Fight over “pay for delay” heats up in Washington - MedCity News https://medcitynews.com/2021/07/fight-over-pay-for-delay-heats-up-in-...

After being left to the courts for a decade, reverse settlement deals between
generic and brand pharmaceutical companies, dubbed “pay for delay” deals, are
finally getting their moment on the Hill.

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What makes them interesting, and surprising, is that instead of the generic having
to pay damages for infringing the innovator’s patent, the patent holder pays cash
or provides something of value as a condition of the settlement.

Next week, the Senate Judiciary Committee will consider legislation to tackle this
practice sponsored by Sen. Amy Klobuchar (D-MN): the Preserve Access to
Affordable Generics and Biosimilars Act (S. 1428). On Thursday, Committee Chair
Dick Durbin said he supported the bill.

While policymakers found themselves too politically divided to take action over
drug pricing under Trump, this spring found them more united amid the
pandemic. A solid eight bipartisan antitrust bills have now been introduced, with
some being signed or folded into executive action.

Congress is still deliberating over proposed legislation to curb settlements that the
Federal Trade Commission has long argued only serve to extend brand
monopolies and fill generic coffers at consumers’ and taxpayers’ expense.

On July 13, the Senate Judiciary Subcommittee on Competition Policy, Antitrust,

and Consumer Rights heard testimony as it contemplated how best to tailor such
laws.

“I believe if we put that on the Senate floor in any which way, we’d get it done,”
Klobuchar said as she opened the floor at the July 13 hearing.

Constituents across the country have been asking their congressional

representatives to take action that would lower high prices for drugs such as
Humira, EpiPen and insulin products, whose manufacturers AbbVie, Pfizer and

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Accessible Medicine (AAM) while securing the state $70 million in settlement
payments from companies accused of the practice that year, alone.

However, federal action has been stymied by disagreement about the scope of
these settlements and how to determine whether their impact is positive or
negative for drug consumers and the U.S. pharmaceutical industry overall.

On July 9, President Joe Biden signed an executive order against the practice,
arguing companies use it to avoid competition, keep prices high and stifle
innovation. Biden advised the FTC to ban pay for delay by rule, which would
sidestep the need for congressional action.

The pharma lobby, of course, would like to maintain the status quo on such deals.

In immediate response to Biden’s executive action, PhRMA CEO Steve Ubl said
Americans already benefit from “the world’s most competitive market for
prescription medicines.”

It also stands to be seen how wide of an impact Biden’s EO will have. Sidley Austin
partners recently opined: “A number of [Biden’s] proposals may be inconsistent
with existing statutory and regulatory authority, with litigation likely to follow if
these proposals are finalized and implemented.”

Congressional testimony seeks bipartisan compromise

On July 13, the Senate Judiciary Subcommittee heard different perspectives in

search of solutions to the problem of high drug prices. When it came to “pay for
delay,” some supported Klobuchar and Iowa Republican Sen. Chuck Grassley’s
proposed solution, while others wanted Congress to go back to the drawing board.

Rachel Moodie, vice president of Patents and Legal for Fresenius Kabi, which

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By contrast, George Mason University’s Mercatus Center Senior Research Fellow

Alden Abbott told senators to leave reverse settlements to antitrust enforcement
agencies. Without wholesale healthcare regulatory reform, the unfortunate result
of any attempted legislative fixes would be “significant competitive distortions
that hamper competition,” he argued.

PhRMA counsel Geoffrey Levitt agreed that existing statutory structures were
balancing competition and innovation, and should be left alone.

“It would be inappropriate to put FTC in the role of substituting its business
judgment for that of companies and second–guessing companies on a
retrospective basis, which could have a substantial chilling effect on innovation or
even punish pro-competitive behavior,” he testified.

The Supreme Court took up the issue in 2013, ruling weakly in favor of the Federal
Trade Commission in FTC v. Actavis, Inc. The highest court refused to uphold the
FTC’s assertion that reverse payment deals are by nature anticompetitive, instead
telling future courts to apply an antitrust “rule of reason” test to determine their
market impact.

Reverse settlements still under fire in the courts

Not surprisingly, litigation has continued.

A new class action against Takeda and Endo accuses the Japanese pharmaceutical
giant and generic company Par Pharmaceutical — now part of Endo — of engaging
in an anticompetitive patent settlement in 2014 that delayed generic alternatives
to Takeda’s constipation drug Amitiza.

The complaint highlighted another criticism of reverse settlements with first-

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Counsel and representatives for plaintiffs and defendants did not respond to
requests for comment.

Hiding in plain sight

Recent research by UC Hastings’ famed drug law professor Robin Feldman

implies the practice of reverse settlements is alive, well, and taking huge chunks
out of Americans’ pockets.

While academics and policymakers alike have spent decades referencing the FTC’s
2003 estimate that such deals cost Americans $3.5 billion a year, a new analysis
by Feldman’s Center for Innovation estimated they actually cost a minimum of
$6.4 billion and $36 billion annually. That’s anywhere from double to 10 times
that of the FTC’s widely used figure.

“These findings cast greater urgency and provide further context for the bills
before Congress and Biden’s call to ban ‘pay-for-delay’ practices,” Feldman said in
an email.

Photo: Ligorko, Getty Images

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