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.”

Legislation to Ban “Pay-to-Delay” Drug Agreements Introduced in Congress

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

A bill to prohibit brand name drug manufacturers from compensating generic drug makers to delay the entry of a generic drug into the market was introduced in the House of Representatives by Rep. Bobby Rush (D-Illinois) on March 25.

The legislation specifically addresses, and seeks to ban, provisions in settlements of patent infringement litigation between pharmaceutical companies that involve "reverse payments"—payouts by the brand name drug maker to the generic maker in return for an agreement by the generic to keep its drug off the market for some specified amount of time.

Dubbed the "Protecting Consumer Access to Generic Drugs Act of 2009," the measure (H.R. 1706) would have an effect similar to a proposal introduced in the Senate by Herb Kohl (D-Wisconsin) on February 3. That bill (S. 369), the "Preserve Access to Affordable Generics Act," remains under consideration by the Senate Judiciary Committee.

While aiming to accomplish similar goals, the bills would address the matter through different statutes. The House bill would declare a “pay-to-delay” agreement an unfair and deceptive act prohibited by the FTC Act, and would grant the FTC the authority to enforce the legislation. The Senate bill would instead amend the Clayton Act, calling the conduct "Unlawful Interference with Generic Marketing."

Another difference between the bills concerns their definitions of what constitutes an applicable "agreement." The House bill refers solely to those constituting an agreement under the FTC Act, while the Senate bill would ban those that are considered agreements by the Sherman Act as well. Both would allow the FTC to create exceptions through its rulemaking process.

Text of H. R. 1706 appears here. Text of S. 369 appears here. Further information about both bills is available at the Library of Congress “Thomas” website.