Generic drug makers are applauding the latest change to the health care bill - eliminating the ban on patent settlements.
The measure, which was backed by the Federal Trade Commission, would in most cases have barred so-called "pay for delay" settlements of patent cases brought by generic companies against brand-name drug makers. In such cases, the brand name maker pays the generic company to delay the market entry of a lower-cost generic drug alternative.
The FTC estimated that such reverse payment deals cost consumers $3.5 billion per year. But the provision in the House version of the health care bill was unpopular with both generic and brand name drug companies. (The Senate bill does not include it.)
“Imposing a ban on patent settlements would have the unintended consequence of preventing pro-consumer settlements that would actually allow generic competition sooner than if the generic company had taken the case to its conclusion and lost—always a possibility in patent litigation,” said Kathleen Jaeger, president of the Generic Pharmaceutical Association, in a statement.
“Sweeping the good settlements out with the bad settlements is simply bad health policy and a misguided approach to cost containment," she continued. "Such an across-the-board ban would reduce the number of patent challenges brought by generics, creating an unnecessary hurdle to bringing lower cost generic drugs to the market.”
According to an industry analysis by RBC Capital Markets, there were 65 first-to-file patent suits brought by generic drug makers against brand name companies in 2009, up from 51 in 2008 and more than double the number three years ago.
When these cases go to trial, the generics are successful 48% of the time, according to RBC. RBC also found that the number of settlements in 2009 “reached an all-time high of 54, up from 45 in the prior year."
Generic drug giant Teva Pharmaceutical Industries settled cases 47% of the time, and accounted for nearly one-third of all settlements, RBC found. GlaxoSmithKline and Novartis settled the most cases on the brand-name side.