Sports fans would be outraged if a bookie paid a boxer to throw a fight. But major drugmakers are doing something similar, increasingly paying competitors to keep cheaper generic alternatives off the shelves.
The practice is costing patients and taxpayers billions of dollars in extra health care spending.
The Federal Trade Commission says the so-called pay-for-delay practice inside the drug industry rose 43 percent last year alone. Lawmakers in both parties are clamoring for a fix.
"It's a practice that puts the interests of drug companies above the interests of consumers, and it's time for it to end," said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Judiciary Committee. "These anticompetitive patent settlements between brand and generic drug companies hurt consumers' access to affordable medications, and they hurt taxpayers who pay for prescription drugs under both Medicare and Medicaid."
In fact, an analysis by the nonpartisan Congressional Budget Office found that the government could save as much as $4.7 billion through 2021 if federal health care programs had the greater access to generic brands. Mr. Grassley said the deals keep generic medications off the shelves by an average of 17 months.
The deals are also called "reverse payment settlements," because the patent holders (name-brand pharmaceutical companies) are paying people that infringe on their patents (generic manufacturers).
For creating a pay-to-not-play scheme that will cost Medicare and Medicaid unnecessarily, the brand-name drug industry wins this week's Golden Hammer, a weekly distinction awarded by The Washington Times to examples of unnecessary federal spending.
Pharmaceutical companies make no apologies for the practice, arguing that the agreements help them maintain profitability and ensure that they can continue to develop and deliver drugs to consumers.
Companies invest hundreds of millions of dollars into research and development of drugs, said Diane Bieri, a lawyer representing the Pharmaceutical Research and Manufacturers of America, the drug industry's main lobby group. Patent protections give companies a safety net to invest time and take risks in creating drugs, which in turn improves public health, she said.
Without the assurances of economic exclusivity, 65 percent of pharmaceutical products never would have been brought to market, Ms. Bieri told a hearing of the Senate Judiciary subcommittee that deals with antitrust and competition issues, which held a hearing on the pay-for-delay issue last month.
"Innovator companies are able to undertake this costly, time-consuming research despite the relatively low chance of success only because patent protection offers at least the possibility of recovering their investment during the period of patent exclusivity," she said.
Last year, there were 140 agreements between drug companies to keep generics off the shelves, 40 of which involved payments. The payments "involve 31 different branded pharmaceutical products with combined annual U.S. sales of approximately $8.3 billion," the FTC said.
Senators step in
Mr. Grassley and Sen. Amy Klobuchar, Minnesota Democrat, say that is too much and are introducing legislation that would make pay-for-delay deals illegal.
"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," Ms. Klobuchar said.
How far the Preserve Access to Affordable Generics Act will go remains to be seen. In 2011, Mr. Grassley, Ms. Klobuchar and other senators introduced a similar bill, but it died without getting a Senate floor vote.
The Supreme Court also has weighed in, ruling 5-3 in June that the agreements could violate antitrust laws, and therefore could be regulated or outlawed. And that leaves the ball in Congress' hands.
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