Healthy Skepticism Library item: 18349

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Publication type: news

Ed.
Drug Company Payoffs
The New York Times 2010 July 7
http://www.nytimes.com/2010/07/07/opinion/07wed2.html?_r=1

Full text:

Before heading home for a weeklong recess, the House of Representatives passed a bill on July 1 that would crack down on a devious tactic used by some pharmaceutical companies. The tactic, known as “pay for delay,” involves business deals in which the makers of patented brand-name drugs pay generic competitors to delay the introduction of cheaper alternatives.

The agreements arise after a generic manufacturer tries to market its drug before the patent on a brand-name drug has expired.

The generic company typically contends that the patent is invalid or that there is no infringement. With billions of dollars at stake and neither company certain how it might fare in court, a brand-name manufacturer might prefer to pay its potential competitor substantial compensation to delay its generic drug and the generic maker might welcome a hefty payoff rather than face the uncertainties of litigation and marketing.

Both companies profit handsomely. The big loser is the American consumer, who must continue to pay monopoly prices for brand-name drugs instead of buying cheaper generics.

The Federal Trade Commission, which has valiantly fought to ban such agreements, estimates that they will cost American consumers about $35 billion over the next 10 years unless they are stopped.

The House included a provision in its supplemental appropriations bill that presumes such agreements are illegal but leaves room for the affected companies to overcome that presumption in court. The compromise language falls short of an outright ban but should still be a strong deterrent to the practice.

The Congressional Budget Office estimated that the provision would reduce the federal deficit by $2.6 billion over the next 10 years, thus providing useful if modest savings that would help offset the cost of domestic programs in the bill, such as emergency support to local school districts to prevent teacher layoffs.

Now it will be up to the Senate to approve the bill as amended by the House. Should the senators be inclined to make any changes, they should be sure to retain the provisions curbing pay-for-delay tactics. It would end an underhanded practice, reduce the deficit slightly and save consumers billions of dollars.