This spring, the U.S. Supreme Court faces several decisions that will impact millions of people: legal challenges to the Defense of Marriage Act (DOMA) and the Voting Rights Act, for instance. But another case getting less media attention will affect all Americans who pay health care premiums or taxes.
The Supreme Court will decide whether the increasingly frequent practice of brand-name drug companies paying off their competitors to keep new generics off the market is a violation of antitrust law. As former Federal Trade Commission (FTC) attorney David Balto told Politico “There’s no other case that can have as much impact on reducing health care costs.”
This practice, called “pay-for-delay,” has skyrocketed since an appeals court decision allowed the first such deal in 2005. Since then, over a hundred pay-for-delay deals have delayed generic versions of 20 to 30 brand-name drugs each year, according to federal regulators at FTC.
There is no question delaying access to generic drugs harms consumers. That’s why Community Catalyst has helped consumers and advocacy organizations join legal challenges to pay-for-delay deals that blocked consumer access to generics of Provigil, K-Dur and Tamoxifen for years. We have also filed or joined Amicus briefs, and organized national and state-based advocates calling on Congress to ban pay-for-delay agreements.
Recently, Politico ran another story about how one defendant drug-maker in the case (Solvay Pharmaceutical) claimed that these pay-for-delay agreements don’t harm consumers, a position echoed by the generic drug industry’s trade group GPhA. But the FTC, U.S. Department of Justice, Attorneys-General in 36 states and consumer advocates all disagree. Why? Because access to generic drugs brings big savings for consumers and health plans. Look at GPhA’s own data that estimates access to generic drugs has saved consumers and our health care system more than $1 trillion from 2002 to 2011. That’s because generics cost one-fifth to one-tenth as much as brand-name drugs.
How the System’s Supposed to Work
Traditionally, generic drug companies wait for the patent on a brand-name drug’s active ingredient to expire and then file an application with the FDA to bring the generic version of the drug to market. Then the brand-name drug company sues the generic drug company, claiming some “patent infringement.” But in nearly all cases, the drug itself is off-patent. So the infringement is of a “secondary” or “defensive” patent that addresses some minor detail, like how the drug is formulated into a pill, or some step in the manufacturing process. The generic drug company then defends themselves from the litigation, and if they win, they launch their generic right away.
How Pay-for-Delay Deals Broke the System
Since 2005, generic and “BigPharma” companies have decided to do what the federal and state anti-trust regulators see as collusion. During litigation, the brand-name drug company offers to settle the patent infringement lawsuit they filed by paying tens or even hundreds of millions to the generic company, which then agrees to not to start selling a generic for several years. Pay-for-delay settlements are very suspicious, not only because they are made in secret but also because the payments are going the wrong way. Usually the patent-infringer is forced to pay if they violate someone else’s patent. But in these pay-for-delay settlements, these roles are reversed.
For example, Bayer sued four generic manufacturers, saying, in essence: You have infringed the patent on our blockbuster drug Cipro. To show you how angry we are, we will pay you 400 million dollars. But only if you stay off the market.
As a result, consumers did not have a generic version of the antibiotic Cipro for another seven years, while Bayer made billions in unfair profits. Overall, these so-called settlements have caused consumers and their health plans to pay tens of billions right into the pockets of the brand-name drug companies. This creates a powerful incentive to collude and delay competition as long as possible. For the millions who are underinsured, delaying a generic can force patients to pay thousands of dollars a year, or go without needed medicine.
One story we collected from a consumer from Kansas describes his struggle to afford Provigil, whose generic was delayed from 2006 to 2011 by pay for delay. He reported: “[Despite] paying almost $17,000 in annual premiums for my family [health insurance plan] last year, I was paying around$650/month [for Provigil]… That is out of pocket money I have to come up with until later in the year when I reach my deductible [sic] and I can enjoy a few months of only paying $60/month. I cannot describe to you how much stress and difficulty this has caused for me and my family the last several years…”
The real question is whether the high court will allow these secret deals and legal maneuverings to continue? Or will it restore legitimate competition to this market, lowering health care costs and ensuring better access to affordable medicines for all Americans?
Stay tuned. We will be blogging regularly about this case as it unfolds and calling attention to how pay-for-delay deals harm consumers and increase the cost of health care.