Bill Would Prohibit Agreements to Delay Generic Drug Competition

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Brand name drug makers would be prohibited from using pay-off agreements to delay the marketing of cheaper generic equivalents under the proposed federal “Preserve Access to Affordable Generics Act.”

The measure (Senate Bill No. 369) was introduced by Senator Herb Kohl (D- Wis.) on February 3, one day after the FTC filed its latest challenge to agreements among pharmaceutical companies (see Trade Regulation Talk, Feburary 10, 2009).

“Pay-for Delay” Patent Settlements

“It’s time to stop these drug company pay-for-delay deals that only serve the profits of the companies involved and deny consumers access to affordable generic drugs,” said Senator Kohl in proposing the bill. “With this legislation, we can end a practice seriously impeding generic drug competition—competition that could save American families and taxpayers billions of dollars in health care costs.

The legislation would make unlawful provisions in patent infringement settlements that involve anticompetitive payments from the brand name drug maker to the generic company in return for an agreement by the generic to keep its drug off the market.
The proposal would not ban any settlement that does not involve an exchange of money. Despite the opposition of the FTC to so-called "pay-for-delay" patent settlements, recent federal appellate court decisions have sanctioned the practice, leading to an increase in their use.

Exemption for Beneficial Agreements

A measure similar to Senate Bill No. 369 was introduced in the last Congress, but was ultimately unsuccessful. The latest version of the legislation includes a new provision that would permit the FTC to exempt from this amendment's ban certain agreements that the FTC determines would benefit consumers, according to Senator Kohl.

The bill was referred to Senate Committee, read twice and referred to the Committee on the Judiciary on February 3. Further information, including full text of the bill, appears here at the Thomas Library of Congress website.