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Writing on the wall for 'pay to delay' generics deals

Published on 09/07/09 at 11:03am

Deals allowing US pharma companies to pay generics competitors to delay the launch of rival products should be ended, according to an influential government watchdog.

The Federal Trade Commission has published its conclusions on so-called 'pay to delay' deals, which are common in the US, saying ending the practice was one of its highest priorities.

FTC chairman Jon Leibowitz said outlawing the deals would save consumers $3.5 billion a year and also reap significant savings for the US federal government, which pays approximately one-third of all prescription drug costs.

Leibowitz urged Congress to pass pending legislation to ban or restrict such anti-competitive settlements, which often arise from challenges to patents.

"The decision about whether to restrict pay-for-delay settlements should be simple," he said. "On the one hand, you have savings to American consumers of $35 billion or more over ten years - about $12 billion of which would be savings to the federal government - and the prospect of helping to pay for health care reform as well as the ability to set a clear national standard to stop anticompetitive conduct. On the other hand, you have a permissive legal regime that allows competitors to make collusive deals on the backs of consumers."

The existing US law, known as the Hatch-Waxman Act was designed to balance access for generic manufacturers against patent protection for innovative drugs, but contains a loophole allowing pharma to pay potential competitors to delay the launch of drugs.

Leibowitz said that before 2005 the FTC had succeeded in blocking such deals, but since then legal rulings have "opened a Pandora's box of settlements". The FTC says this has resulted in generic firms "competing to be the first to get paid off to stay out of the market instead of competing to be the first to come to market".

There are a number of contentious cases. The FTC has been pursuing legal action against Bayer and Barr Labs, accusing them of using a $398 million patent settlement in 1997 to delay generic competition to Bayer's Cipro anthrax treatment. The case has been rejected a number of times, and the Supreme Court recently refused to review it.

The US industry body PhRMA maintains that 'authorised generics' deals do not discourage the availability of generics, but momentum is now gathering for reform, with the US Justice Department weighing in by saying such deals should be declared illegal in most cases.

A sub-committee in the House of Representatives also recently voted in favour of a draft bill, the Protecting Consumer Access to Generic Drugs Act of 2009, which would prohibit the settlements.

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