developed by GPM, and will employ a very broad set of strategies, targeting a diverse set of audiences, ranging from seniors to parents of young children, in large cities, small towns and rural communities.
The recipients were selected for the innovativeness of their approaches, their previous consumer education experience, their relationships with the target populations and their geographic diversity. They will work closely with GPM and with each other over the next year and a half to implement, refine and document a set of best practices and model approaches for how to encourage consumers to switch to generic drugs.
GPM’s team of medical experts and health care advocates are developing a set of printed, electronic and video materials on generic drugs. An electronic copy of these materials will available on www.genericsarepowerful.org to any interested organizations or individuals.
These materials will include:
Factsheets and brochures about what generic drugs are, how they are inspected and approved, and how to save money on prescription drugs
A wallet-sized card for patients to bring to medical appointments and pharmacies, reminding them of questions to ask about their medications and obtain generics, when appropriate
Template public service advertisements for consumer publications
An online search tool where patients can look up whether there are generics available for their medications
A 10-minute video documentary on generics, featuring a physician, a pharmacist and several consumers
All these materials will be consumer-friendly, written in easily-understood, readable language, with a minimum of jargon. Many of the materials will be translated into Spanish.
Initial funding for GPM came from residual settlement funds in two class action lawsuits that alleged that a pharmaceutical company illegally kept generic versions of two prescription drugs off the market. GPM is seeking additional funding for the program and hope to make additional grants available in the future.
Generic drugs have become a vital tool for consumers to save money on their prescription medications. Generic drugs use the same active ingredient as brand-name drugs and are approved by the FDA. Generic drugs are as safe as the brand-name equivalent, yet much less expensive (often only 20-30% of the brand-name price). 65% of prescriptions in the US in 2007 were filled with generics, yet they accounted for only 20% of spending on prescription drugs.
Despite the huge savings possible with generics, they are still underutilized. American consumers and the health care system could save billions of dollars more by increasing the usage of generic drugs. With a recent study by Medco showing that more than 50% of Americans now routinely take one or more prescription drugs for a chronic condition, generics will become increasingly important.
Unfortunately, many consumers have been deceived by myths about generics that have been perpetuated by the brand-name pharmaceutical industry. Brand-name drug companies now spend more than $5 billion a year marketing to consumers and more than $20 billion a year marketing to physicians. In addition to the message about any particular drug, there is an underlying set of myths in all such advertising – the inaccurate ideas that “newer is better,” that brand-name name drugs are superior to generic drugs , and that the more expensive a drug is, the more effective it must be. GPM aims to expose and confront these myths head-on, to provide consumers with the truth about generics, and to give them the tools to make smart choices about prescription drugs.
Increasingly, health plans and pharmacies urge consumers to switch to generics. Yet consumers sometimes view these messages skeptically, seeing them as self-serving. What makes GPM unique is that its materials and messages come from sources with no such self-interest, and will be delivered by well-trusted organizations with established relationships in their communities. This will help overcome the skepticism that some consumers have about generics messages delivered by other entities.
More information about Generics are Powerful Medicine is available at www.genericsarepowerful.org. The GPM materials will be made available on that website this summer.
The Alosa Foundation is a non-profit organization dedicated to the dissemination of accurate, unbiased, evidence-based and non-commercial information about medications for prescribers and patients. It sponsors the Independent Drug Information Service which provides educational research to prescribers and is funded by the Commonwealth of Pennsylvania Department of Aging. Alosa is not affiliated with any pharmaceutical company in any way.
Community Catalyst is a national advocacy organization that builds consumer and community participation in the shaping of our health system to ensure quality, affordable healthcare for all. Community Catalyst believes that health care is a basic human right and that all people–including children, the poor, the elderly, minority communities, and others who are vulnerable–should have access to quality health care. Community Catalyst works in partnership with consumer and community groups around the country to promote health care justice.