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    FTC Asks Lawmakers To Ban Agreements To Delay Market Entry Of Generic Medications

The Federal Trade Commission on Wednesday at a hearing of the Senate Judiciary Committee asked lawmakers to take action to prevent agreements in which brand-name pharmaceutical companies pay generic pharmaceutical companies to delay market entry of their products, the AP/Richmond Times-Dispatch reports (AP/Richmond Times-Dispatch, 1/18). The agreements involve "a provision of the 1984 Hatch-Waxman legislation ... meant to encourage generic drug makers to challenge invalid or narrow patents on brand-name drugs," CQ HealthBeat reports. Under the provision, the first generic pharmaceutical company to challenge successfully a patent on a brand-name medication receives six months of market exclusivity for a generic version of the treatment (Reichard, CQ HealthBeat, 1/17). FTC since the late 1990s had blocked the agreements. However, in late 2005, the U.S. Court of Appeals for the 11th Circuit ruled that FTC officials exceeded their authority when they blocked an agreement between Schering-Plough and Upsher-Smith Laboratories over K-Dur 20, a treatment for hypertension and congestive heart disease. FTC filed an appeal with the Supreme Court, but the court declined to hear the case without comment (Kaiser Daily Health Policy Report, 10/31/06). At the hearing, FTC Commissioner Jon Leibowitz testified that the courts have taken "an extremely lenient view" of the agreements. As a result, half of the 28 settlements in patent disputes between brand-name pharmaceutical companies and generic pharmaceutical companies in fiscal year 2006 involved the agreements, according to Leibowitz (CQ HealthBeat, 1/17). He said, "Such settlements restrict competition at the expense of consumers, whose access to lower-priced generic drugs is delayed, sometimes for years" (Newark Star-Ledger, 1/18).

Legislation Announced
At the hearing, committee Chair Patrick Leahy (D-Vt.) announced a bill that would bar the agreements. Supporters of the legislation include Sens. Chuck Grassley (R-Iowa), Russ Feingold (D-Wis.), Herb Kohl (D-Wis.) and Charles Schumer (D-N.Y.) (CQ HealthBeat, 1/17). FTC officials said that the commission "strongly supports" the bill (Bloomberg/Winston-Salem Journal, 1/18). According to Leahy, the agreements amount to "collusion that limits consumer choices and keeps consumer prices artificially high." Leahy said, "Congress never intended for brand-name drug companies to be able to pay off generic companies not to produce generic medicines. That would be a shame, harmful to consumers, and a crime" (Newark Star-Ledger, 1/18).

Additional Testimony
Sen. Arlen Specter (R-Pa.) said, "I do think there's a burden on people making these settlements to show why they are not anti-competitive," but added, "Is it wise for the Congress to have a sweeping generalization that this is a per se violation?" Pharmaceutical Research and Manufacturers of America President Billy Tauzin said, "Blanket prohibitions on certain types of settlements could force both sides to spend valuable resources litigating their patent dispute to judgment." He said that brand-name pharmaceutical companies would win a "significant number" of those decisions, adding that "a win by the patent holder means the generic likely would not be able to enter the market before the patent expires" (CQ HealthBeat, 1/17). Bruce Downey, CEO of Barr Pharmaceuticals, also defended the agreements. He said, "It's not the settlement that keeps the product off the market, it's the patent" (Bloomberg/Winston-Salem Journal, 1/18). Michael Wroblewski of Consumers Union said that the agreements cost brand-name pharmaceutical companies less than a potential loss in sales from generic competition and that generic pharmaceutical companies benefit more from the agreements than they would from sales of their products (AP/Richmond Times-Dispatch, 1/18).

"Reprinted with permission from You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at The Kaiser Daily Health Policy Report is published for, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

Publication Date: 2007-01-22 15:00

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