FTC fights increasing patent settlements

The issue of patent settlements, their effect on drug prices and availability, and by extension their legality has been around for a long time and will likely remain an issue for years to come. But according to a report released in May by the Federal Trade Commission, the settlements have been on the rise, increasing from 16 in 2009 to 31 in 2010.

Patent settlements often occur when a generic drug maker files with the Food and Drug Administration for approval of a version of a branded drug that has not lost patent protection. Under the terms of the Hatch-Waxman Act of 1984, the branded drug company is entitled to sue the generic company, which puts an automatic stay of final FDA approval on the generic for two and a half years or until the two parties settle the matter before the court. In practice, what often happens is that the companies will reach a deal that allows the generic manufacturer to launch months or even years before loss of patent protection, in exchange for not launching immediately; delaying launch after a patent has expired would be illegal.

Under the leadership of chairman Jon Leibowitz, the FTC has positioned itself as a sworn enemy of the deals, deriding them as “pay-for-delay” settlements that keep generic drugs out of consumers’ hands. “Collusive deals to keep generics off the market are already costing consumers and taxpayers $3.5 billion a year in higher drug prices,” Leibowitz said when the FTC report was released. “The increasing number of these deals is a win-win proposition for the pharmaceutical industry, but a lose-lose for everyone else.”

In July, the Senate Judiciary Committee voted in favor of the Preserve Access to Affordable Generics Act, introduced in January by Sen. Herb Kohl, D-Wis., though previous attempts to ban patent settlements have proven unsuccessful. 

The generic and branded drug industries have defended the settlements, saying that they usually allow generics to reach the market before patent expiration. The Generic Pharmaceutical Association called Kohl’s bill “misguided,” noting that the bill would retroactively extend the ban on patent settlements to products already on the market, which could possibly result in the drugs being pulled from the market. “The legislation considered [on July 21] by the Judiciary Committee has repeatedly garnered bipartisan opposition and failed to receive support from the full Congress,” the GPhA said. “Moreover, the courts have consistently held that these settlements are pro-consumer and pro-competitive.”

The group also said that of the 23 new generic drug launches expected in 2011, 17 would launch before a patent’s expiration because of patent settlements.

”It is also important to recognize that many of these drugs — including generic versions of Lipitor and Plavix — will become available later this year because of a pro-consumer patent settlement,” GPhA executive director Bob Billings said. “If such agreements were outlawed, patients could be forced to wait at least an additional five years for access to either of these lifesaving medications, a delay that would cost consumers and the U.S. healthcare system billions of dollars.”

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