Date: 3 May 2011
Source: ftc.gov
Link: http://ftc.gov/opa/2011/05/mmareport.shtm

Deals Are Costing Taxpayers, Consumers Billions of Dollars
Pharmaceutical companies struck an unprecedented number of deals in Fiscal Year (FY) 2010 in which the manufacturers of branded products paid potential generic rivals and generic companies agreed to defer the
introduction of lower-cost medicines for American consumers, according to an overview of industry data released by the staff of the Federal Trade Commission .

The FTC staff report found that the number of these deals skyrocketed more than 60 percent, from 19 in FY 2009
to 31 in FY 2010. Overall, the agreements reached in the latest fiscal year involved 22 different brand-name pharmaceutical products with combined annual U.S. sales of about $9.3 billion.

"Collusive deals to keep generics off the market are already costing consumers and taxpayers $3.5 billion a year in higher drug prices," said FTC Chairman Jon Leibowitz. "The increasing number of these deals is a win-win proposition for the pharmaceutical industry, but a lose-lose for everyone else."

Millions of Americans rely on generic drugs to make medicine affordable, and generics also help hold down costs for taxpayer-funded health programs such as Medicare and Medicaid. Generic prices are typically at least 20 to 30 percent less than the name-brand drugs, and in some cases are up to 90 percent cheaper.

In recent years, certain brand-name companies have paid generic challengers to settle their patent challenges and delay the introduction of lower-cost medicines. An FTC staff study   has found that such settlements that include a payment delay generic entry by 17 months longer on average than those that do not include a payment.

The FTC has challenged a number of these patent settlement agreements in court, contending that they are anticompetitive and violate U.S. antitrust laws. The agency also has supported legislation in Congress
that would prohibit settlements that increase the cost of prescription drugs.

The staff report summarizes data on patent settlements filed with the FTC and the Department of Justice during FY 2010. There were a total of 113 final patent settlements. Of those, 31 settlements contained a payment to a generic manufacturer and also restricted the generics ability to market its product. Of those 31 settlements, 26 involved generics that were so-called "first filers," meaning that they were the first to seek FDA approval to market a generic version of the branded drug. Because of the regulatory framework, when first filers delay entering the market, other generic manufacturers can also be blocked from entering the market, which makes such patent settlement deals particularly harmful to consumers.