End of Agreements To Delay Market Entry of Generic Medications Could Help Reduce Health Care Costs, Opinion Piece States

A "simple approach" to efforts to reduce health care costs that could "save consumers billions of dollars annually" is "stopping pharmaceutical companies from colluding with competitors to keep lower-cost generic alternatives to prescription drugs off the market," Jon Leibowitz, one of five members of the Federal Trade Commission, writes in a Washington Post opinion piece.

According to Leibowitz, the Hatch-Waxman Act, which Congress passed in 1984, has made "it easier for noninfringing generic drugs to enter the market, while giving brand-name manufacturers the patent protection they need to encourage the lifesaving research that is the hallmark" of the pharmaceutical industry.

However, the "crucial benefit is threatened by ... the emergence of 'pay-for-delay' settlements" -- in which brand-name pharmaceutical companies pay generic pharmaceutical companies to delay market entry of their products -- and the "willingness of some federal courts to permit such obviously anticompetitive agreements," Leibowitz writes. "When these troubling deals first came to light in the late 1990s, the FTC fought them -- and stopped them cold" -- as "no brand and generic companies entered pay-for-delay deals" between 2000 and 2004, but "that success is under siege," according to Leibowitz.

He writes that two federal appeals courts recently "have found that a brand-name drug company facing a patent challenge is free to pay any amount to keep a generic producer from entering the market until the patent expires." Leibowitz adds, "These rulings depart from the spirit of Hatch-Waxman and our nation's antitrust laws, and they harm consumers by subverting the competition at the heart of our free-market system."

He writes, "Not surprisingly, after two courts blessed such payoffs, the frequency of these settlements has increased sharply," adding, "In fiscal 2006, fully half of all pharmaceutical patent settlements (14 of 28) contained such payments." In response, FTC supports the "bipartisan legislation to ban such agreements that is moving through both houses of Congress" and, "until that law is enacted, we are doing everything in our power to end these unconscionable deals," Leibowitz concludes (Leibowitz, Washington Post, 2/25).