Retail News Breaks Archives
FTC chairman: banning 'pay for delay' deals would save billions
June 25th, 2009
WASHINGTON – Stopping “pay for delay” settlements between brand-name and generic drug manufacturers would save consumers billions of dollars each year, according to Federal Trade Commission chairman Jon Leibowitz.
In a speech this week before the Center for American Progress in Washington, D.C., Leibowitz said an internal FTC analysis also found that putting an end to these settlements would yield hefty savings for the federal government.
The commission's analysis projected that banning pay-for-delay settlements could save consumers $3.5 billion annually, totaling $35 billion over a decade. What's more, because the federal government pays roughly a third of the nation’s $235 billion prescription drug bill, prohibiting such settlements could save the government about $1.2 billion a year, or $12 billion over 10 years, the FTC estimated.
Leibowitz commented that “eliminating these deals is one of the Federal Trade Commission’s highest priorities.”
In pay-for-delay agreements, a brand-name pharmaceutical firm settles a patent lawsuit by paying the generic drug maker to delay entering the market. That can end up costing consumers billions of dollars, since generics are typically priced much less than their branded counterparts, according to the FTC.
These deals work counter to the aims of the Hatch-Waxman Act, which Congress passed more than two decades ago to make it easier for lower-cost generic drugs to enter the market while providing brand-name drugs with the necessary patent protection to spur vital research, Leibowitz explained. Though the legislation initially worked as intended, drug companies found that they could delay the market entry of generics by settling patent litigation using pay-for-delay tactics, he noted.
Leibowitz urged Congress to pass pending legislation to ban or restrict such patent settlements as a way to mitigate prescription drug costs, foster the benefits of generic competition and help pay for health care reform.
“From my perspective, the decision about whether to restrict pay-for-delay settlements should be simple,” Leibowitz said in his speech. “On the one hand, you have savings to American consumers of $35 billion or more over 10 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.”