Big Pharma’s Pay-for-Delay Deals Take a Hit

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Big Pharma’s controversial “pay-for-delay” agreements took a hit today. In FTC v. Actavis, the U.S. Supreme Court ruled that the FTC’s case against the payoff keeping generic AndroGel from the market can move ahead in the lower courts.

The court chose not to declare all such payoffs unlawful, however, spurring consumer advocates to call on Congress to finish the job.

“It’s good news that the Court is allowing the FTC’s case against the AndroGel deal to move ahead. And while we’re disappointed the court did not take the next step and outlaw anticompetitive practice, we expect Congress to now give this issue the attention it deserves and end these deals once and for all,” said MASSPIRG’s Legislative Director, Deirdre Cummings.

Generic competition typically lowers drug prices by 85-90 percent. For example, brand name Lipitor costs about $205 for a 30-day supply, but the generic costs $16. By delaying competition, pay-for-delay deals inflate prices, costing consumers and taxpayers $3.5 billion every year, according to the Federal Trade Commission (FTC).

The case before the Supreme Court involved a payment from Solvay Pharmaceuticals (now owned by Abbott Laboratories) and a number of would-be generic competitors (including Watson Pharmaceuticals, now called Actavis, Inc.) to delay a generic version of AndroGel, a synthetic testosterone drug used by AIDS patients, cancer patients, and others with low testosterone. The brand-name drug costs $379 for a 30-day supply, and the deal delayed the generic until August 2015.

The FTC argued that these deals are anti-competitive, harm consumers, and should be considered illegal.

“These pay-for-delay deals are win-win for the brand name and generic drug companies, but they are lose-lose for Massachusetts consumers and taxpayers,” said Cummings. “Consumers pay billions more for their medicine, and taxpayers foot higher drug bills in Medicare and other programs.”

The mechanics of pay for delay are complicated. In its simplest form, generic drug makers challenge the patents of blockbuster drugs, often winning against weak patents. In a pay-for-delay deal, the brand name drug company evades the challenge by simply paying off the generic drug maker to delay them from selling a generic version of their drug. Without competition, the brand name drug company can keep prices high. 

Experts say these deals have delayed availability of a host of generics, from cancer and AIDS drugs to blood pressure medications and antidepressants. 

“Now consumers stuck paying more than they should have to for prescription drugs look to Congress to put a stop to these anticompetitive deals,” said Cummings.“  Lawmakers need to put a stop to these drug company shenanigans that unnecessarily delay generics and inflate drug prices.” 

Senators Amy Klobuchar (D-MN) and Charles Grassley (R-IA) have introduced a bill to crack down on pay-for-delay deals. The Preserve Access to Affordable Generics Act (S. 214) declares that pay-for-delay settlements are presumed to be anticompetitive and unlawful, and authorizes the FTC to enforce the law by initiating legal proceedings. The Congressional Budget Office estimates the bill would save $11 billion in federal spending over 10 years, in addition to saving out-of-pocket expenses for consumers.

Additionally, Senators Al Franken (D-MN) and David Vitter (R-LA) have introduced the Fair and Immediate Release of Generic Drugs Act, a.k.a. the FAIR Generics Act (S.504). The bill reduces the incentive for generic and brand name drug companies to enter into pay-for-delay settlements by letting a second generic drug company bring the generic to market if the first generic company took a pay-for-delay deal.



MASSPIRG, the Massachusetts  Public Interest Research Group, is a consumer group that stands up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society.