BioWorld Perspectives Contributing Writer

When thinking about health care reform, the public should think about consumables as well as services. Even if insurance premiums and cash outlays for the services of doctors and hospitals were adjusted, what about the cost of prescription drugs? If adjustments are made in drug costs, so that consumers and government agencies pay less, who pays for the cost of research? How much is too much? Where does competition fit into the scheme of drug costs, and how long should biopharmaceutical companies be able to sell their products without competition?

Questions such as these are being asked in congressional and judicial chambers and in biopharma boardrooms, particularly in view of some proposed legislation in the U.S. In October, the Senate Judiciary Committee passed a bill designed to keep brand-name pharmaceutical companies from paying generic drugmakers to delay entrance to the market of their products, a practice the Federal Trade Commission (FTC) said costs the government and consumers billions of dollars, according to an October article in BioWorld Today. The House Energy and Commerce Committee passed a similar bill last July as part of its health reform legislation.

Saving Consumers and Governments Money
According to FTC Chairman Jon Leibowitz, enacting legislation to stop the so-called pay-to-delay practice could save consumers $3.5 billion per year while saving the government $12 billion over 10 years. The added expenditures for prescription drugs are the result of brand-name companies paying generic producers to stay out of the market, according to an FTC study released in June.

"By taking this action, the committee clearly recognizes the very real danger that these sweetheart deals pose to Americans struggling to pay their medical bills," said the chair of the FTC, which has long sought to use antitrust enforcement to stop the pay-for-delay agreements.

Similar arguments are made in Europe. According to Reuters, European Union Competition Commissioner Neelie Kroes said such settlements had increased European consumers' bills by 20 percent between 2000 and 2007. BioWorld International cited a report from the EU's competition authority that claimed the delays to generic launches has cost European health services €3 billion in potential savings in the last seven years, and has reduced incentives to innovate.

Opposing Views on Pay-to-Delay
In July, the U.S. Justice Department argued that drug company payments to prevent generic competition were "presumptively unlawful," a shift from the Bush administration, which had not opposed the deals. President Barack Obama supports a ban, and European Union antitrust regulators also oppose such deals. In a brief filed to the Second Circuit Court of Appeals in New York, the Justice Department joined with the Federal Trade Commission, which has been crusading against the settlements.

The case involved Bayer AG paying Barr Laboratories Inc. to prevent it from bringing a generic version of Cipro (ciprofloxacin) to market. The Arkansas Carpenters Health and Welfare Fund, CVS Pharmacy Inc., Rite Aid and others filed the case against Bayer and Barr. "A settlement involving a payment to the alleged drug patent violators in exchange for its agreement to withdraw its challenge to the patent and delay bringing its generic drug to market is presumptively unlawful and requires the defendant to offer justifications in order to avoid antitrust liability," said the brief, which was signed by Christine Varney, the new head of the Justice Department's Antitrust Division.

Is the Tide Turning Against Payments?
According to the AARP Bulletin, the brief is a sign that the tide may be turning against the payments. Bills pending in the U.S. Congress would ban the deals. Additionally, the FTC has filed suit against several of the settlements, hoping to find one that the Supreme Court would find illegal.

Meanwhile, according to the AARP article, the FTC has challenged the deals in court with mixed success. The first known "pay-to-delay" was in 1994, when Bristol-Myers Squibb Co. paid $290 million to Schein Pharmaceutical Inc. to delay the sale of a generic version of the Bristol-Myers anxiety drug Buspar (buspirone). In 2006, the FTC failed to convince the Supreme Court to hear its case against Schering-Plough Corp. for a deal with Upsher-Smith because of opposition from the Justice Department.

Most recently, according to BioWorld, in February, the FTC filed an antitrust case challenging a pay-to-delay deal between Solvay Pharmaceuticals Inc. and generic drugmakers Watson Pharmaceuticals Inc. and Par Pharmaceuticals Cos., which sought to delay the entry to the market of less expensive versions of Solvay's AndroGel, a testosterone-replacement drug with annual sales of about $400 million. The FTC alleged that Solvay agreed in 2006 to share its profits with the generic competitors as long as they did not launch their generic versions until 2015.

Is There Compromise for What Some Call an 'Egregious' Practice?
When testifying before Congress in March, FTC Commissioner Thomas Rosch said legislation was likely to be swifter and more comprehensive than litigation in preventing anticompetitive settlements. He claimed that the courts have treated pay-to-delay agreements "too leniently," said that two 2005 appellate court decisions had permitted the payoffs, and opined that arguments made by some supporters of pay-for-delay settlements are "contradicted by experience in the market."

In 2008, the FTC reported that nearly half of all patent settlements in fiscal year 2007 involved payments from brand-name firms to generic manufacturers in return for an agreement to keep the less expensive versions off of the market. In the year prior to those decisions, however, no patent settlement reported to the FTC contained such an agreement, the agency said. (See BioWorld Today, May 27, 2008.)

If legislation were enacted to ban the deals, said Sen. Herb Kohl (D-Wis.), who sponsored the Senate Judiciary Committee bill, it would "end an egregious practice." However, the Senate bill included a compromise provision that would allow settlement agreements between drug companies if they can prove with clear and convincing evidence that the deal will not harm competition. (See BioWorld Today, Oct. 19, 2009.)

The Need for Balance Between the Rights of Drugmakers and Patients
Certainly, a drug company that took the risk and absorbed the time and expense of bringing a drug to market deserves adequate compensation for getting it there and, thereby, curing a given disease.

Considering success/failure and risk/reward ratios, it is not surprising that the company getting to the finish line first with a safe, effective drug should get a big carrot. The question is how big that carrot ought to be in order to make drugs affordable for the consumer and the government. There needs to be a sense of balance between a company's right to make a profit and a consumer's right to obtain a drug without breaking the bank.

Published: January 14, 2010