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Bill Banning Drug "Pay-For-Delay" Gets Hearing

Legislation would prevent Big Pharma from delaying generic alternatives

June 4, 2009

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Congress is holding hearings this week on a bill that would prohibit drug companies from so called "pay for delay" tactics to keep lower priced generic drugs off the market.

The bill — the Protecting Consumer Access to Generic Drugs Act of 2009, H.R. 1706 — which would prohibit these anticompetitive settlements in which a drug company challenging a patent agrees to delay its challenge in return for a settlement with the company that holds the patent.

Supporters of the legislation say it can provide a comprehensive solution to a problem that is prevalent, extremely costly, and subverts the goals of the Hatch-Waxman Act, which was designed to prevent weak patents from obstructing lower-cost generic drug competition.

Richard A. Feinstein, Bureau of Competition Director for the Food and Drug Administration, appeared before the House Judiciary Committee's Subcommittee on Courts and Competition Policy in support of the measure.

He testified that anticompetitive patent settlements in the U.S. pharmaceutical industry delay consumer access to lower-cost generic drugs, and impose "enormous costs" on consumers; employers; federal, state and local governments; and the U.S. health care system.

Congressional action to prohibit these "pay-for-delay" settlements between brand-name drug manufacturers and their generic competitors is "both appropriate and timely," he said, and would help contain spiraling health care costs.

Without a law in place, the FTC has sought to use antitrust enforcement to stop so-called "pay-for-delay" agreements.

"Since 2005, court decisions have taken a lenient approach to such agreements in drug patent settlements," Feinstein testified.

As a result, it has become increasingly difficult to bring antitrust cases to stop pay-for-delay tactics, and such agreements have become a common industry strategy.

The implications are troubling, Feinstein said, because the increased costs resulting from anticompetitive agreements that delay generic competition harm all those who pay for prescription drugs. Feinstein said the FTC continues to use its enforcement authority to challenge pay-for-delay settlements, bringing two new cases in the past 16 months. Despite the Commission's ongoing antitrust enforcement efforts, however, the appellate court decisions upholding the legality of pay-for-delay settlements "have prompted a resurgence in settlements in which parties settle with a payment to the generic company and an agreement by the generic company not to market its product," Feinstein said.

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