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WASHINGTON — The U.S. healthcare system has saved $25.5 billion over seven years from generic drugs launched under patent settlements between branded and generic drug manufacturers, according to a new study.
The study, conducted by the IMS Institute for Healthcare Informatics on behalf of the Generic Pharmaceutical Association, a Washington-based trade group of generic drug manufacturers, tracked 33 drugs subject to patent settlements between 2005 and 2012. Settlements, the report found, allowed generic versions of the drugs to enter the market an average of 81 months ahead of patent expiry.
When a generic drug company desires to get its version of a branded drug to market early, it will file a Food and Drug Administration application containing a Paragraph IV certification, a legal assertion that one or more patents covering the drug are invalid, unenforceable or not in danger of infringement. Typically, the branded drug maker will respond with a lawsuit, enjoining the FDA from approving the generic for 30 months or until a settlement is reached. In many cases, such a settlement will involve a "consideration," such as a cash payment or an agreement by the branded drug company not to launch a so-called authorized generic — essentially the branded drug marketed under its generic name at a reduced price — during the FDA-mandated period of 180 days in which the first generic drug maker to market has the exclusive right to compete against the branded drug.
Opponents of such settlements deride them as "pay-for-delay" deals that keep drugs out of the hands of consumers for extended periods of time, thus raising costs for patients and payers. They recently took their opposition to the Supreme Court, which ruled last month in the case of Federal Trade Commission v. Actavis that patent settlements with consideration were not by default illegal, but that courts should review them on a case-by-case basis.
"For years, opponents of pharmaceutical patent settlements with consideration have stated that settlements create a cost for consumers, the government and others," GPhA president and CEO Ralph Neas said. "This new analysis provides the most current, complete and transparent estimate of the impact of patent settlements on health costs, and it shows that the opposite is true."
Neas said that the settlement between Pfizer and Ranbaxy Labs over Lipitor (atorvastatin calcium) would save $22 billion during the next four years. Ranbaxy launched its generic version of Lipitor in November 2011, and numerous versions of the drug have become available since then. The IMS report estimated that patent settlements on the 33 drugs analyzed would save $61.7 billion in addition to the $25.5 billion already saved if the current level of savings continues through to the expiration of their patents.
The report also found that of the $25.5 billion saved, $8.3 billion of that went to the federal government. Without the settlements, the report found, the total $87 billion in savings would be reduced by $45 billion.