The Attorneys General of 34 states and DC announced on Tuesday a $5.5 million settlement with Warner Chilcott. The settlement addresses the AGs’ claims that Warner paid Barr laboratories $20 Million to not bring a generic version of the contraceptive Ovcon to the market. Such settlements are called “reverse payment settlements” because they involve a brand-name drug company that is suing to block a generic from coming to market paying off the generic drug company defendant.

Some notable features of the settlement include:

  • Warner is prohibited from entering into any agreement that would limit the research, development, manufacture, or sale of a generic alternative to one of its drugs.
  • Warner Chilcott must provide the states notice of agreements it enter into with generic manufacturers. The Medicare Modernization Act instituted a requirement that drug companies provide copies of such agreements to the Federal Trade Commission, which the FTC uses to issue annual reports regarding such settlements. This settlement appears to extend this requirement to the AGs of these 34 states and DC.

While this settlement is a positive development, dealing with such collusive settlements case-by-case and drug-by-drug is inadequate. Congress must step in to ban these settlements, which undermine the system for hastening generic drugs to market that was created by the Hatch-Waxman Act. PAL and 20 other organizations recently urged the House Energy and Commerce Committee to report out a bill that would do just that, HR 1902, the “Protecting Consumer Access to Generic Drugs Act of 2007.”

Reverse payment settlements are just one of the obstacles to Americans being able to purchase cheaper and equally effective generic drugs. Others include:

  • So-called “Authorized Generics,” in which a brand-name drug company introduces a “fake generic” just as the first true generic comes onto the market. These fake generics undermine the first true generic’s 180 day “exclusivity” period, in which it gets to be the only generic on the market. This 180 days is built into the law so that generic companies are able to recoup the expenses they incur to bring a generic to market — expenses which are substantial, given the arsenal of tactics that brand-name drugmakers bring out to block access to cheaper generics.
  • Frivolous “citizen petitions” that brand-name drug makers file with the FDA, seeking only to delay the FDA’s approval of a generic drug’s application.
  • Bogus and duplicative patents filed by brand-name drug makers with the Patent & Trademark Office (PTO). Drug makers use such additional patents to extend their patent monopoly, and thus keep generics off the market longer.
  • Frivolous patent infringement lawsuits, in which brand-name drug companies sue generic drug makers even though they know they will not prevail. Brand-name drug companies get an automatic 30-month extension on their patent if they file such lawsuits, regardless of whether their patent is valid. An extra 30 months can be worth billions, so the incentive to file such lawsuits is nearly impossible to resist. There is perhaps no greater return on investment (ROI) in the pharmaceutical marketplace — a few million spent on a patent lawsuit can translate into billions in additional sales.
  • A backlog of over 800 generic drug applications at the FDA. The FDA’s Office of Generic Drugs needs adequate funds to hire enough reviewers to process these applications and eliminate the backlog.

Each of these obstacles cries for legislative and regulatory changes. But, given the Senate’s unwillingness to include in the reauthorization of the Prescription Drug User Fee Act (PDUFA) any significant challenge to Big Pharma’s stranglehold over the FDA, such changes don’t seem forthcoming any time soon.