According to IQVIA, a health-care data firm, generic prescription drugs saved Kentucky $5.7 billion in 2017, $3.2 billion of which were savings reaped by the commonwealth’s Medicare and Medicaid programs.
However, legislation (S. 64) being considered by the U.S. Senate would delay Kentucky patients access the more-affordable generic and biosimilar drugs being developed today.
In fact, it would likely discourage the innovation and investment in research needed to make those drugs a reality by allowing brand-name drug companies to stymie the free market by abusing the patent process – the primary contributor to keeping generic drugs from getting to the market earlier after the expiration of the original patent dates.
The stated intent of the Senate’s proposed legislation would be to end what’s known as “pay for delay,” whereby generic drug manufacturers negotiate with brand companies to actually mark the day on the calendar their products will come to market, and supposedly receive compensation for the delay.
As distasteful as a policy labeled “pay for delay” may be at its core, especially when it involves potentially life-saving drugs, the practical end result of one important part of this policy causes generic drugs to reach the market sooner.
The U.S. Senate legislation purports to undo the entire current “pay for delay” program in order to get rid of another aspect of this program, which involves controversial “reverse settlement” payments which, indeed, is very bad policy designed to allow brand companies to avoid generic competition for additional years.
However, this “pay for delay” legislation is, like other prescription-drug policies moving through the U.S. Senate, a solution in search of a problem when it comes to such payments.
Even worse, it would throw the bed out with the bedpan by disrupting the current mechanism in place allowing agreements which give generic drug makers what they want and need most: a certain date of when they can begin offering their drugs on the market.
The kind of anticompetitive monetary settlements which actually do delay those drugs from becoming accessible to patients was largely dealt with when the Supreme Court decided in 2013 (FTC v Actavis) that a “an unexplained large reverse payment … likely seeks to prevent the risk of competition.”
The court’s decision has been vigorously enforced by the Federal Trade Commission (FTC), which reviews all settlements between generic manufacturers and brand-drug companies to ensure compliance. It has essentially removed obstacles to generics reaching the marketplace, at least the ones involving “unexplained large” reverse payments.
The FTC released a report in May indicating that only one of the 232 agreements between generic and brand drug companies in 2016 failed to authorize a date on the calendar for the generic medicine involved to get to market.
While the actual number of agreements has increased since the Actavis ruling, they’re not of the “explained large reverse payment” variety. Rather, they result in brand-drug companies paying generic manufacturers – primarily in the form of litigation fees – to maintain some restrictions on compensation and obtain a calendar date for giving access of the drug to patients and consumers.
Kentucky Senator and Majority Leader Mitch McConnell, who will play a significant role in deciding which proposals move forward in the deliberative body, might want to take a closer look at what’s being proposed.
While good intentions abound with such legislation – making sure, for example, that those big bad pharmaceutical companies don’t shut out the competition posed by generics and biosimilar drugs – the bill as currently written actually offers some serious unintended consequences. It:
* Overturns the Supreme Court’s Actavis decision and make virtually all settlement agreements – not just the ones with alleged reverse payments – between generic makers and brand-drug companies illegal.
* Threatens agreements reached by private parties since the Court’s ruling by imposing a higher legal standard, which amounts to unfairly changing the rules after the fact.
* Deprives patients for generic drugs they count on now and delays access for future generics and biosimilars.
Senators wanting to do something politically symbolic during an election season to show they’re looking out for the little guy – consumers and patients – could codify the Court’s Actavis decision in a way that only impacts agreements going forward and prevents a repeat of past shenanigans resulting in patients being denied access to lifesaving medicines , and sooner, by drug companies’ greed.
Even more significant, they could implement policies such as those in the CREATES Act, which appears to have strong bipartisan support in the U.S. Senate and which we will address – along with other healthy policy proposals – in the next post.