Drug & Device News

Report Faults Pay-for-Delay Agreements for Some High Drug Prices

The Federal Trade Commission (FTC) has issued a report criticizing the drug industry for using so-called “pay-for-delay” agreements to keep drug prices high. “The delays in competition resulting from these agreements can be significant,” stated the FTC in a release announcing the results of the final report.

These types of agreements emerged after passage of the Hatch-Waxman Act, which was promulgated to ease the introduction of generic versions of brand-name drugs into the market. In certain circumstances, the Act grants a 180-day exclusivity period to the first-filing generic maker, during which other generic manufacturers of the subject drug may not enter the market. However, the maker of the name-brand pharmaceutical is free during that same 180-day period to launch its own generic version of the drug. Pay-to-delay agreements are those in which, in settlement of a patent challenge between a brand-name drug manufacturer and one seeking to produce a generic version of that drug, the brand-name maker agrees to delay the marketing of a generic version of its own product, and the would-be generic manufacturer agrees to do the same. The generic manufacturer presumably is paid a satisfactory fee for its forbearance while the name-brand producer enjoys a significantly longer period of brand-name exclusivity, and the higher profits that that arrangement entails. The FTC states, “In the 39 settlements between FY 2004 and FY 2010 that combined an explicit agreement by the brand not to launch an authorized generic competitor and a commitment by the first-filing generic to delay entry, generic entry was delayed by an average of 37.9 months past the settlement date.” The losers in these win-win agreements for drug companies are consumers, insurers and government entities that lose the opportunity to choose generic drugs over higher priced name-brand versions. The FTC report, titled “Authorized Generic Drugs: Short-Term Effects and Long-Term Impact,” is available at www.ftc.gov/os/2011/08/2011genericdrugreport.pdf.

In a release responding to the FTC report (see www.phrma.org/media/releases/phrma-statement-regarding-authorized-generics), Matthew Bennett, Senior Vice President of the Pharmaceutical Research and Manufacturers of America (PhRMA), said that the report offered further proof that consumers are well served by the opportunity to purchase lower-priced generic drugs, but added that it was “unfortunate that the FTC used this potentially valuable report on the benefits to patients of authorized generics to further its attack on patent settlements.”

Report Faults Pay-for-Delay Agreements for Some High Drug Prices

The Federal Trade Commission (FTC) has issued a report criticizing the drug industry for using so-called “pay-for-delay” agreements to keep drug prices high. “The delays in competition resulting from these agreements can be significant,” stated the FTC in a release announcing the results of the final report.

These types of agreements emerged after passage of the Hatch-Waxman Act, which was promulgated to ease the introduction of generic versions of brand-name drugs into the market. In certain circumstances, the Act grants a 180-day exclusivity period to the first-filing generic maker, during which other generic manufacturers of the subject drug may not enter the market. However, the maker of the name-brand pharmaceutical is free during that same 180-day period to launch its own generic version of the drug. Pay-to-delay agreements are those in which, in settlement of a patent challenge between a brand-name drug manufacturer and one seeking to produce a generic version of that drug, the brand-name maker agrees to delay the marketing of a generic version of its own product, and the would-be generic manufacturer agrees to do the same. The generic manufacturer presumably is paid a satisfactory fee for its forbearance while the name-brand producer enjoys a significantly longer period of brand-name exclusivity, and the higher profits that that arrangement entails. The FTC states, “In the 39 settlements between FY 2004 and FY 2010 that combined an explicit agreement by the brand not to launch an authorized generic competitor and a commitment by the first-filing generic to delay entry, generic entry was delayed by an average of 37.9 months past the settlement date.” The losers in these win-win agreements for drug companies are consumers, insurers and government entities that lose the opportunity to choose generic drugs over higher priced name-brand versions. The FTC report, titled “Authorized Generic Drugs: Short-Term Effects and Long-Term Impact,” is available at www.ftc.gov/os/2011/08/2011genericdrugreport.pdf.

In a release responding to the FTC report (see www.phrma.org/media/releases/phrma-statement-regarding-authorized-generics), Matthew Bennett, Senior Vice President of the Pharmaceutical Research and Manufacturers of America (PhRMA), said that the report offered further proof that consumers are well served by the opportunity to purchase lower-priced generic drugs, but added that it was “unfortunate that the FTC used this potentially valuable report on the benefits to patients of authorized generics to further its attack on patent settlements.”