Senators Reignite Fight to Block Pay-for-Delay

Michael Fitzhugh

Two U.S. senators have reintroduced legislation targeting "pay-for-delay" agreements, in which generic drugmakers agree to postpone competing with branded drugs in exchange for payment.

This article published with permission from The Burrill Report.

Two U.S. senators have reintroduced legislation targeting “pay-for-delay” agreements, in which generic drugmakers agree to postpone competing with branded drugs in exchange for payment.

Senators Amy Klobuchar (D-Minnestota) and Chuck Grassley (R-Iowa) want to put an end to the deals, which they and the Federal Trade Commission view as anti-competitive.

If passed, the Preserve Access to Affordable Generics Act could accelerate the availability of lower-priced generic drugs and generate more than $4.7 billion in budget savings to the Federal Treasury between fiscal years 2012 and 2021, according to an estimate by the Congressional Budget Office.

The act would curtail the deals, following a year in which the Federal Trade Commission reported a 40 percent increase in the number of potential pay-for-delay settlements, a jump to 40 deals in 2012 from just 28 deals in 2011. Klobuchar and Grassley introduced similar legislation in 2010 following a resurgence of settlement agreements that year.

“Clearly, pay-for-delay dealmaking is an obstacle to getting cheaper prescription drugs on the market,” says Grassley. “These anti-competitive patent settlements between brand and generic drug companies hurt consumers’ access to affordable medications, and they hurt taxpayers who pay for prescription drugs under both Medicare and Medicaid.”

Pay-for-delay settlements delay generic entry into the market nearly 17 months longer on average than agreements without payments, according to the FTC. The settlements (also known as “reverse payments”) delay consumer access to generic drugs, depriving consumers of the savings they would have realized if cheaper generics were available earlier, say opponents of the agreements.

The senators’ effort comes as the FTC, generic, and brand-name drugmakers await a hearing before the U.S. Supreme Court this spring, a case intended to bring resolution to a long history of courts of appeals rulings divided over how federal competition laws apply to pay-for-delay agreements.

Innovator and generic pharmaceutical trade groups alike have sought to protect pay-for-delay agreements. They say that the legal settlements have helped make lower-cost generics available months and even years before patents on branded drugs have expired. However, they have also welcomed the Supreme Court’s review in hopes that it will clarify conflicts over whether the arrangements are anti-competitive.

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