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Access to Generic Drugs Bill Scheduled for Committee Action

July 11, 2011 - by Donny Shaw

A year and a half after the landmark health care reform bill was signed into law, Congress is moving forward with new bipartisan legislation to increase consumer access to cheaper generic medications. The bill, entitled the Preserve Access to Afordable Generics Act, is meant to prohibit brand-name drug comapnies from paying off generic drug companies to not bring their cheaper, substantially-similar products to market. It is scheduled for markup by the Senate Judiciary Committee on Thursday and will likely be approved.

During a 2009 speech at the Center for American Progress, Federal Trade Chairman Jon Leibowitz explained the legal background for this issue and this bill:

More than two decades ago, Congress passed a landmark law, the Hatch-Waxman Act, to make it easier for generic drugs to enter the market, while giving brand-name manufacturers the patent protection they needed to encourage the lifesaving research that is the hallmark of America’s pharmaceutical industry. One of the critical steps was to set up a process that encourages generic drug firms to challenge weak branded drug patents-those that are likely invalid or not infringed.

For a time the legislation worked. Generic manufacturers brought patent challenges and, when the parties did not reach a settlement based on the strength of their claims, generic firms won often – getting victories for over two-thirds of the challenged branded drugs, according to a 2002 FTC study. The result was significantly lower prices for patients. The law truly spurred competition.

But as Sen. Herb Kohl [D, WI], the bill’s main sponsor explains, since 2005, when two appelate courts ruled that brand-name companies could leally pay off generic competitors to settle patent disputes out of court, the practice of “pay-to-delay” has exploded. " In the two years after these two decisions, the FTC has found nearly half of all patent settlements involved payments from the brand name from the generic manufacturer in return for an agreement by the generic to keep its drug off the market."

Kohl’s bill would prohibit settlements between brand-name and generic drug companies from involving the generic company receiving anything of value or agreeing to delay bringing a product to market for a period of time. The only exception would be for agreements that the FTC determines to have pro-competitive effects that outweigh any anti-competitive effects. You can read the relevant section of the bill text for yourself here.

The bill currently has 5 Democratic co-sponsors, two Republicans, and one Independent. It is supported by the Obama Administration as well. That all indicates that it could pass through the split chambers of Congress and make it into law this session. But given the nastiness of everything on the Hill lately, I wouldn’t hold your breath.

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  • fakk2 07/11/2011 5:23pm

    prohibit brand-name drug comapnies from paying off generic drug companies to not bring their cheaper, substantially-similar products to market

    ARE YOU FREAKING KIDDING ME?! They’re trying to say companies that decide NOT to bring products to market, but instead take an immediate payout from bigger companies, is wrong?! I’m all for cheap generic drugs, each to their own. I’m also for running a business that makes money. If the generic drug company wants a payday from the big pharma company, they should get it. Kinda like winning a $200 M lottery and deciding the 1-time payout is better than waiting 20 years for a full payout, although not as much money is received due to higher taxes.

    This is gross overregulation.

    given the nastiness of everything on the Hill lately, I wouldn’t hold your breath

    I hope you’re right Donny.

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  • Naame 07/12/2011 10:17am

    We live in a nation of modern capitalism. In order for our system to thrive, we need to ensure that it is filled with consumer friendly competition. Unfortunately, a lot of the most powerful players in our system are really smart people and they have learned how to game the system in many ways which effectively eliminate competition without actually competing.

    To allow those kinds of practices to continue freely will only serve to weaken our system and potentially destroy it if left unchecked for too long. The only way to counter balance this weakness is through effective government regulation which serves the common best interests of the people, and allows the opportunities for competition to remain fruitful.

    I support this legislation for those reasons.

  • fakk2 07/12/2011 9:20pm

    I forgot to mention this earlier Naame, but well said. Very eloquent way of putting things.

  • dorothyphelps 07/19/2011 10:10am

    Yes, I agreed with you Naame. I gained more opinions from you especially the way to counter balance in this weakness.

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