Today’s New York Times reports that PHARMA has finally staked out their agenda in health care reform – avoiding cost controls, and keeping generics off the market.

An undisclosed deal announced this past Sunday between the drug industry, Sen. Baucus, and the Obama administration would help pay as much as half the cost of brand name drugs for seniors in the costly ‘donut hole’ under Medicare. (Currently, a Prescription Drug Plan regulated under Medicare Part D pays three fourths of the first $2,700 in yearly prescription costs, but then stops at the ‘donut hole.’ This forces the consumer to pay all of the next $3,454 in costs out of pocket. Medicare Part D coverage starts back up when the drug costs exceed $6,100.)

Due in part to the continually rising costs of prescription drugs, a fourth of Medicare beneficiaries hit their donut hole. One out of seven of the seniors who hit the donut hole then stop taking their medications due to cost.

A White House spokesperson notes that the deal would save these elderly consumers $30 billion over the next 10 years, but that an additional $50 billion would go to the federal government over the next decade, possibly in the form of rebates to Medicaid or other federal programs purchasing drugs.

While proposals to control or reduce drug costs are needed, our experience with drug pricing fraud by the drug industry teaches us that reliable and transparent price benchmarks are needed to keep this proposal from being a sham. For instance, a nationwide class action lawsuit by PAL members revealed that drug wholesaler McKesson Corp. manipulated reported prices that were used as reimbursement benchmarks, which cost Medicaid, private insurers, and consumers over $7 billion from 2001 to 2005. Another PAL class action lawsuit revealed that over 13 of the largest drug manufacturers engaged in a scheme between 1991 and 2004 to inflate their reported reimbursement prices on doctor-administered drugs, costing Medicare part B, insurers, and consumers billions of dollars.

Finally, a government report from 2006 showed that even when the federal government negotiates contracts with drug makers that guarantee federally funded community health centers the best possible price, the drug industry failed to comply with the contracts, costing hundreds of millions of dollars each month, and possibly billions of dollars a year. In this case, lax monitoring and enforcement by HHS left community health centers and other front-line government programs with little recourse.

These lawsuits and other lessons illustrate the need for full transparency, to allow consumers advocates to monitor progress, and ensure that Medicare consumers truly benefit from this proposal.

In addition to heading off cost controls, the other prong of the drug industry’s agenda is to shoulder aside their generic competitors. As pointed out in today’s Wall Street Journal, this ‘discount program’ may actually discourage seniors on Medicare from switching to less expensive generic drugs.

PHARMA has also come out against legislation that would prevent brand name drug companies from paying their generic rivals to delay bringing new generics to the market. These “pay-for-delay” settlements have become common since 2005, and have cost consumers and insurers an estimated $12 billion a year in lost savings.

For instance, the current class action lawsuit by PAL member AFSCME District Council 37 has challenged multiple settlements between Cephalon Corp. and generic manufacturers Teva, Barr, Mylan, and Ranbaxy. These settlements, totaling up to $136 million dollars, have stopped all four of these generic companies from bringing a generic version of the drug Provigil to the market.

The House version of the bill to prevent “pay-for-delay” settlements, HR 1706, passed an important hurdle on June 3rd, when it was approved by the House Subcommittee on Commerce, Trade, and Consumer Protection, and sent to the full Committee on Energy and Commerce. The NY Times reports that the Senate version of the bill, S. 369, is poised for a vote this week.

The Times article noted that President Obama’s budget criticized these settlements as “anticompetitive agreements” that keep generic drugs off the market. The FTC, which continues to challenge the anti-competitive nature of these settlements in court, sees consumers being harmed. FTC chairman Jon Leibowitz said that allowing these settlements to continue would cost consumers tens of billions of dollars in the next decade. According to the Times, Mr. Leibowitz cautioned that

“Drug companies are lobbying furiously against the legislation because they want to preserve their monopoly profits at the expense of consumers.”

The Times article also made clear that Pharma has launched their own dis-information campaign on the bills. Pharma made the outrageous claims that these anti-competitive agreements benefitted consumers because they “avoided litigation and allowed generic drugs to enter the market before drug patents expired.”

However, in case after case (K-Dur, Tamoxifen, Cipro) these settlements have prevented generic versions of brand name drugs from becoming available to consumers. How?

These settlements, often for many millions of dollars, allow brand name companies to ‘buy-off’ their generic competitors with multi-million dollar payments that are far in excess of the profit margin on a new generic drug. This lets the brand name drug continue its exclusive sales, guaranteeing them hundreds of millions, if not billions of dollars free from competition.

These “pay-for-delay” settlements are likely to arise in current litigation on the validity of patents for the drugs OxyContin, Protonix. and Wellbutrin.

You can help. Please contact your Congressperson or Senator, and urge them to support HR. 1706/S. 369. If you are part of an organization, please contact us to sign on to a letter of support of these bills.

Deadline for claims in July 9, 2009!
The Wall Street Journal today reported on the three settlements resulting from PAL member lawsuits against drug wholesaler McKesson Corporation, and publishers First DataBank and MediSpan. (See article here.) One of these settlements allows for claims by consumers and insurers who paid for any one of these 386 drugs, as described below. With the claims deadline of July 9, 2009, there are only four weeks left to file a claim.

In November 2008, a federal court in Boston gave preliminary approval for a proposed $350 settlement in a class action lawsuit called New England Carpenters Health Benefits Fund, et al. v. First Databank, Inc. and McKesson Corporation. The settlement is schedule for a final approval hearing on July 23, 2009 in federal District Court in Boston.

Background on the settlement:
In November 2008, a federal court in Boston gave preliminary approval for a proposed $350 settlement in a class action lawsuit called New England Carpenters Health Benefits Fund, et al. v. First Databank, Inc. and McKesson Corporation. Final approval of the settlement is scheduled for July 23, 2009 in Massachusetts federal District Court in Boston.

What the lawsuit is about:
The class action lawsuit alleged that two companies, a drug wholesaler (McKesson Corporation) and a publisher of drug data (First Databank) wrongfully inflated the mark-up factor used by the wholesaler to determine the Average Wholesale Price (“AWP”) for hundreds of brand-name drugs. The AWP is the benchmark used by insurers and government programs to reimburse pharmacies. The lawsuit alleged that the defendants artificially inflated the AWP while keeping the actual cost of the drug low so that pharmacies, many of whom were customers of McKesson, received a larger return. It is estimated that this practice cost consumers, insurers, and Medicaid programs over $7 billion in excess costs between 2001 and 2008. You can read more on this case in an article in the Wall Street Journal, or in our earlier blogs (Two landmark settlements to roll back drug prices!; Unions in PAL Coalition win $350 Million settlement in McKesson class action).

McKesson agreed to pay $350 million to settle the lawsuit against it. Insurers and eligible consumers who purchased any of the 386 prescription drugs during the class period may be eligible to receive a portion of the settlement. The drugs included in the settlement include some of the top selling drugs in the United States, such as Adderall, Advair, Allegra, Ambien, Celebrex, Clarinex, Claritin, Coumadin, Levaquin, Lipitor, Nasonex, Nexium Ortho Tri-Cyclen, Plavix, Prevacid, Prilosec, Protonix, Prozac, Risperdal, Seroquel, Topamax, Valium, Valtrex, Zantac, Zoloft, Zyprexa, and many more. A full list of the drugs involved in the settlement is available on our website here or at the settlement website here.

The agreement designates approximately $20,900,000 to settle claims of consumers who paid percentage co-pays and $40,425,000 to settle claims of consumers who paid the cash price of the drugs subject to the lawsuit. The amount consumers will receive depends on the number of claims filed and the amount of the claims. Perhaps most importantly for consumers, an additional settlement with publishers MediSpan and First DataBank includes a 4% price rollback of these 386 drugs. Set to take effect in late September, this rollback could save an estimated $1 billion in future drug costs in its first year.

Consumers may file a claim:
• If you paid a percentage co-payment for any drugs on the list between August 1, 2001 and March 15, 2005. (A percentage co-payment is a co-payment that varies, depending on the cost of the drug. You may not file a claim if you made only flat or fixed dollar co-payments or if you were not obligated to make a co-payment. A flat co-payment is one that is the same cost, usually $5 or $10, no matter how much the drug costs your insurance company.

or

• If you paid the full price for any of the drugs on the list between August 1, 2001 and January 23, 2009.
•
Any claim you file must be post-marked by JULY 9, 2009!

More details about the settlement, claim forms, and information on how to file a claim can be found at www.McKessonAWPSettlement.com. You can also call toll-free: 1-877-625-9414, or email info@McKessonAWPSettlement.com.

Prescription Access Litigation (PAL) is grateful to the participation of our coalition members AFSCME District Council 37, New England Regional Carpenters/New England Carpenters Benefit Funds, and by three other union or retiree benefit funds, who were instrumental in bringing this important lawsuit on behalf of consumers and insurers nationwide.

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.

The bill al (more…)