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The court has the tough job of deciding whether holding back competition can be in the public’s interest.
Tuesday, March 26, 2013
Prescription drugs not only work wonders for many patients, but lower the cost of their health care. And controlling the cost of the drugs themselves will be increasingly important next year, as millions of uninsured Americans gain access to coverage — and regular health care — in the next phase-in of the Affordable Care Act.
With that as a backdrop, the Obama administration Monday asked the Supreme Court to stop big pharmaceutical companies with patents on brand-name drugs from paying makers of cheaper, generic versions to keep them off the market.
Federal regulators call this “pay for delay,” and estimate it adds $3.5 billion a year to consumers’ bills for drugs to manage conditions that otherwise would worsen and require more expensive care. Big Pharma counters that the payments are “reverse settlements” of patent challenges and actually save customers money by shaving years off of patents they hold — which would yield big savings in the case of a truly breakthrough drug.
Trouble is, not all patents are so obviously worthy.
The practice is anti-competitive on its face, the Federal Trade Commission argues, and thus a violation of federal antitrust laws. Big Pharma has prevailed several times in lower courts, however. Now the high court must sift through competing claims and discern how best to protect consumer interests.
The dispute arises out of the Drug Price Competition and Patent Term Restoration Act, passed by Congress in 1984 to encourage generic drug makers to challenge old patents on expensive breakthrough drugs such as Lipitor and Plavix — now available as generics.
A provision of the law allows patent holders to pay competitors to keep generics off the market for years. In the case heard Monday, drugmaker Solvay got a 20-year patent on a slightly reformulated synthetic testosterone sold as a gel brand-named AndroGel. Generic drugmakers challenged the patent, but when one got federal approval to market the drug for six times less, it agreed to a “reverse settlement.” Solvay would pay the maker up to $42 million a year to help market AndroGel, and the generic would not go on the market for another nine years.
The FTC says generics win close to 75 percent of patent challenges when they actually go to trial, but often can make more money with such a settlement — paid by consumers and, increasingly, by taxpayers.
If the court finds this is the intent of the law, Congress should revisit it.
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