CBO ups savings estimate for ban on deals between drug companies

Restricting certain legal settlements between brand-name and generic drug companies could save the federal government almost $5 billion, the Congressional Budget Office said Tuesday.

The CBO said a Senate bill to restrict so-called “pay for delay” settlements would cut the deficit by $4.8 billion over 10 years. That’s noticeably higher than CBO’s previous estimates of largely the same proposal — the budget office said last year that curbing the settlements would save about $2.6 billion over a decade.

Sen. Herb Kohl (D-Wis.) is a leading proponent of further restrictions on drugmakers’ patent settlements, and the Federal Trade Commission has strongly urged Congress to step in. Both the brand-name and generic drug industries are strongly opposed to new limits on their legal agreements.

Restricting “pay-for-delay” agreements would help get generic drugs to market more quickly, CBO said, cutting the cost of prescription drugs for everyone. The budget office said new limits would save the U.S. a total of $11 billion, roughly $4 billion of which would be savings to government programs including Medicare, Medicaid and the healthcare reform law’s subsidies for private insurance.

Kohl tried to get his pay-for-delay bill into the healthcare law through the budget reconciliation process, but it was ruled ineligible because its savings are secondary to a policy change. Kohl and the FTC believe the settlements are anticompetitive.

The agreements are referred to as pay-for-delay settlements because brand-name companies pay generics not to sell their products. The brand-name company can then continue charging higher prices, because it doesn’t have to compete with a cheaper generic version of the same drug. And the brand simply pays the generic a cash settlement, making up for at least some of the money the generic would have made by selling its drug.

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