Leading Members Of Senate Judiciary Panel Introduce
Bipartisan Bill
To Stop Payoffs That Delay Generic
Medicines
Leading members of the Senate
Judiciary Committee on Wednesday took aim at the growing
problem of brand-name drug manufacturers using pay-off
agreements to delay access to generic medicines by introducing
a bill to prohibit the practice.
Senator Patrick Leahy, (D-Vt.), the
chairman of the Committee, introduced a bipartisan bill along
with Senators
Herb Kohl (D-Wisc.), Chuck Grassley (R-Iowa), Russ Feingold
(D-Wisc.), and Charles Schumer (D-NY), to prohibit pay-off
settlements aimed at keeping cheaper, generic medicines off
the market. The Committee also held a
hearing “Paying Off Generics to Prevent
Competition with Brand Name Drugs: Should It Be
Prohibited?” on
Wednesday to examine the issue and discuss the proposed
legislation.
Below is a
release on the Preserve Access to Affordable Generics
Act, followed by
Senator Leahy’s statement from the Committee’s hearing.
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Kohl, Leahy, Grassley,
Schumer, Feingold Introduce Bill
To Stop ‘Payoffs’ That
Delay Generic Drugs
Washington,
D.C. – Today, top Senate Judiciary Committee
members Herb Kohl (D-WI), Patrick Leahy (D-VT), Chuck Grassley
(R-IA), Charles Schumer (D-NY) and Russ Feingold (D-WI) will
introduce the “Preserve Access to Affordable
Generics Act” in
the 110th Congress to explicitly prohibit
brand-name drug manufacturers from using pay-off agreements to
keep cheaper generic equivalents off the market.
Leahy,
chairman of the Judiciary Committee, held a hearing today to
examine the issue. Federal Trade Commissioner Jon Leibowitz
and former-Congressman Billy Tauzin, now CEO of
Pharmaceutical Research and Manufacturers of America (PhRMA),
were on hand to discuss the impact these agreements have on
the pharmaceutical market.
“When big
brand-name drug companies pay generic
manufacturers to stop generic drugs from reaching
pharmacy shelves, consumers lose big-time,” Kohl said.
“We can’t say we care about the high cost of
prescription drugs while turning a blind eye to backroom deals
between brand and generic drug companies. This practice has
got to stop.”
Leahy said, “Some drug firms have
colluded to pad their profits by forcing consumers to pay
higher prices than they would pay for lower-cost
generics. Now that this sweetheart dealing has been
uncovered, we owe it to consumers to end it. Our bill is
a clear-cut opportunity to remove an impediment to competition
that prevents the marketplace from working as it should -- to
benefit consumers, and not just the drug
companies.”
In 2005,
two appellate court decisions overturned Federal Trade
Commission’s (FTC) long-standing position against this
practice and upheld settlements that include such pay-offs.
Last year’s Supreme Court dismissal of the FTC’s latest appeal
prompted lawmakers to introduce this important bill.
“Recently, the dramatic increase in
wheeling and dealing between brand name and generic
pharmaceutical manufacturers have only ended up delaying the
entry of less costly medicines in the marketplace, leaving the
bill to the consumer. These deals also threaten the
sustainability of federal health care programs, such as
Medicare and Medicaid. It's important that the Federal
Trade Commission have as many tools as possible in its arsenal
to protect the American public from these types of
anti-competitive agreements,” Grassley said.
“When consumers have access to
lower-cost drugs, we all win,” Schumer said. “But as long as
we let stand the appellate court decisions that encourage
brand and generic companies to split up the pie between them
and not give the consumer a fork, we are accepting higher drug
prices for the average American.”
“The current high prescription drug
prices take a particularly heavy toll on sick and low-income
individuals who desperately need life-saving medicines.
It is time for Congress to ensure that a truly competitive
marketplace for prescription drugs is in place -- one that
will help bring down the skyrocketing prices in this country,”
Feingold said.
A FTC
report found that in the six months following the 2005 court
decisions, there were three settlement agreements in which the
generic company received compensation and agreed to a
restriction on its ability to market the product.
Additionally, the FTC found that at least seven settlement
agreements made in 2006 included a pay-off from the brand
manufacturer in exchange for a promise by the generic company
to delay entry into the market.
According
to a study released last year by Pharmaceutical Care
Management Association (PCMA), health plans and consumers
could save $26.4 billion over the next five years by using the
generic versions of 14 popular drugs that are scheduled to
lose their patent protections before 2010.
Kohl and Leahy have also introduced S.
25, Citizen Petition Fairness and Accuracy Act of 2007,
legislation that prohibits brand name drug companies from
abusing the Food and Drug Administration’s (FDA) “citizen
petition” review process.
In 2003,
Senators Grassley and Leahy were able to include their Drug
Competition Act in the Medicare Modernization Act. The Drug
Act required companies such as Schering-Plough to report all
proposed deals with potential generic competitors, which were
often previously worked out in secret, to the federal
antitrust law enforcers – the FTC and the Justice
Department.
Sen.
Schumer is also the author of the Greater Access to Affordable
Pharmaceuticals Act with Senator John McCain (R-AZ). The
Schumer-McCain law, which was enacted in 2003, shut down
loopholes that drug companies created in Hatch-Waxman law,
enabling generic drugs to be brought to market sooner, and
lowering the cost of prescriptions for millions of
Americans.
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(Leahy Statement
from Hearing)
Statement Of Sen.
Patrick Leahy
Chairman, Senate Judiciary
Committee
Hearing On “Paying Off Generics To Prevent
Competition With Brand Name Drugs:
Should It Be
Prohibited?”
January
17, 2007
This hearing today is a continuation
of a longstanding, bipartisan effort by several members of
this Committee to provide consumers more choices and
lower-cost medicines. My focus in this hearing is on
making lower-cost generic medicines available to our seniors
and families, based on provisions of existing law which I
think are being misused by some brand-name and generic drug
companies. The fact that we have scheduled this hearing
so early in this new Congress is a sign that solving this
problem will be the high priority for this Committee that it
deserves to be, and that consumers want it to be.
We will be examining the harmful
effects of a type of collusion that limits consumer choices
and that keeps consumer prices artificially high. Rarely
do we have such a clear-cut opportunity as this to remove
impediments that prevent competition and the marketplace from
working as they should, to benefit
consumers.
The basics of this issue are very
simple: Congress never intended for brand-name drug
companies to be able to pay off generic companies NOT to
produce generic medicines. That would be a shame,
harmful to consumers, and a crime.
In fact, the history and text of the
Hatch-Waxman laws make it clear that the OPPOSITE of delay was
the goal.
It is no
secret that prescription drug prices are rising and are a
source of considerable concern to many Americans, especially
senior citizens and working families. In a marketplace
free of manipulation, generic drug prices can be as much as 80
percent lower than the comparable brand name version.
In June of
last year I sponsored a bill, introduced by Senator Kohl, and
also sponsored by Senators Grassley, Schumer, Feingold and
Johnson, which would have stopped these payoffs to delay
access to generic medicines. Working with Senators Kohl
and Grassley and with many others, we will try to enact a new
version of that
bill.
It is
unfortunate that we even have to do this. However, as I
said in June, there are still some companies driven by greed
that may be keeping low-cost, life-saving generic drugs off
the marketplace, off pharmacy shelves, and out of the hands of
consumers, by carefully crafted anti-competitive
agreements.
Since some
of these deals used to be done in secret, I am glad that
because of a bill that was reported out of this Committee,
Congress is now aware of this problem. In 2001, I worked
with Chairman Hatch and later with Senator Grassley to make
sure that our law enforcement agencies – the Federal Trade
Commission and the Department of Justice – at least were made
aware of these secret, and potentially criminal, deals.
The
New York Times and others published major
investigative stories on how the manufacturer of a
hypertension drug to help prevent strokes and heart attacks --
Cardizem CD -- had made deals to pay a potential generic
competitor $10 million every three months to stop it from
developing a generic version of Cardizem. This led to my
introduction of S. 754 – the Drug Competition Act -- which was
reported out of this Committee and was finally passed as part
of the Medicare Modernization Act Amendments with significant
assistance from Senator Grassley.
The concept of that law is
simple: It requires that if a brand-name company and a
generic firm enter into an agreement that is related to the
sale of either the brand named drug or its generic version,
then both companies must file copies of any agreements with
the FTC and the DOJ so those agencies can enforce the law.
Incidentally, once the Cardizem deal was exposed and
challenged, the U.S. Circuit Court held that the “the
horizontal market allocation agreement . . . [was]
per se illegal
under the Sherman Act.”
Today, Commissioner Leibowitz will
testify about what the FTC has found regarding these deals
between brand-name companies and generic competitors, as
revealed through the provisions of the Drug Competition Act,
and the harm done to the public.
I will once again strongly support an
effort by Senators Kohl and Grassley to allow the FTC to do
its job. Two subsequent Circuit Court decisions have
undermined the Cardizem approach and relied on the general
rule favoring settlements between private litigants. The
problem -- with respect to deals not to compete -- is that the
interests of millions of senior citizens, millions of
children, and millions of others – are not taken into account.
Those cases ignore the decision in Associated General in
which the U. S. Supreme Court noted that “the Sherman Act was
enacted to assure our customers the benefits of price
competition . . . .” Note the focus is on consumers, not
on whether private companies should be able to make back-room
deals that harm consumers as part of a settlement of a
lawsuit.
Our bipartisan bill will solve that
problem by making payments by brand-name companies, to delay
introduction of a generic drug, unlawful. My initial
position is to follow this bright-line approach to avoid
endless litigation and set forth a clear standard. I
will be interested in hearing from others on possible
solutions, so long as the interest of the public in accessing
these life-saving medicines is paramount. That has been,
and will continue to be, my top priority.
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