Law That Can Delay Generics Gets Congressional Scrutiny

Congress is moving to counter a growing practice among drug makers to sign private agreements with pharmaceutical companies that manufacture generic drugs that may keep low-cost versions of drugs off the market for years after their original patents expire.

Manufacturers of generic drugs sometimes accept cash payments to delay release of their own drug or a license to make and sell the name-brand drug in the future.

The agreements and payments were sharply curtailed by regulators in recent years, but court decisions in 2005 supporting the practice led to a recent resurgence. Last month Democratic lawmakers introduced legislation to curb the practice as a way to expand consumer access to the low-cost alternatives. Without legislative intervention, critics of the private agreements said, consumers and taxpayers will continue to be denied “billions” of dollars in potential savings.

Drug manufact urers “are denying consumers the considerable savings they would otherwise receive from generic drugs,” said Rep. Bobby Rush (D-Ill.), the lead sponsor of the legislation and chair of the Subcommittee on Commerce, Trade, and Consumer Protection. The subcommittee, which has jurisdiction over consumer-related issues, approved Rush's bill (HR 1902) in May.

The bill would bar agreements under which generic drug makers “agree not to research, develop, manufacture, market, or sell, for any period of time” alternatives to name brand drugs.”

The bill's supporters, including Jon Leibowitz, commissioner of the Federal Trade Commission (FTC), said existing law gives exclusive patent-challenge rights to the first company to challenge a name-brand drug patent. A“ bottleneck” develops that keeps out drug manufacturers with either stronger cases for marketing a drug in its generic version or products less likely to infringe on the name-brand drug patent.

“Under the current interpretation of the law [subsequent generic drug makers] cannot pursue their case until the first generic drug goes to market,” Leibowitz said.

He described the Rush bill as “a bright line” that would solve the problem quickly.

Barry Sherman, Ph.D., CEO of Apotex Inc., an Ontario-based generic drug maker, testified in May before the House Commerce, Trade, and Consumer Protection Subcommittee that the bottlenecks have kept his company from bringing drugs to the market. Although he tentatively supports the bill, he said a better approach would be to give all companies that file suit on the same day “shared exclusivity.”

According to supporters, the legislation is needed to stem the growth of the exclusion agreements. The number of such agreements has risen from almost none in the years when the FTC was enforcing an administrative ban to 14 in 2006, after two federal courts ruled against the ban in separate cases the previous year.

Banning drug-maker agreements based on cash exchanges would save money for both consumers and the government, which paid for $214 billion in prescription drugs in 2006. Consumers Union estimated that generic-drug versions of just five brand name drugs released in 2006 saved consumers over $6 billion.

“This is in no way a radical bill,” Rush said at the hearing on the bill. “We're trying to legislate with a scalpel, not a meat axe.”

Opponents of the measure, who include many Republicans, disagreed with Rush's assessment. They characterized it as a “blunt instrument” because it does not allow the FTC to examine such agreements on a case-by-case basis for benefits to consumers. Private agreements can set a date on which the generic versions of brand-name drugs will become available, they said. Although that date is usually after the patent expiration date, extended court challenges over patents only delays the availability of generics further.

Theodore Whitehouse, an attorney who represents other generic brand drug manufacturers, said that one company estimated that 10 agreements it signed actually hastened the release of generic drug versions by a total of 83.5 years and saved consumers $67 billion.

Similar legislation (S 316) aimed at banning the agreements between drug companies was approved with bipartisan support by the Senate Judiciary Committee in February. Supporters in that chamber have moved to attach the bill's language to legislation that would overhaul the Food and Drug Administration's drug safety procedures.

The text of the House and Senate bills can be accessed at<http://thomas.loc.gov/ by searching on the respective bill numbers, HR 1902 or S 316.▪