Leading Members Of Senate
Judiciary Panel Introduce Bipartisan Bill
To Stop Payoffs That Delay Generic Medicines
Leading members of the Senate
Judiciary Committee on Wednesday took aim at the growing problem of
brand-name drug manufacturers using pay-off agreements to delay
access to generic medicines by introducing a bill to prohibit the
practice.
Senator Patrick Leahy, (D-Vt.), the
chairman of the Committee, introduced a bipartisan bill along with
Senators Herb Kohl
(D-Wisc.), Chuck Grassley (R-Iowa), Russ Feingold (D-Wisc.), and
Charles Schumer (D-NY), to prohibit pay-off settlements aimed at
keeping cheaper, generic medicines off the market. The Committee
also held a hearing “Paying Off Generics to Prevent
Competition with Brand Name Drugs: Should It Be Prohibited?”
on Wednesday to examine the issue and discuss the proposed
legislation.
Below is a release on
the
Preserve Access to Affordable Generics Act,
followed by Senator Leahy’s statement from the Committee’s hearing.
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Kohl, Leahy, Grassley, Schumer, Feingold
Introduce Bill
To Stop ‘Payoffs’ That Delay Generic Drugs
Washington, D.C.
– Today, top Senate Judiciary Committee members Herb Kohl (D-WI),
Patrick Leahy (D-VT), Chuck Grassley (R-IA), Charles Schumer (D-NY)
and Russ Feingold (D-WI) will introduce the “Preserve
Access to Affordable Generics Act”
in the 110th Congress to
explicitly prohibit brand-name drug manufacturers from using pay-off
agreements to keep cheaper generic equivalents off the market.
Leahy, chairman of the
Judiciary Committee, held a hearing today to examine the issue.
Federal Trade Commissioner Jon Leibowitz and former-Congressman
Billy Tauzin, now CEO of Pharmaceutical Research and
Manufacturers of America (PhRMA), were on hand to discuss the impact
these agreements have on the pharmaceutical market.
“When big brand-name
drug companies pay generic manufacturers
to stop generic drugs from reaching pharmacy shelves, consumers lose
big-time,” Kohl said. “We can’t say we care about the
high cost of prescription drugs while turning a blind eye to
backroom deals between brand and generic drug companies. This
practice has got to stop.”
Leahy said, “Some drug firms have
colluded to pad their profits by forcing consumers to pay higher
prices than they would pay for lower-cost generics. Now that this
sweetheart dealing has been uncovered, we owe it to consumers to end
it. Our bill is a clear-cut opportunity to remove an impediment to
competition that prevents the marketplace from working as it should
-- to benefit consumers, and not just the drug companies.”
In 2005, two appellate
court decisions overturned Federal Trade Commission’s (FTC)
long-standing position against this practice and upheld settlements
that include such pay-offs. Last year’s Supreme Court dismissal of
the FTC’s latest appeal prompted lawmakers to introduce this
important bill.
“Recently, the dramatic increase in
wheeling and dealing between brand name and generic pharmaceutical
manufacturers have only ended up delaying the entry of less costly
medicines in the marketplace, leaving the bill to the consumer.
These deals also threaten the sustainability of federal health care
programs, such as Medicare and Medicaid. It's important that the
Federal Trade Commission have as many tools as possible in its
arsenal to protect the American public from these types of
anti-competitive agreements,” Grassley said.
“When consumers have access to
lower-cost drugs, we all win,” Schumer said. “But as long as we let
stand the appellate court decisions that encourage brand and generic
companies to split up the pie between them and not give the consumer
a fork, we are accepting higher drug prices for the average
American.”
“The current high prescription drug
prices take a particularly heavy toll on sick and low-income
individuals who desperately need life-saving medicines. It is time
for Congress to ensure that a truly competitive marketplace for
prescription drugs is in place -- one that will help bring down the
skyrocketing prices in this country,” Feingold said.
A FTC report found that
in the six months following the 2005 court decisions, there were
three settlement agreements in which the generic company received
compensation and agreed to a restriction on its ability to market
the product. Additionally, the FTC found that at least seven
settlement agreements made in 2006 included a pay-off from the brand
manufacturer in exchange for a promise by the generic company to
delay entry into the market.
According to a study
released last year by Pharmaceutical Care Management Association (PCMA),
health plans and consumers could save $26.4 billion over the next
five years by using the generic versions of 14 popular drugs that
are scheduled to lose their patent protections before 2010.
Kohl and Leahy have also introduced S.
25, Citizen Petition Fairness and Accuracy Act of 2007, legislation
that prohibits brand name drug companies from abusing the Food and
Drug Administration’s (FDA) “citizen petition” review process.
In 2003, Senators
Grassley and Leahy were able to include their Drug Competition Act
in the Medicare Modernization Act. The Drug Act required companies
such as Schering-Plough to report all proposed deals with potential
generic competitors, which were often previously worked out in
secret, to the federal antitrust law enforcers – the FTC and the
Justice Department.
Sen. Schumer is also the
author of the Greater Access to Affordable Pharmaceuticals Act with
Senator John McCain (R-AZ). The Schumer-McCain law, which was
enacted in 2003, shut down loopholes that drug companies created in
Hatch-Waxman law, enabling generic drugs to be brought to market
sooner, and lowering the cost of prescriptions for millions of
Americans.
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(Leahy Statement
from Hearing)
Statement Of Sen.
Patrick Leahy
Chairman, Senate Judiciary Committee
Hearing On “Paying Off Generics To Prevent Competition With
Brand Name Drugs:
Should It Be Prohibited?”
January 17, 2007
This hearing today is a continuation
of a longstanding, bipartisan effort by several members of this
Committee to provide consumers more choices and lower-cost
medicines. My focus in this hearing is on making lower-cost generic
medicines available to our seniors and families, based on provisions
of existing law which I think are being misused by some brand-name
and generic drug companies. The fact that we have scheduled this
hearing so early in this new Congress is a sign that solving this
problem will be the high priority for this Committee that it
deserves to be, and that consumers want it to be.
We will be examining the harmful
effects of a type of collusion that limits consumer choices and that
keeps consumer prices artificially high. Rarely do we have such a
clear-cut opportunity as this to remove impediments that prevent
competition and the marketplace from working as they should, to
benefit consumers.
The basics of this issue are very
simple: Congress never intended for brand-name drug companies to be
able to pay off generic companies NOT to produce generic
medicines. That would be a shame, harmful to consumers, and a
crime.
In fact, the history and text of the
Hatch-Waxman laws make it clear that the OPPOSITE of delay was the
goal.
It is no secret that
prescription drug prices are rising and are a source of considerable
concern to many Americans, especially senior citizens and working
families. In a marketplace free of manipulation, generic drug
prices can be as much as 80 percent lower than the comparable brand
name version.
In June of last year I
sponsored a bill, introduced by Senator Kohl, and also sponsored by
Senators Grassley, Schumer, Feingold and Johnson, which would have
stopped these payoffs to delay access to generic medicines. Working
with Senators Kohl and Grassley and with many others, we will try to
enact a new version of that
bill.
It is unfortunate that
we even have to do this. However, as I said in June, there are
still some companies driven by greed that may be keeping low-cost,
life-saving generic drugs off the marketplace, off pharmacy shelves,
and out of the hands of consumers, by carefully crafted
anti-competitive agreements.
Since some of these
deals used to be done in secret, I am glad that because of a bill
that was reported out of this Committee, Congress is now aware of
this problem. In 2001, I worked with Chairman Hatch and later with
Senator Grassley to make sure that our law enforcement agencies –
the Federal Trade Commission and the Department of Justice – at
least were made aware of these secret, and potentially criminal,
deals.
The New York Times
and others published major investigative stories
on how the manufacturer of a hypertension drug to help prevent
strokes and heart attacks -- Cardizem CD -- had made deals to pay a
potential generic competitor $10 million every three months to stop
it from developing a generic version of Cardizem. This led to my
introduction of S. 754 – the Drug Competition Act -- which was
reported out of this Committee and was finally passed as part of the
Medicare Modernization Act Amendments with significant assistance
from Senator Grassley.
The concept of that law is simple: It
requires that if a brand-name company and a generic firm enter into
an agreement that is related to the sale of either the brand named
drug or its generic version, then both companies must file copies of
any agreements with the FTC and the DOJ so those agencies can
enforce the law. Incidentally, once the Cardizem deal was exposed
and challenged, the U.S. Circuit Court held that the “the horizontal
market allocation agreement . . . [was]
per se illegal under the
Sherman Act.”
Today, Commissioner Leibowitz will
testify about what the FTC has found regarding these deals between
brand-name companies and generic competitors, as revealed through
the provisions of the Drug Competition Act, and the harm done to the
public.
I will once again strongly support an
effort by Senators Kohl and Grassley to allow the FTC to do its
job. Two subsequent Circuit Court decisions have undermined the
Cardizem approach and relied on the general rule favoring
settlements between private litigants. The problem -- with respect
to deals not to compete -- is that the interests of millions of
senior citizens, millions of children, and millions of others – are
not taken into account. Those cases ignore the decision in
Associated General in
which the U. S. Supreme Court noted that “the Sherman Act was
enacted to assure our customers the benefits of price competition .
. . .” Note the focus is on consumers, not on whether private
companies should be able to make back-room deals that harm consumers
as part of a settlement of a lawsuit.
Our bipartisan bill will solve that
problem by making payments by brand-name companies, to delay
introduction of a generic drug, unlawful. My initial position is to
follow this bright-line approach to avoid endless litigation and set
forth a clear standard. I will be interested in hearing from others
on possible solutions, so long as the interest of the public in
accessing these life-saving medicines is paramount. That has been,
and will continue to be, my top priority.
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