Two senators want to do away with the agreements that pharmaceutical companies make with one another to keep lower-priced generic copies of brand-name drugs off the market.
Democratic Sen. Amy Klobuchar of Minnesota and Republican Charles Grassley of Iowa say such "pay-for-delay" deals force consumers to pay higher prices for critical drugs. Their bill would make such agreements illegal unless the companies can prove in court that they aren't anti-competitive.
At issue Tuesday at a Senate hearing were so-called "pay for delay" agreements: A brand-name drug manufacturer pays a settlement to a company that challenges its patent and looks to produce the same drug under its generic name but is willing to delay introducing it for a price.
The Supreme Court ruled last month that such "patent-related settlement agreements can sometimes violate antitrust law" and be challenged in court. Klobuchar and Grassley's bill would presume that such agreements are illegal and would require the companies involved to prove in court that they aren't.
"It's simply outrageous that consumers are forced to pay higher prices for critical drugs because of brand companies colluding with generic competitors," Klobuchar said.
Robert Romasco, president of AARP, said agreements between brand and generic drug manufacturers are a growing problem because many important drug patents are expiring. Citing a recent Federal Trade Commission study, he said that agreements delay the arrival of a generic drug on the marketplace by about 17 months.
"In the meantime, consumers must pay brand-name drug prices," he said. "This substantially raises the costs for consumers, businesses and taxpayer-funded health care plans."
Klobuchar and Grassley's bill would save the government alone as much as $4.7 billion over a decade, according to a report from the nonpartisan Congressional Budget Office.
Representatives of the pharmaceutical industry say outlawing such agreements would be unfair to companies that sometimes spend hundreds of millions of dollars to develop a new drug. The industry also says some agreements actually speed the arrival of generic drugs onto the market before the brand-name manufacturer's 20-year patent expires.
Sen. Mike Lee, R-Utah, argued that shifting the burden to companies to explain why their deals don't create an uncompetitive and unfair environment would damage the integrity of U.S. patent laws while ignoring the benefit to consumers of bringing generics to consumers sooner than a patent might normally allow.
Lee said the term "pay for delay" is used too broadly. He said settlements between drug companies don't typically extend the amount of time a patent is in effect. "Most of the time they end up shortening the term of the patents by allowing generic manufacturers to enter the market before the patent has expired," he said.
"You can't on its face say whether these settlements are pro- or anti-competitive," said Jonathan Orzag, an economic consultant and an economic adviser to President Bill Clinton.
But Edith Ramirez, the chairwoman of the Federal Trade Commission, told the committee that agreements between drug companies regularly lead to "delayed entry" of generic drugs. She said she would welcome Klobuchar and Grassley's legislation because it would speed up a clogged process.
"The issue we're concerned about here is that a reverse payment has the potential to eliminate the risk of competition," she said. "So the issue here is that a payment will distort the competitive process and lead to delayed entry."