Senate Passes Leahy Bill
Targeting Sweetheart Deals
That Delay Low-Cost Generic Drugs
WASHINGTON (Nov.
19) – A bill authored by Sen. Patrick Leahy aimed at eliminating the
secret deals between big pharmaceutical firms and generic drug
makers that keep affordable prescription drugs off the market passed
the Senate Monday night.
Leahy’s Drug
Competition Act (S. 754) requires brand-name and generic companies
to report their deals to the Federal Trade Commission (FTC) and the
Justice Department’s Antitrust Division so that these antitrust
enforcement agencies can promptly investigate any aspects of the
deals that raise competitive concerns.
“Consumers pay the
price when drug makers collude to stifle competition and drive up
the cost of prescription drugs,” said Leahy, who chairs the Senate
Judiciary Committee, which oversees the Justice Department and its
antitrust division. “Our bill discourages these sweetheart deals by
ensuring that antitrust authorities can take quick and decisive
action against these companies.”
Big pharmaceutical
firms have become major players in the legislative process, and the
bill has been held hostage by anonymous Republican holds for more
than a year after it was unanimously approved by the Judiciary
Committee.
Paying off smaller
rivals to eliminate competition is an abuse of the Hatch-Waxman law
that was intended to promote generic alternatives. The Leahy bill
is cosponsored by Sen. Herb Kohl (D-Wisc.), the chairman of the
panel’s Antitrust Subcommittee; Sen. Charles Schumer (D-N.Y.); Sen.
Richard Durbin (D-Ill.); Sen. Russell Feingold (D-Wisc.), Sen Maria
Cantwell (D-Wash.), and Sen. Charles Grassley (R-Iowa). The Drug
Competition Act and its companion in the House, HR 1530, would
protect consumers by solving the most difficult problem faced by
federal antitrust investigators: learning about improper deals in
time to do something about them. The law will expose these deals
and subject them to immediate action by the FTC and the Justice
Department.
The Federal Trade
Commission recently issued a study and report on the generic drug
marketplace, and one of the agency’s two recommendations for
improving access to generic drugs was simply the passage of the Drug
Competition Act. The study had followed several actions by the FTC
last year in which the agency brought civil charges against drug
manufacturers for engaging in precisely the behavior that the Drug
Competition Act addresses. In one case, the FTC brought civil
charges against Schering-Plough for allegedly paying two generic
drug makers to delay a generic alternative to a drug used by heart
patients. The agency cited the $90 million that Schering paid to
American Home Products Corp. under the pact, which the FTC said
forced consumers to pay $100 million in higher prices while keeping
a cheaper generic version off the market for several years. The FTC
had earlier settled two other such cases by consent decree. The
first, involving Hoechst Marion Roussel (now Aventis
Pharmaceuticals, Inc.), Carderm Capital L.P., and Andrx Corporation,
resolved a dispute over the companies’ agreement, affecting the $750
million-a-year market for Cardizem CD, a widely prescribed drug for
treatment of hypertension and angina. The second resolved charges
against Abbott Laboratories and Geneva Pharmaceuticals Inc. that the
firms entered into a similarly anticompetitive agreement in which
Abbott paid Geneva substantial sums to delay bringing to market a
generic alternative to Abbott's brand-name hypertension and prostate
drug, Hytrin. The FTC estimated that this agreement saved consumers
$100 million.
# # # # #
(Fact Sheet and Leahy statement follow)
FACT SHEET
S. 754, The Drug Competition Act
!
S. 754, the Drug Competition Act of 2001, requires brand
name and generic drug companies that enter into agreements relating to
the introduction of generic drugs to the market to file those
agreements with the Justice Department and the Federal Trade
Commission. S. 754, sponsored by Sen. Patrick Leahy, was reported out
of the Judiciary Committee without objection on October 18, 2001. It
was passed by the Senate on November 18, 2002.
Background on S. 754
!
Prescription drug prices are rapidly rising and are a
source of considerable concern to many Americans, especially senior
citizens and families. Generic drug prices can be as much as 80
percent lower than the comparable brand name version.
!
Under the Hatch-Waxman Act, companies are given
incentives to bring generic versions of brand name drugs to market.
Most importantly, the first generic manufacturer approved by the FDA
to sell a generic drug before the patent on the brand name version
expires enjoys protection from other generic competition for 180 days.
!
Some generic drug companies have abused this provision
of Hatch-Waxman, however, by receiving permission to market the
generic version of a drug, claiming the 180-day grace period from
competition – thereby blocking any other generic drugs from entering
the market – while getting paid by the brand name company not to sell
the generic version.
!
The FTC has sued pharmaceutical companies that have made
such secret and anticompetitive deals, but the antitrust enforcement
agencies are only finding out about such deals by luck, or by
accident. The FTC’s recent study and report on the generic
pharmaceutical marketplace specifically suggested passage of S. 754 as
a partial solution to the problems in bringing generic drugs to
American consumers.
Provisions of S. 754
!
The Act will give the FTC and the Justice Department
timely access to any agreement between a brand name and a generic drug
company that relates to that critical 180-day period, or to the
manufacture, marketing, or sale of either company’s version of the
drug.
!
The Act simply requires pharmaceutical companies that
enter into this narrow but important class of agreements to file those
agreements with the antitrust enforcement agencies within ten days of
the agreement’s execution.
!
The Act does not create any presumption of illegality on
the part of the filing companies, but will allow the law enforcement
agencies to review those agreements to ensure that no illegality has
taken place – and if it has, to bring the antitrust laws appropriately
to bear.
!
A company that fails to file an agreement will be
subject to civil penalties of up to $11,000 a day. The FTC or the
Justice Department also may seek federal district court orders for
other equitable relief or for compliance orders.
# # # # #
On The Drug Competition Act of 2002
Mr. LEAHY. Mr.
President, I am pleased that the Senate has, at long last, taken up
the Drug Competition Act of 1002, S. 754. Prescription drug prices are
rapidly increasing, and are a source of considerable concern to many
Americans, especially senior citizens and families. Generic drug
prices can be as much as 80 percent lower than the comparable brand
name version.
While the Drug
Competition Act is a small bill in terms of length, it is a large one
in terms of impact. It will ensure that law enforcement agencies can
take quick and decisive action against companies that are driven more
by greed than by good sense. It gives the Federal Trade Commission and
the Justice Department access to information about secret deals
between drug companies that keep generic drugs off the market. This is
a practice that hurts American families, particularly senior citizens,
by denying them access to low-cost generic drugs, and further
inflating medical costs.
This has been a
genuine bipartisan effort, and I must thank all my colleagues,
including Senator Hatch who has a long-standing interest in these
issues, subcommittee Chairman Kohl who has worked with me from the
start on this effort, and particularly Senator Grassley
who has worked hard to reach consensus on this bill that will help
protect consumers.
The issue of drug
companies paying generic companies not to compete was exposed in
recent years by the FTC, and by articles in major newspapers,
including an editorial in the July 26, 2000, the New York Times,
titled ``Driving Up Drug Prices.'' This editorial concluded that the
problem ``needs help from Congress to close loopholes in federal
law.'' And while the FTC has sued pharmaceutical companies that have
made such secret and anticompetitive deals, as the then-Director of
the Bureau of Competition Molly Boast testified before the Judiciary
Committee in May 2001, the antitrust enforcement agencies are only
finding out about such deals by luck, or by accident. Most recently,
the FTC has issued a comprehensive study of the generic pharmaceutical
industry which explicitly supported passage of S. 754.
Under current law, the
first generic manufacturer that gets permission to sell a generic drug
before the patent on the brand-name drug expires, enjoys protection
from competition for 180 days--a headstart on other generic companies.
That was a good idea--but the unfortunate loophole exploited by a few
is that secret deals can be made that allow the manufacturer of the
generic drug to claim the 180-day grace period--to block other generic
drugs from entering the market--while, at the same time, getting paid
by the brand-name manufacturer to not sell the generic drug.
The bill closes this
loophole for those who want to cheat the public, but keeps the system
the same for companies engaged in true competition. The deals would be
reviewed only by those agencies--the agreements would not be available
to the public. I think it is important for Congress not to overact and
throw out the good with the bad. Most generic companies want to take
advantage of this 180-day provision and deliver quality generic drugs
at much lower costs for consumers. We should not eliminate the
incentive for them. Instead, we should let the FTC and Justice look at
every deal that could lead to abuse, so that only the deals that are
consistent with the intent of that law will be allowed to stand. This
bill accomplishes precisely that goal, and helps ensure effective and
timely access to generic pharmaceuticals that can lower the cost of
prescription drugs for seniors, for families, and for all of us.
# # # # #
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