Senate panel adopts bill restricting generic drug delays

Washington The Senate Judiciary Committee on Oct. 15 approved a bill that would restrict brand-name drug companies' abilities to settle patent disputes by paying drugmakers to delay the introduction of generics -- an arrangement sometimes called "pay-for-delay."

The committee voted 12-7 to adopt the measure, known as the Preserve Access to Affordable Generics Act. The bill has eight co-sponsors, including two Republicans. One of them -- Sen. Charles Grassley (R, Iowa) -- said the legislation is a response to a flurry of pay-for-delay arrangements after two appellate court decisions in 2005 allowed such deals. Nearly half of all patent settlements in the two years after the decisions involved pay-for-delay, he said.

"Our bill takes direct aim at anti-consumer, anticompetitive agreements between generic and brand-name pharmaceutical manufacturers that line drugmakers' pockets at the expense of consumers," Grassley said.

The bill would presume that pay-for-delay deals are illegal. But the companies would have a chance to provide clear and convincing evidence in court that the settlement provides more pro-competition benefits than anti-consumer effects. If not, the Federal Trade Commission could issue a cease-and-desist order and pursue financial penalties against the parties.

Generic Pharmaceutical Assn. President and CEO Kathleen Jaeger said the bill needs a Congressional Budget Office cost estimate to help judge its merits. Sometimes patent settlements actually lead to the earlier introduction of generic drugs, which benefits consumers, she said. "Without the ability to settle litigation, generic companies are far less likely to challenge brand patents to the detriment of the health care system and consumers."

Sen. Orrin Hatch (R, Utah) said he agrees on the need to stop anti-consumer settlements, but he did not support the bill, partly because he believes it could discourage generic drugmakers from pursuing patent infringement lawsuits. "We've made some significant improvements to this bill, but I don't think we're there yet."

Sen. Herb Kohl (D, Wis.), the bill's sponsor, first introduced the measure in 2006. A House Energy and Commerce subcommittee approved its own legislation in June that would ban pay-for-delay agreements.