Generic Drugs: The Pay-for-Delay Problem (Public Health in the 21st Century)

GENERIC DRUGS: THE PAY-FOR-DELAY PROBLEM......Page 3
GENERIC DRUGS: THE PAY-FOR- DELAY PROBLEM......Page 5
CONTENTS......Page 7
PREFACE......Page 9
SUMMARY......Page 13
BACKGROUND......Page 15
FINDINGS FROM PHARMACEUTICAL AGREEMENT FILINGS FROM FY2004 THROUGH FY2009......Page 16
STUDY METHODOLOGY......Page 18
How Staff Calculated the Estimate of $3.5 Billion Annually that Consumers Lose due to Pay-For-Delay Agreements......Page 19
(1) Consumer savings from generic competition......Page 20
(3) Sales Volume of Drugs for which Settlements are Likely......Page 21
Results with Varied Assumptions......Page 22
End Notes......Page 23
“PAY-FOR-DELAY” SETTLEMENTS IN THE PHARMACEUTICAL INDUSTRY: HOW CONGRESS CAN STOP ANTICOMPETITIVE CONDUCT, PROTECT CONSUMERS’ WALLETS, AND HELP PAY FOR HEALTH CARE REFORM (THE $35  BILLION SOLUTION)......Page 25
A BRIEF HISTORY......Page 27
Savings to Consumers and the Federal Government......Page 29
ENCOURAGING SIGNS......Page 31
APPENDIX: CALCULATION OF CONSUMER SAVINGS......Page 32
Consumer Savings from Generic Competition......Page 33
Sales Volume of Drugs for which Settlements are Likely......Page 34
Final Estimate Calculation......Page 35
End Notes......Page 36
STATEMENT OF THE FEDERAL TRADE COMMISSION, BEFORE THE SUBCOMMITTEE ON COURTS AND COMPETITION POLICY, HEARING ON “ANTICOMPETITIVE PAY-FOR-DELAY SETTLEMENTS IN THE PHARMACEUTICAL INDUSTRY: WHY CONSUMERS AND THE FEDERAL GOVERNMENT ARE PAYING TOO MUCH FOR PRESCRIPTION DRUGS”......Page 39
A. Permissive Court Decisions have Made Pay-for-Delay Settlements Commonplace in Hatch-Waxman Patent Cases......Page 41
B. The Profitability of Delaying Generic Entry Means that these Agreements will become More Prevalent......Page 44
C. Pay-For-Delay Settlements Impose Enormous Costs on Consumers and the Health Care System......Page 45
D. Permissive Legal Treatment of Pay-for-Delay Settlements Undermines the Hatch-Waxman Act......Page 47
E. Legislation is Likely to be Swifter and More Comprehensive than Litigation......Page 48
II. THE ARGUMENTS AGAINST BARRING EXCLUSION PAYMENTS ARE CONTRADICTED BY EXPERIENCE IN THE MARKET......Page 49
III. THE LEGISLATIVE REMEDY......Page 50
End Notes......Page 51
TESTIMONY OF HEATHER BRESCH, CHIEF OPERATING OFFICER, MYLAN, INC., BEFORE THE SUBCOMMITTEE ON COURTS AND COMPETITION POLICY, HEARING ON “PAY TO DELAY: ARE PATENT SETTLEMENTS THAT DELAY GENERIC DRUG MARKET ENTRY ANTICOMPETITIVE”......Page 55
A BRIEF HISTORY OF HATCH-WAXMAN......Page 57
AUTHORIZED GENERICS......Page 58
PATENT SETTLEMENTS......Page 61
TESTIMONY OF BRET M. DICKEY, SENIOR VICE PRESIDENT, COMPASS LEXECON, BEFORE THE SUBCOMMITTEE ON COURTS AND COMPETITION POLICY, HEARING ON “PAY TO DELAY: ARE PATENT SETTLEMENTS THAT DELAY GENERIC DRUG MARKET ENTRY ANTICOMPETITIVE”......Page 65
Executive Summary......Page 69
A. Innovation and Patent Protection......Page 74
B. Generic Competition......Page 75
3. Overview of Hatch-Waxman......Page 76
4. Patent litigation under Hatch-Waxman......Page 77
D. Patent Litigation and Settlement Agreements......Page 78
2. Patent settlements have the potential to be anticompetitive......Page 79
1. Basic Model......Page 81
2. Litigation costs......Page 83
3. Risk aversion......Page 84
4. Information asymmetries......Page 85
A. Overview......Page 87
1. History......Page 88
2. Current status......Page 89
D. Basic Economic Model......Page 90
1. Overview......Page 92
3. Cash payments with a cash-strapped generic......Page 93
4. Cash payments with an optimistic generic......Page 95
5. Cash payments with information asymmetries......Page 96
6. Collateral business agreements......Page 97
IV. Long-Run Competitive Effects......Page 98
V. Policy Implications and Conclusions......Page 99
End Notes......Page 100
STATEMENT OF GUY DONATIELLO, ENDO PHARMACEUTICALS INC., BEFORE THE SUBCOMMITTEE ON COURTS AND COMPETITION POLICY, HEARING ON “PAY TO DELAY: ARE PATENT SETTLEMENTS THAT DELAY GENERIC DRUG MARKET ENTRY ANTICOMPETITIVE”......Page 105
COMPANY PROFILE......Page 109
THE CHALLENGE......Page 110
THE POSITION OF NEPHRON PHARMACEUTICALS CORPORATION ON H.R. 1706......Page 112
NEPHRON’S RECOMMENDATION FOR H.R. 1706......Page 113
End Notes......Page 114
TESTIMONY OF WILLIAM VAUGHAN, SENIOR HEALTH ANALYST, CONSUMERS UNION, NON-PROFIT PUBLISHER OF CONSUMER REPORTS, BEFORE THE SUBCOMMITTEE ON COURTS AND COMPETITION POLICY, HEARING ON “PAY TO DELAY: ARE PATENT SETTLEMENTS THAT DELAY GENERIC DRUG MARKET ENTRY ANTICOMPETITIVE”......Page 115
High Costs Impact Familie......Page 117
Generics Dramatically Lower Costs......Page 118
THE DYNAMICS OF GENERIC DRUG COMPETITION CREATE POWERFUL INCENTIVES FOR BRAND-NAME AND GENERIC COMPANIES TO SETTLE PATENT LITIGATION IN A WAY THAT THWARTS THE OBJECTIVES OF THE HATCH-WAXMAN ACT......Page 119
OTHER LEGISLATIVE SUGGESTIONS TO HELP SPEED GENERIC ENTRY......Page 121
FINDING OTHER WAYS TO HELP CONSUMERS HOLD DOWN DRUG COSTS WHILE PROMOTING DRUG INNOVATION......Page 123
Best Buy Drug Campaign......Page 126
The Hatch-Waxman Act Exacerbates the Incentive to Settle Patent Litigation with Compensation Paid to the Generic Applicant......Page 128
THESE SETTLEMENTS ARE CONTRARY TO THE PURPOSE OF THE HATCH-WAXMAN ACT......Page 129
THE COURTS ARE UNLIKELY TO PROVIDE TIMELY RELIEF TO CONSUMERS......Page 130
End Notes......Page 132
CHAPTER SOURCES......Page 133
Untitled......Page 135