(MintPress) – Ever wonder why some prescription drugs have generic competitors and others don’t? Part of it is because pharmaceutical companies have been giving generous financial incentives to generic drug competitors to delay the release of cheaper versions of brand-name drugs — and now federal regulators are pressing the Supreme Court to step in and […]
(MintPress) – Ever wonder why some prescription drugs have generic competitors and others don’t? Part of it is because pharmaceutical companies have been giving generous financial incentives to generic drug competitors to delay the release of cheaper versions of brand-name drugs — and now federal regulators are pressing the Supreme Court to step in and end this profit game for the pharmaceutical industry.
These “pay-for-delay” deals have put an unnecessary financial burden on American consumers since generic versions of drugs can lead to price reductions as much as 90 percent. The Obama administration, with the support of groups such as the American Medical Association (AMA), have reported that these delays add about $3.5 billion to consumers’ drug bill annually.
Generic drugs account for about 80 percent of all American prescriptions for medicines and vaccines, but Americans spend far more on brand-name drugs. According to the health data firm IMS Health, generics saved American patients, taxpayers and the health care system an estimated $193 billion in 2011 alone.
The AMA believes pay-for-delay agreements undermine the balance between spurring innovation through patents and fostering competition through generics, said AMA President Dr. Jeremy A., Lazarus. “Pay for delay must stop to ensure the most cost-effective treatment options are available to patients.”
“AARP believes it is in the interest of those fifty and older, and indeed the public at large, to hasten the entry of generic prescription drugs to the marketplace,” said Ken Zeller, senior attorney with the AARP Foundation Litigation. “Pay-for-delay agreements such as those at issue in this case frustrate that public interest.”
Drugstores also believe pay-for-delay deals “pose considerable harm to patients because they postpone the availability of generic drugs which limits patient access to generic medications,” said Chrissy Kopple of the National Association of Chain Drug Stores.
But pharmaceutical companies maintain that they need to preserve the high costs of drugs as long as possible to make up for the billions of dollars they spend researching and developing new drugs each year.
The Supreme Court has agreed to hear this case, known as Federal Trade Commission vs. Actavis, Inc., 12-416. Justice Samuel Alito didn’t take part in considering whether to hear the case and is not expected to take part in arguments.
Pay for delay 101
These deals often occur when a generic company files a challenge against a brand-name drug with the Food and Drug Administration (FDA). Patents on drugs usually allow a large pharmaceutical company to be the sole creator of a drug for about 20 years, but if the generic company can prove that their is a flaw in the patent or drug, it renders the patent invalid and the company can launch a generic version of the drug before the patent was to expire.
Brand-name drug companies often file a lawsuit against the generic companies after a generic company begins analyzing a patent, and then there are a few different outcomes based on the strength of each side’s argument.
If neither side is confident they will win, they often agree to a deal that the generic company can sell a similar drug before the patent expires, but a big pharma company gets a few more years to collect massive profits. The deal is usually sealed with a large financial gift from the brand-name drug maker to the generic company.
Recently AstraZeneca, the second largest drugmaker in the U.K., settled a lawsuit against claimed generic drugmaker Actavis. The company charged Actavis with violating the patent on its best-selling cholesterol pill, Crestor. The agreement between the two companies allows Actavis and its partner Egis Pharmaceuticals to begin selling its generic copy of the cholesterol medicine in May 2016, and will pay a royalty of 39 percent of net sales until the end of pediatric exclusivity on July 8, 2016 to AstraZeneca.
“This agreement ensures that consumers will benefit from an earlier launch of a rosuvastatin calcium product and eliminates ongoing litigation and uncertainty of marketplace acceptance of a non-generically substitutable product if Actavis had proceeded to launch the alternate product,” Paul Bisaro, president and chief executive officer of Actavis, said in the statement.
Depending on how the Supreme Court rules, this agreement may be affected.
A study by RBC Capital Markets Corp. of 371 cases during 2000-2009 found brand-name companies won 89 at trial compared to 82 won by generic drugmakers. Another 175 ended in settlement deals, and 25 were dropped.
Pay for delay deals almost doubled in the last two years, and in 2012 there were about 31 deals.