Pay-for-delay drives up costs

By Sonia Ashe

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Whether you are young, old, sick or healthy - chances are that you are going to need to be prescribed some sort of medication in the next year. Often, the prescription will be for a minor ailment, but sometimes it will be for a little pill that will save your life.

Unfortunately, right now, consumers and taxpayers are paying an extra $3.5 billion in unnecessarily high prescription drug prices every year due to a widely unknown, anti-competitive practice called “pay-for-delay.”

Pay-for-delay deals allow brand-name drug companies to avoid facing market competition by paying off generic drugmakers to stop them from selling a generic version of the same drug. This is a problem because it prevents generics that typically cost 85 percent to 90 percent less than brand-name equivalents from reaching the market for years.

The Federal Trade Commission has reported that this practice is widespread across the industry and on the rise, with at least eight of the top 10 big pharmaceutical companies participating.

Here's an example of how this works: Brand name antibiotic Cipro costs about $53 for 30 tablets. The generic, now that it's available, costs about $7.50. But consumers were stuck paying the higher price for far longer than they otherwise might have.

That's because Bayer paid three generic companies a combined $398 million, which then delayed bringing the generic to market for six years. Without competition, Bayer was able to keep making $900 million a year in sales on the brand name drug.

Unfortunately, the Cipro case is not unique. These deals have delayed the introduction of cheaper generics for cancer drugs, AIDS treatments, blood pressure medications, antidepressants, allergy medications, sleep aids, ADD medications and more.

The irony is that this practice was an unintended outgrowth of a law enacted to help consumers by increasing the availability of generic drugs - known as the 1984 Hatch-Waxman Act. The law gives drug companies exclusive rights to sell a drug for a period of time while it also establishes a clear process for generic manufacturers to challenge patents on drugs.

With generic companies winning these challenges about 73 percent of the time, brand-name drug companies have responded by simply paying off generic challengers to delay the release of generic drugs for years longer. The practice is a win-win for brand name and generic drug companies, but it's a lose-lose for consumers and taxpayers left paying the price.

It's time to put a stop to these deals and lower inflated drug prices.

In FTC v. Actavis, the U.S. Supreme Court ruled this week that the FTC's case against the payoff keeping generic AndroGel from the market can move ahead in the lower courts - a big hit for Big Pharma and pay-for-delay agreements.

The court chose not to declare all such payoffs unlawful, however, which simply puts more pressure on Congress to finish the job.

There is bipartisan support for ending pay-for-delay in Congress. Sen. Chuck Grassley (R-Iowa) and Sen. Amy Klobuchar (D-Minn.) are sponsoring the Preserve Access to Affordable Generics Act. The bill declares that pay-for-delay deals are presumed anticompetitive and unlawful, and it authorizes the FTC to enforce the law by initiating proceedings against the companies that participate in such deals.

Another bill, the FAIR Generics Act, reduces the incentive for generic and brand-name drug companies to make pay-for-delay deals by letting a second generic drug company enter the market if the first generic company blocks generic access by taking a pay-for-delay deal.

Both of these bills will go through the Health, Education, Labor & Pensions committee in the Senate, which is chaired by Sen. Tom Harkin (D-Iowa). Critical involvement by both Iowa senators demands a mass show of support within our state to make sure these bills receive the attention they deserve.

The high cost of health care is a daunting issue to tackle, but this is one instance where we can make a simple change that lowers costs right away.

Sonia Ashe of Des Moines is an advocate with the Iowa Public Interest Research Group, a non-partisan non-profit organization that challenges special interests by tackling issues for the public interest, www.iowapirg.org. Comments: sashe@iowapirg.org