New Health Care Proposal Would End Pay-for-Delay Drug Settlements

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

President Barack Obama announced on February 22 his latest proposal for health care reform. One of the provisions of the proposal is aimed at preventing delays in generic drug competition by targeting “pay-for-delay” settlements between drug companies.

Presumption of Illegality

Under the proposal, agreements in which a generic drug manufacturer receives anything of value from a brand-name drug manufacturer would be presumed unlawful if the generic drug manufacturer agrees to limit or forego research, development, marketing, manufacturing, or sales of the generic drug.

The presumption of illegality could be overcome only if the parties to the agreement could demonstrate by clear and convincing evidence that the procompetitive benefits of the agreement outweighed the anticompetitive effects of the agreement.

The FTC would have enforcement authority to address the problem. The proposal also would require the Chief Executive Officer of the branded pharmaceutical company to certify to the accuracy and completeness of any agreements required to be filed with the FTC.

A summary of the new proposal appears here on the White House website.

FTC Chairman’s Reaction

FTC Chairman Jon Leibowitz issued a statement in response to the announcement, expressing his appreciation for the inclusion of restrictions on pay-for-delay settlements.

“When drug companies agree not to compete, consumers lose,” said FTC Chairman Leibowitz. “Ending pay-for-delay settlements will help control drug costs. We’re delighted about the President’s resolute support for this bipartisan initiative.”