Point:Counterpoint Re Pharma’s "Pay-to-Delay" Arrangements

Last Friday there was a small press release that hitting the wires that Alza Corporation has filed suit alleging patent infringement, again, against Impax. Though the facts there are specific to their relationship, it is clear there is more similar litigation news between branded pharma and the generics than we’ve seen in previous decades. It comes with controversy.

Much as the USDA has paid farmers not to grow grain, branded drug companies are paying generic drug companies to delay their generic product launches as part of settlements of patent lawsuits. (For details on how this works, see here.) The Federal Trade Commission (FTC) has weighed in heavily with a scathing report on these “collusive deals.” Yesterday, Matthew Herper used the Forbes blog to defend the practice. Mixing in their comments, let’s look closer at the debate:

P:  There is a 60% increase in pay-to-delay deals.

CP: It stands to reason the number of deals would increase as the number of blockbuster drugs coming off patents increases.

P: These deals cost consumers $3.5 billion a year in higher prices.

CP: By Forbes reckoning, that represents 1% of what Americans spend annually, so how big is the "problem" effect, really?

P: These deals are “collusive” restraints of trade.

CP: The FTC used to exert some authority over these (2005), but the courts have said labeling these deals as antitrust violations would change the nature of established patent law.

P: These deals benefit the branded drug and generic drug entities and penalize the consumer.

CP: It can be argued that in many cases the settlement monies serve to ensure the financial ability of the generic drug companies to eventually release the generic, proving an ultimate benefit to all.

CP: The system works, as 78% of all prescriptions are dispensed as generics.

A not insignificant portion of patent value is tied up in the drug companies’ ability to do these deals. A provision of the House version of the Affordable Health Care Act that would have forbidden the practice did not make it into the final, but the Obama administration is calling for a curbing of pay-to-delay in his 2012 budget plan.