Wednesday, October 26, 2011

Pay For Delay Scam

I would be remiss if I didn't acknowledge that the Washington Post editorial board actually got something right in a recent editorial. The board strongly deplored the practice of pharmaceutical companies' paying off manufacturers of generic drugs in an effort to hold off competition when it comes to new drugs. It's an easy way to keep the dollars rolling in while the consumers foot the bill.

AN UPCOMING REPORT by the Federal Trade Commission shows that brand-name pharmaceutical makers continue to cut questionable deals with generic manufacturers that delay the introduction of cheaper drugs onto the market.

Such pay-for-delay arrangements hurt consumers and increase costs for federal programs such as Medicare and Medicaid, according to the report, a copy of which was obtained by the editorial board. These deals are not illegal, but they should be. ...

In 2004, the FTC did not identify a single settlement in a patent litigation matter involving drug makers that raised pay-for-delay concerns. In its new report, the agency points to 28 cases that bear the telltale signs of pay-for-delay, including “compensation to the generic manufacturer and a restriction on the generic manufacturer’s ability to market its product.”
[Emphasis added]

Here's how it works: when a patent on a drug is about to expire, the patent holder fends off a competitor's attempt to market a less expensive version by litigation. Once the papers have been filed, the patent holder settles with the challenger, paying money to keep the generic off the market for a while. Both companies win, but consumers lose. As the editorial notes, all of this is at the present time perfectly legal.

Keeping the generic off the market for a year or longer has some steep consequences, as this AP article notes.

Drugs like Zyprexa can cost up to $500 per month. Generic versions can cut the cost by up to 80 percent.

That's a lot of money to be saved, especially for elders caught up in the doughnut hole dilemma in their Medicare Part D plan. Making approved generic versions available once the patent on the original drug ends saves consumers and the federal government a lot of money. Projections on the savings vary, but the Congressional Budget Office has it at about $3 billion over ten years. That's something that should get the Super Committee's attention.

Sens. Charles E. Grassley (R-Iowa) and Herb Kohl (D-Wis.) have offered a bill which would end the practice of pay-for-delay. This is one bit of bipartisanship I can live with. Whether PHARMA will allow the bill to pass remains to be seen, but it certainly couldn't hurt to contact your senators and urge their support for the bill.

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