Bill to stop generic pay-offs

By Anna Lewcock

- Last updated on GMT

Related tags: Generic drugs, Generic drug

The Senate Judiciary Committee last week approved legislation that
would prevent drug manufacturers from paying off firms to delay
entry of generic versions of their products onto the market.

The Preserve Access to Affordable Generics Act aims to stem the flow of brand-name drug manufacturers who exploit a loop-hole in the Drug Price Competition and Patent Term Restoration Act, commonly referred to as the Hatch-Waxman Act. "Exclusion payment settlements" have become increasingly common, and refer to cases of patent litigation in which a brand-name drug manufacturer pays a potential generic competitor to abandon a patent challenge and delay entering the market. According to Senator Patrick Leahy, commissioner of the Federal Trade Commission (FTC), during fiscal 2006 half of all patent settlements involved compensation to the generic patent challenger and an agreement by the generic firm to put off launching the generic product for a period of time. Exclusion payments such as this represent highly lucrative deals for both brand name and generic firms, but "such settlements restrict competition at the expense of consumers, whose access to lower priced generic drugs is delayed, sometimes for many years,"​ says Leahy. While generic alternatives to brand name drugs are well-known to offer considerable cost savings, Leahy highlights the fact that generic competition following successful patent challenges involving just four brand-name drugs has been estimated to have saved consumers over $9bn. While the bill has been approved by the Judiciary Committee and will now move to the Senate, the legislation has not been welcomed by all. Billy Tauzin, the president and CEO of Pharmaceutical Research and Manufacturers of America (PhRMA), expressed concerns about the proposed bill at a hearing back in January: "Blanket prohibitions on certain types of settlements could force both sides to spend valuable resources litigating their patent dispute to judgement,"​ said Tauzin. "Both innovators and generics would have to absorb – or pass on to consumers - the costs of increased litigation." "A law that would ban patent settlements just because the brand company transfers something of value to the generic…would chill all patent settlements."​ PhRMA suggested at the hearing that general legislation addressing the apparent loophole in the Hatch-Waxman Act may simply not be necessary, and proposed that agencies and courts continue to evaluate patent settlements on a case by case basis. Tauzin highlighted the fact the FTC and Department of Justice do already have the authority to evaluate patent settlement agreements between brand-name and generic companies before the generic hits the market. However, Sen. Leahy and fellow committee members Herb Kohl, Chuck Grassley, Russ Feingold and Charles Schumer supported the legislation that aims to get competitively priced generic drugs onto the market as soon as possible. "We have worked diligently with industry leaders to reach a proposal that lessens some of their concerns but that saves for our bottom line – to end the trend of anti-competitive agreements between brand name pharmaceutical companies and generic companies to delay entry of affordable generics into the market,"​ said Leahy.

Related topics: Regulatory & Safety

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