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Washington Post Editorial Supports a Ban on Pay-for-Delay Settlements!

Posted Jul 24 2009 10:49pm

An editorial in last week’s Washington Pos t recognized the significance of banning pay-for-delay settlements and the potential benefit to prescription drug consumers. As mentioned in the editorial, the current law’s intent to allow generic drugs to come to market sooner just isn’t working and the result is costing consumers billions of dollars a year.

For example, in one case involving the brand-name maker of the drug Provigil, Cephalon, Inc. allegedly paid off four generic companies up to $136 million to delay market entry of a generic version of Provigil for at least an additional 6 ½ years. The case against Cephalon, Inc. alleges that the brand-name manufacturer recognized the weakness of its patent and the unlikelihood that it would be the victor of a patent infringement lawsuit. That is why just about a month before its patent expired, Cephalon allegedly paid its potential generic counterparts to stay off of the market. Without these agreements consumers would have been able to purchase generic versions of Provigil at much lower costs as early as 2006. Instead, as one Cephalon executive exclaimed, Cephalon earned $4 billion in unanticipated sales. Meanwhile, consumers continue to pay high prices for Provigil and have to wait until at least 2011 or a verdict against Cephalon for a generic option. You can read more about this case on our website or in an earlier blog ( New Judge and New Obama Administration Position Sparking Developments in the Provigil Lawsuit Case?)

Although there are currently several patent infringement lawsuits that may involve pay-for-delay settlements similar to the agreements in the Provigil case, including cases involving the drugs Oxycontin, Protonix, and Wellbutrin, litigation may not be the best way to solve the problem. Three out of four federal circuits to hear the case have not found a violation of anti-trust laws and the U.S. Supreme Court has twice declined to hear these cases.

There is a glimmer of hope that pay-for-delay settlements will not be able to increase prescription drug costs for American consumers much longer. The Washington Post editorial sums up need for change:

As Congress embarks on major health-care reform, it has a chance to fix the system. Banning all “pay-for-delay” settlements except where they can be proven to be pro-competitive would be a good start. True, some pay-for-delay settlements inadvertently benefit consumers by allowing generic products to enter markets sooner than they would have after litigation. But that is no excuse for failing to fix a system with fundamentally flawed incentives. The only difference between one company paying another not to produce a competing product and one company paying another not to produce a competing product yet is that the second is still, paradoxically, legal. This must change.

There are two bills pending in Congress to ban such settlements (H.R. 1706 & S. 369). You can read more about pay-for-delay settlements in PAL’s blogs. (See Obama Dept. of Justice Joins FTC in opposing pay-for-delay settlements, & House Subcommittee Approves “Protecting Consumer Access to Generic Drugs Act of 2009” H.R. 1706!) Continue to watch our blog for further updates on these very important bills!

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