Pharmaceutical industry on verge of major Hill victory

The pharmaceutical industry is on the verge of a major victory as the lame-duck congressional session winds down.

An effort to severely restrict pharmaceutical industry deals from delaying the entry to the market of low-cost generic drugs appears likely to die in the lame-duck. That could kill the legislation for some time because a Republican House is seen as unlikely to support the measure.

The Senate appropriations bill includes language that would put new limits on generic drugmakers’ ability to accept payment to settle patent disputes with brand-name drug companies. The provision, which is backed by senior senators in both parties and the Federal Trade Commission, is intended to speed delivery to the market of cheaper, generic drug.

But the Senate appears likely to instead consider a continuing resolution to fund the government through Sept. 30. That resolution, approved by the House this week, does not include the pharmaceutical language.

Other legislative opportunities to pass the limits on drugmakers seem narrow. The bill squeaked by the Senate Appropriations Committee in July by a 15-15 vote, even though it had bipartisan co-sponsors, Sens. Herb Kohl (D-Wis.) and Chuck Grassley (R-Iowa).

Both the brand-name and generic pharmaceutical industries oppose the legislation, and they have support from Republicans in the Senate and House.

Four Republican senators voiced their opposition to the bill in a September letter to Minority Leader Mitch McConnell (R-Ky.), contending it gives the FTC too much discretion.

“We believe the reported bill gives excessive power over such settlements to the FTC — a power that the FTC has shown itself in the past to be unable to exercise in a responsible or economically rational manner,” the senators wrote.

At the heart of the so-called “pay-for-delay” deals are brand-name drugmakers’ interest in holding onto lucrative patents for as long as possible. A generic competitor may sue to gain market entry prior to the expiration of a brand-name drug patent, and, if successful, other generics would be allowed to manufacture competing products.

But over the past few years, brand-name drug makers have reached settlements with generics to drop patent challenges in exchange for a portion of the profits. The companies generally keep the deals quiet, but they are required to notify the FTC and Department of Justice within 10 days.

Opponents of these deals say they stifle competition and drive up drug prices by delaying market entry for generics, which can cost as much as 90 percent below brand-name prices.

The Congressional Budget Office said the bill would save the government about $2.5 billion over 10 years, while the FTC — a strong proponent of limiting pay-for-delay agreements — estimated a ban on the agreements would save consumers at least $3.5 billion each year.

Between the 2004 and 2009 fiscal years, nearly 70 such agreements have been made to delay generic entry into the market, according to a January 2010 FTC report.

The bill wouldn’t ban pay-for-delay settlements entirely. It would still allow deals when companies can prove to a judge “clear and convincing” evidence that any deal won’t hurt competition.

Even if the bill doesn’t make it through the lame-duck session scheduled to end Friday, Kohl insisted the issue is “in no way dead.”

“We are continuing to gain support — the latest in the form of an endorsement from Walmart Corporation — and the need to lower drug costs and save taxpayer money is not going to end with this Congress,” Kohl said in a statement provided to The Hill.

The deals have become increasingly common as courts have become more lenient, according to Michelle Seagull, an antitrust lawyer who advises drug companies. Support for pay-for-delay deals is one of the rare cases in which brand-name and generic drugmakers have found common ground, she said.

“It certainly keeps the greatest number of settlement options open,” said Seagull of Axin, Veltrop and Harkrider LLP.

The Generic Pharmaceutical Association (GPhA) has repeatedly pushed backed against efforts to limit pay-for-delay deals, arguing that the deals never prevent or delay a generic from coming to market past patent expiration.

“Winning drug-patent litigation is a 50-50 proposition at best for generic companies,” the GPhA said in September. “But settling patent litigation is a proven way to assure that affordable generics reach consumers earlier than would otherwise be possible."

Even if Congress doesn’t get a chance to legislate against the agreements, the Supreme Court still may hear a recent Second Circuit Court of Appeals case upholding the legality of pay-for-delay deals. Retail pharmacies CVS and Rite Aid accused Bayer Corporation and Barr Laboratories of an antitrust violation for their 1997 settlement agreement involving Bayer’s Ciprofloxacin patent.

And if litigation fails, the FTC will remain persistent on this issue, with Chairman Jon Leibowitz identifying pay-for-delay deals as one of his top priorities. Leibowitz has been strongly advocating for a legislative fix.

“In the meantime, the agency will continue to aggressively pursue our investigations and enforcement actions,” Leibowitz told a House Judiciary subcommittee in July.