Drug companies narrowly missed a big blow to their business with the passage of the healthcare-reform bill as an amendment that would have banned reverse settlements was removed, but the danger hasn’t gone away yet.
Following the bill’s passage, Sen. Herb Kohl, D-Wis., pledged to press for a ban on the settlements, in which a generic drug company that wants to market its version of a drug ahead of the expiration of patents covering the branded version agrees not to immediately launch in exchange for monetary payment or an agreement by the brand drug maker not to launch its own “authorized generic” to compete with the generic during the latter’s six-month market exclusivity period. Kohl introduced in February 2009 the bill S.369, the Preserve Access to Affordable Generics Act; Sen. Patrick Leahy, D-Vt., filed a written report on the bill in February 2010.
Critics of the settlements—including Kohl and the Federal Trade Commission—deride the settlements as “pay-for-delay” deals, charging that they deny patients timely access to generic drugs and violate antitrust laws. Supporters, such as the generic and branded drug industries, say the deals actually result in generic drugs entering the market earlier than they would if most patent litigation suits went to trial.
“It’s driven by two different issues: One is a general perception both among some members of Congress and the Federal Trade Commission, and others, that brand-generic settlements result in a denial of lower-cost generic drugs to consumers…as well as a general perception that the entry of generics into the market immediately reduces prices, and if the brand companies would simply move out of the way, prescription drugs would be cheaper for everybody,” David Farber, a litigator and lobbyist with the Washington law firm Patton Boggs who represents drug and healthcare companies and has followed the patent-settlement issue, told Drug Store News.
Farber disputed the perception that the settlements are anti-competitive, saying that in many instances, the generic company has a weak case to begin with, and the cases carry significant risks for litigants. “Opportunities to settle are often rational agreements between very sophisticated parties that balance the risks of the litigation,” Farber said. “There are many Hatch- Waxman patent challenges that I’ve seen that result in shorter exclusivity through a settlement than if the branded manufacturer had taken the case to trial and won.”