Bill would ban the reverse payment settlements that are keeping new generics off the market!

Yesterday, a bill to ban the “pay-for-delay” settlements between brand-name drug companies and their generic competitors cleared its first legislative hurdle.

The House Subcommittee on Commerce, Trade, and Consumer Protection reported H.R. 1706, the “Protecting Consumer Access to Generic Drugs Act of 2009” out of subcommittee, sending it the House Committee on Energy and Commerce.

If passed, H.R. 1706 would ban the “pay-for-delay” settlements between brand name drug makers and generic drug makers that postpone the entry of generic drugs on the market. The measure has the potential to make a huge difference to consumers currently unable to afford their brand-name prescription drugs. Generic drugs usually cost 80-90% less than the equivalent brand name drug. During a hearing when the bill was introduced just over two months ago, testimony before the subcommittee suggested that these settlements have cost consumers about $12 billion per year since they became common in approximately 2005. [FN1] This is supported by an FTC estimate that early market entry of the generic form of only four brand name drugs (Zantac, Prozac, Taxol, and Platinol) has saved consumers and providers over $9 billion in health care costs. [FN2]

These settlements arise in part due to the laws governing the early entry of generic drugs to the market. Under current law (the Hatch-Waxman Act) the generic drug maker may apply to the FDA for approval to market and sell a generic version of a brand name drug if they feel the drug’s patent is invalid. The brand name drug maker nearly always responds by suing the generic company for patent infringement.

Since approximately 2005, brand name drug companies have been settling these patent disputes by buying-off the generic companies with multi-million dollar settlements. (See our cases on Provigil, Oxycontin, Cipro, Tamoxifen, and K-Dur.)

Current PAL member lawsuits on Provigil and Oxycontin are challenging these ‘pay-for-delay” settlements, and other PAL member lawsuits on Protonix and Wellbutrin will likely result in such a settlement. Past PAL-member lawsuits have lost challenges to these settlements in two of the three federal circuit courts to address the issue (K-Dur in the 11th Circuit and Tamoxifen in the 2nd Circuit) while only the 6th Circuit (in a non-PAL lawsuit, In re Cardizem CD Antitrust Litig., 332 F.3d 896, 908 (6th Cir. 2003)) and the FTC continue to reject these settlements as anti-competitive. H.R. 1706 would ultimately resolve the mixed results encountered by lawsuits.

H.R. 1706 would deem any payment between a brand name drug maker and a generic manufacturer to settle a patent infringement dispute to be an unfair and deceptive practice, and an unfair method of competition under the Section 5 of the FTC Act (15 USC § 45).

These “pay-for-delay” settlements also allow a loophole under the Hatch-Waxman Act to prevent any other generic manufacturer from subsequently applying to bring that generic drug to market until 6 months after the first generic company has done so. Therefore, if a brand name drug maker pays off the first generic company, which holds this 6 month period of exclusivity, no other generic company can bring that same generic to the market until after the original patent expires. For these reasons, these settlement agreements are highly anti-competitive and harmful to consumers.

The bill also makes it clear that a generic drug company that settles its patent infringement litigation forfeits their rights to exclusivity.

Both the FTC and the Obama administration have come out against “pay-for-delay” settlements. [FN3] For more information, see the House Subcommittee on Commerce, Trade, and Consumer Protection hearing on H.R. 1706 on Tuesday, March 31, 2009 here. Those testifying in favor of the bill were FTC Commissioner Thomas Rosch (testimony on-line), Scott Hemphill, Associate Professor of Law, Columbia University (testimony on-line), and Joanne Handy, Board Member, AARP (testimony on-line).

PAL and Community Catalyst urge consumer advocates to support this bill!

The subcommittee’s approval of the bill sends it to the full House Committee on Commerce and Energy, bringing it one step closer debate on the House floor. This bill would help save consumers and our health care system billions of dollars on future drug costs. Congressional action is needed now more than ever. Today’s New York Times reports that the recession is forcing more and more patients to forgo filling their prescriptions due to high costs.

If your organization would like more information, or would like to join a letter in support of a ban on these “pay-for-delay” settlements, please contact us at or 617-275-2822.

Keep your eye on our blog for regular updates on the progress of this bill!

============= [FN1] Hemphill Testimony, Mar. 31, 2009, before the House Committee on Energy and Commerce, Subcommittee on Commerce, Trade, and Consumer Protection.

[FN2] Rausch Testimony, Mar. 31, 2009, at 14, (citing Generic Pharmaceuticals Marketplace Access and Consumer Issues: Hearing Before the Senate Commerce Comm., 107th Cong. Apr. 23, 2002, statement of Kathleen D. Jaeger, President and CEO, Generic Pharmaceutical Ass’n, at 12.)

[FN3] Office of Management and Budget, Executive Office of the President, Budget of the US Government, Fiscal Year 2010 (2009) (proposed) at 28, available at (President Obama explained “The Administration will prevent drug companies from blocking generic drugs from consumers by prohibiting anticompetitive agreements and collusion between brand name and generic dreg manufacturers intended to keep generic drugs off the market.”)