Industry groups oppose House attempt to ban patent settlements

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The trade group representing the generic drug industry has decried a House of Representatives amendment curbing reverse-payment patent settlements.

The amendment was part of a package of measures tacked onto the War Funding Bill (H.R. 4899) and passed by the House last week. It would give the Federal Trade Commission (FTC) new powers to restrict patent settlements, which involve drug companies paying manufacturers of generic pharmaceuticals to delay launch of competing products.

“To add a drug patent settlement restriction to the must-pass War Funding bill is a clear display of politics over policy,” said Kathleen Jaeger, president and CEO of the Generic Pharmaceuticals Association (GPhA), in a statement. “The fact is that supporters of limiting settlements could not pass legislation either as a stand-alone bill or as an amendment to Tax Extenders, so they pinned it on a bill that is intended to support our military troops.”

GPhA's counterpart representing brand companies, PhRMA, said it favors the case-by-case review of settlements that the law currently authorizes the FTC to do, rather than an all-out ban. In addition to the drug industry, Republican lawmakers have lined up opposition. In a letter to House Appropriations Committee Chairman David Obey (D-WI), they urged him to strip the patent-settlement measure from the war bill.

Similar in intent to an earlier measure co-sponsored by Sen. Herb Kohl (D-WI), the bill lays out fines of “not more than three times the gross revenue of the NDA holder” from sales of the drug, starting from the date of the agreement. FTC said a ban would help consumers by hastening the arrival of generic drugs to the market.

Jaeger argued that a patent-settlement ban would actually hurt the public. When companies reach a patent settlement, a launch prior to patent expiry occurs in 76% of cases, she said in an earlier statement, citing a Royal Bank of Canada analysis. “Without the ability…to settle patent disputes, consumers will be forced to wait until patent expiration more frequently.”

The bank's analysis also showed that when brand and generic companies litigate patents through to an appellate court, generic firms win in only 48% of cases. Supporters have reached different conclusions. The FTC said generics prevailed in 73% of the patent litigation ultimately resolved by a court decision between 1992 and June 2002 and that, because generics are more likely than not to win their patent trial, they ought to have their day in court.

FTC chairman Jonathan Leibowitz has put limiting so-called pay-for-delay deals high on his agenda. In a 2010 report, the FTC asserted that the agreements cost consumers $3.5 billion per year, based on the sales volume of drugs for which settlements are likely. A Democratic summary of last week's amendment estimated savings from ending the practice at only $2.4 billion over 10 years.

According to a Dow Jones report, the amendment was strongly backed by both House Speaker Nancy Pelosi (D-CA) and House Energy and Commerce Committee Chairman Henry Waxman (D-CA). But its future is uncertain. The war bill, meant to pay the tab for the Afghanistan conflict through the end of fiscal 2010, is up in the air because House Democrats are divided over the war itself. And at a June hearing, Senators Orrin Hatch (R-UT) and Arlen Specter (D-PA) said they were concerned the FTC campaign against patent-settlement deals may discourage agreements that benefit consumers.

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