WASHINGTON - Drug companies increasingly
are reaching legal settlements that delay the introduction of cheaper
generic medicines and cheat Americans of billions of dollars a year in
savings, federal regulators on Wednesday told lawmakers seeking to ban the
agreements.
The Federal
Trade Commission and others allege the settlements allow brand-name
pharmaceutical companies to pay off would-be generic competitors, which
then agree to delay introduction of their less costly but otherwise
identical versions of the original medicines.
The FTC
issued a report Wednesday, to coincide with a Senate Judiciary Committee
hearing on the topic, that shows the settlements have become more common
since two 2005 appeals court decisions upheld their
legality.
In the
12-month period that ended Sept. 30, half of the 28 patent litigation
settlements between brand-name and generic drug makers included such an
agreement, according to the FTC. It tallied just three the previous fiscal
year and none the year before that.
'Pay-for-delay
settlement'
"Sadly, the
incentive to enter in such pernicious pay-for-delay settlements are
substantial," FTC commissioner Jon Leibowitz told
lawmakers.
In a typical
settlement, the payment is still less than the potential loss in sales to
a brand-name company once a generic competitor enters the market, said
Michael Wroblewski, of Consumers Union. And the generic manufacturer makes
more from the payment that it would from actually selling its version of a
drug, he said.
"The losers
are American consumers, who pay high drug prices for years to come," said
Sen. Herb Kohl, D-Wis. Kohl, joined by Democratic and Republican
colleagues, reintroduced legislation Wednesday to ban the
agreements.
The
agreements settle legal challenges mounted by the generic manufacturers
seeking to enter the market for a drug before its patent expires. In doing
so, they thwart the intent of the 1984 law that made such challenges
possible, said Sen. Patrick Leahy, D-Vt.
Costs
passed to the consumer
The
pharmaceutical industry maintains the settlements avoid or cut short
prolonged and costly litigation. Those costs ultimately are passed to the
consumer.
"Courts and
experts have stated unequivocally that settlement of litigation should be
encouraged and that settlement of patent litigation can benefit consumers.
Blanket prohibitions on certain types of settlements could force both
sides to spend valuable resources litigating their patent dispute to
judgment," said former Rep. Billy Tauzin, R-La., president and chief
executive of the Pharmaceutical Research and Manufacturers of
America.
One of the
co-authors of the 1984 law, Sen. Orrin Hatch, R-Utah, suggested reviewing
the settlement agreements on a case-by-case basis and not banning them
outright.
And Bruce
Downey, chairman and chief executive officer of Barr Pharmaceuticals Inc.,
a major generic drug maker, said the proposed law could discourage generic
companies from challenging patents held by pharmaceutical companies - and
settling those challenges.
Downey said settling challenges to
the patents on the antidepressant Prozac and cancer drug tamoxifen allowed
his company to introduce lower-price generic versions of the two medicines
before they lost patent protection, saving consumers more than $1.5
billion.
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