FTC Seeks to Halt ‘Pay to Delay’ Drug Payments

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Most doctors will write you a prescription for a cheaper generic drug in place of the same drug that’s still under patent as a more expensive name brand. There’s just no need to pay the premium. But generics aren’t always available even when the patent for the original drug has run out. The reason is because of what’s known in the pharmaceutical industry as ‘pay to delay’ payments.

These ‘pay to delay’ agreements are settlements where a brand-name drug manufacturer pays a generic competitor to abandon a patent challenge and therefore delay entering the market in direct competition. According to the Federal Trade Commission, the tactic has become a common practice in the pharmaceutical industry .

In a speech last month before the Center for American Progress in Washington, D.C., FTC Chairman Jon Leibowitz said that eliminating these the pay to delay payments is a top priority of the Commission because doing so would save consumers $3.5 billion a year. He also stated that the US federal government pays about one-third of all prescription drug costs.

Pending legislation (H.R. 1706, the Protecting Consumer Access to Generic Drugs Act of 2009) would ban or restrict what Leibowitz describes as anti-competitive patent settlements to control prescription drug costs, restore generic competition, and help pay for healthcare reform.

The Hatch-Waxman Act was designed to make it easier for generic drugs to enter the market while at the same time protecting brand-name manufacturers with patent protection crucial to ensuring they continue costly research. While the legislation initially worked to lower prices for consumers, drug companies soon realized they could delay generic competition by paying them not to enter the market.

Image Credit: bartificial, Flickr

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  1. John's Gravatar Comment by John on July 13th, 2009 at 11:31 am

    Though the practice is abhorrent as described, I do admire the ingenuity it represents. The patent-driven drug industry needs the premium so they can cevote more time to discovery, trials and approval process. How many drugs go through every detail only to fail to get approval in the end?

    I, too, dislike paying for the patent (I recently forked out over $100 for 1/2 oz of ear drops), but would rather overcome with competition. For example, establish a non-profit to counter the brand-names’ “pay-to-delay” proposals.

    Most of the time, it should be possible to “buy” the generic back with a little song and dance about how many people they’ll be helping (it’s probably part of the mission statement, but the generic manufacturer could stand a reminder). But it should also have the power to offer financial incentives (it doesn’t have to be as much as the brand-name’s offer. after all, they’ll get money from selling the generic, too).

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