House Panel Hears Testimony On Bill Banning Patent Settlement Payments To Delay Generic Drug Competition

Main Category: Pharma Industry / Biotech Industry
Article Date: 02 Apr 2009 - 8:00 PDT

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Witnesses and lawmakers at a House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection hearing on Tuesday debated the merits of a bill (HR 1706) that would prohibit patent settlements in which brand-name drugmakers pay makers of lower-cost generic drugs to delay releasing their products, CQ HealthBeat reports. The bill would prevent "the continued erosion" of the 1984 Hatch-Waxman Act, which extends patent exclusivity for new drugs and grants 180 days of exclusivity to a generics maker that successfully challenges the patent of a brand-name drug, House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) said.

The Hatch-Waxman Act was intended to encourage generics firms to challenge weak patents in order to get their products on the market sooner, CQ HealthBeat reports. However, appeals courts have recently interpreted the law to allow drugmakers to settle patent charges by paying generics makers to keep their products off the market. Waxman said, "Those courts are sorely mistaken" because the "use of [the 1984 law] to prevent generic competition is contrary to the intent of the law." The new bill would ban drug companies from providing "anything of value" to generics firms in return for delaying market entry of a product, as well as give the Federal Trade Commission authority to make exceptions that would benefit consumers. Waxman said that "it is designed to rid us of the 'bad' settlements and leave us with the 'good' ones."

Thomas Rousch, an FTC commissioner, said an FTC staff analysis found that in the fiscal year ending September 2007, 14 of 33 final patent settlements "involved compensation to the generic patent challenger and an agreement by the generic firm to refrain from launching its product for some period of time." According to Rousch, the "current legal climate" provides additional reason to believe that "the upsurge in such settlements [will] continue, and early entry of generics [will] decline" as both parties can profit from splitting the consumers' savings that would otherwise result from generic competition. He also noted support for the bill from the Obama administration and the American Medical Association.

The Pharmaceutical Research and Manufacturers of America, generic drugmaker Teva Pharmaceuticals and Republican lawmakers said the measure would hinder innovation and delay market entry of generic products (Reichard, CQ HealthBeat, 3/31).

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