WASHINGTON, D.C. – U.S. Senator Amy Klobuchar, chair of the Judiciary Antitrust Subcommittee, today held a hearing highlighting the need for Congressional action to crack down on anti-competitive, anti-consumer pay-for-delay settlement agreements, which occur when brand-name drug companies seek to eliminate competition by paying generic manufacturers not to sell their products for a period of time. Last month the Supreme Court ruled that pay-for-delay agreements are subject to antitrust scrutiny, but did not make the deals presumptively illegal. Klobuchar has introduced bipartisan legislation with Senator Chuck Grassley (R-IA) to make pay-for-delay settlements presumptively illegal. According to the Federal Trade Commission (FTC), American consumers lose $3.5 billion each year as a result of these backroom deals, and last year the number of pay-for-delay settlements rose 40 percent over the previous year.
“It’s simply outrageous that consumers are forced to pay higher prices for critical drugs because of brand companies colluding with generic competitors to keep cheaper drugs off the market,”said Klobuchar.“The Court’s decision is a step forward to addressing these concerns but now it’s time for Congress to act to help put an end to these harmful deals once and for all. My legislation will help ensure Americans can get the drugs they need at the prices they can afford, and this hearing is an important step in the effort to get this bill passed.”
Witnesses at the hearing included Edith Ramirez, the Chair of the Federal Trade Commission (FTC); Robert G. Romasco, President of AARP; Diane E. Bieri, a partner at Arnold & Porter LLP; Michael A. Carrier, a professor at Rutgers University School of Law; Jonathan Orszag, Senior Managing Director of Compass Lexecon, LLC; Michael Russo, Federal Program Director of U.S. PIRG; and Dr. Summanth Addanki, Senior Vice President of NERA Economic Consulting.
Pay-for-delay settlements occur when brand-name drug companies seek to eliminate competition by paying generic manufacturers not to sell their products for a period of time. These agreements delay generic entry into the market nearly 17 months longer on average than agreements without payments. These pay-off settlements (also known as “reverse payments”) delay consumer access to cost-saving generic drugs, which can be as much as 90 percent cheaper than brand-name drugs.
Klobuchar, and Senator Grassley’s legislation—the Preserve Access to Affordable Generics Act—would help put an end to the practice of brand-name drug manufacturers using pay-off agreements to keep cheaper generic equivalents off the market and help make sure consumers have access to cost-saving generic drugs they need. Klobuchar and Grassley introduced similar legislation in 2010 following a resurgence of patent settlement agreements.
Specifically, the bill would make it illegal for brand-name drug manufacturers to use anti-competitive pay-off agreements to keep cheaper generic equivalents off the market. The Congressional Budget Office (CBO) expects that enacting this legislation would accelerate the availability of lower-priced generic drugs and generate over $4.7 billion in budget savings to the Federal Treasury between fiscal years 2012 and 2021.