Bill Aimed at Stopping Drug Company “Pay-for-Delay” Patent Settlements Passes House

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

The House of Representatives yesterday passed legislation that would restrict the ability of drug companies to enter into pay-for-delay patent settlements. The measure was one of a number of amendments to a war funding bill (H.R. 4899). The bill will now require action by the Senate.

Presumption of Anticompetitive Effects

Under the measure, patent settlements would be presumed to have anticompetitive effects and be unlawful where a potential generic competitor receives “anything of value” from a branded drug company in return for agreeing “to limit or forego research, development, manufacturing, marketing, or sales” of a competing drug.

Parties to an agreement would have to demonstrate that the procompetitive benefits of the agreement outweighed the anticompetitive effects of the agreement.

The proposed “Preserve Access to Affordable Generics Act'' would amend the Federal Trade Commission Act to authorize the agency to initiate a proceeding to challenge the agreements. The agency would also be authorized to issue regulations.

FTC Chairman’s Reaction

“Congress has taken a critical step towards ending a practice that is dramatically increasing the cost of prescription drugs,” FTC Chairman Jon Leibowitz said in a July 2 statement following the House vote.

“This bipartisan legislation would save American consumers and taxpayers billions of dollars by stopping sweetheart deals that delay the entry of low-cost generics, while at the same time allowing settlements that benefit consumers,” he said.

According to the Chairman, FTC economists estimate that the challenged deals cost consumers approximately $3.5 billion a year by delaying consumers’ access to lower-cost generic drugs. Leibowitz has frequently said that stopping pay-for-delay patent settlements in the pharmaceutical industry is one of the Commission’s highest antitrust priorities.

Industry Response

The Pharmaceutical Research and Manufacturers of America (PhRMA), which represents the country’s leading pharmaceutical research and biotechnology companies, has come out against the legislation.

“PhRMA believes including the provision on restricting patent settlements can discourage pro-consumer settlements that often bring generics to market years before patent expiration,” said PhRMA Senior Vice President Ken Johnson in a June 28 statement.