11 Aug 2016
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American consumers face skyrocketing out-of-pocket costs for their prescription medications. Senate Bill 2019 – The Preserve Access to Affordable Generics Act (S. 2019) would lower these costs by stopping the anticompetitive practice of “pay-for-delay” deals, also known as “reverse payment agreements.” These schemes enable brand-name pharmaceutical companies to pay-off potential generic competitors to postpone launching lower cost generic medications. The Federal Trade Commission has estimated that eliminating these agreements would save consumers about $3.5 billion a year. 

Pay-for-delay deals undermine the intent of the Hatch-Waxman Act, which was passed in 1984 to encourage generic drug companies to bring lower cost medications to market at the earliest – not the latest – point possible. A 2010 FTC report recommended that Congress pass legislation to protect consumers from such anticompetitive agreements. The FTC wrote: “a legislative solution offers the quickest and clearest way to deter these agreements and obtain the benefits of generic competitions form consumers.

Introduced in 2015 by Senator Amy Klobuchar (D-MN) and sponsored by Senator Chuck Grassley (R-IA), S. 2019 would enhance market competition by restricting pharmaceutical patent settlements in which brand name pharmaceutical companies compensate generic drug companies for delaying entry of generic drugs to the market. Specifically, the bill would amend the Federal Trade Commission Act to add Section 27, allowing the FTC to “initiate a proceeding to enforce the provisions of this section against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product.” The bill affirms that pay-for-delay deals, with specified exceptions, are presumed to have anticompetitive effects and violate Hatch-Waxman when a pharmaceutical company receives anything of value and agrees to limit or forego research, development, manufacturing, marketing, or sales of the generic drug.

Pay-for-delay opponents have already gained ground, even without such legislation.  In 2013, the Supreme Court ruled that pay-for-delay schemes can be found in violation of the Hatch-Waxman Act on a case-by-case basis. In FTC vs. Actavis, the Court ruled that an agreement between Solvay Pharmaceuticals, the patent holder of the testosterone medication Androgel Pump, and generic company Actavis, which had delayed the launch of a generic version, could be challenged by the FTC as violating anti-trust laws. It did not, however, “presume” that pay-for-delay deals are anticompetitive, but overturned lower court rulings that deemed the deals to be expressly legal as long as they didn’t keep the generic off the market past the maximum term allowed by the patent.

Since the Actavis case, the FTC reports that pay-for-delay deals have declined, showing the deterrent effect of that ruling. The FTC identifies 21 such deals in 2014, down from 29 in 2013, and 40 in 2012. The 21 pay-for-delay deals involved 20 brand name drugs with annual sales of $6.2 billion.

The elimination of all pay-for-delay deals under the legal presumption that they are all anticompetitive would allow lower cost generics to come to market faster, giving American consumers the maximum benefit that Congress intended to provide under the Hatch-Waxman Act. That’s why passing S. 2019 is a necessary step in our battle to reign in prescription drug costs in America. We applaud the co-sponsors of this important bi-partisan legislation that will help advance our cause for access to safe and affordable medications for all Americans.

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