Effort to Curb Pay-to-Delay Generics Gets House Vote

The federal government's decade-long quest to limit drug manufacturers' abilities to keep generic medicines off the market for a specified time—through deals called "pay-to-delay"—took a new turn last week when the House approved an amendment to the War Funding Bill (HR 4899) intended to curb such practices.

Restrictions on "pay-to-delay" were included in the initial House healthcare reform approved last year and in President Obama's healthcare reform proposal this year, where it was portrayed as a cost-saving measure. It was excluded, however, in the final Senate bill—and the subsequent healthcare reform law—passed in March.

But attention since then has been refocused on pay-to-delay in the courts. This spring, the U.S. Second Circuit Court of Appeals in New York upheld the legality of Bayer AG to pay a potential generic competitor, Barr Pharmaceuticals, to delay the introduction of Cipro, a popular antibiotic.

In an unusual move, the court—saying that its hands were tied on the issue by a previous ruling on the drug Tamoxifen— "invited" the plaintiffs in the case (including retail pharmacies CVS and Rite Aid) to petition for a rehearing by the full appeals court.

Following the court case, Federal Trade Commission (FTC) Chairman Jon Leibowitz said, "This is further evidence that courts are rethinking their approach to pay-for-delay settlements."

According to Leibowitz, FTC economists have estimated that deals between brand name and generic drug companies were costing consumers about $3.5 billion a year by delaying consumers' access to lower-cost generic drugs. "Congress has taken a critical step towards ending a practice that is dramatically increasing the cost of prescription drugs," he said after the House action.

The legislation now goes to the Senate where a similar amendment- -introduced by Senators Herb Kohl (D-WI), Charles Grassley (R- IA), and Susan Collins (R-ME)—has been included in the pending Tax Extenders Act (HR 4213).

As expected, the legislation is encountering industry opposition- -including from the group representing the generic pharmaceutical manufacturers. The amendment "will delay consumer access to affordable medicines by severely restricting drug patent litigation settlements," said the Generic Pharmaceutical Association (GPhA) in a statement.

In addition, "more than a decade of evidence shows that patent settlements actually help bring lower-cost generic drugs to market much sooner than patent expiration dates—saving millions of dollars for consumers and the health care system," the group said.

Also, Teva Pharmaceutical Industries last week announce that it launched a generic version of Wyeth's antidepressant Effexor XR, which has had annual sales of approximately $2.75 billion in the United States. Through the current patent settlement agreement with Wyeth, the company was able launch this product seven years earlier, said William Marth, president and CEO of Teva North America, in a statement.

The Congressional Budget Office, weighing in on the issue earlier this year with a bill (S. 369) introduced by Sen. Kohl, said that limiting agreements between brand name and generic drug manufacturers could save the federal government $2.4 billion between 2010 and 2014. The savings would primarily come from government payers such as Medicare or Medicaid paying less for medications.