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By Mr. KOHL (for himself, Mr. GRASSLEY, Mr. FEINGOLD, Mr. DURBIN, and Mr. BROWN):
S. 369. A bill to prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market; to the Committee on the Judiciary.
Mr. KOHL. Mr. President, I rise today to introduce, with Senators GRASSLEY, FEINGOLD, DURBIN and BROWN, the Preserve Access to Affordable Generics Act. Our legislation will prevent one of the most egregious tactics used to keep generic competitors off the market, leaving consumers with unnecessarily high drug prices. The way it is done is simple--a drug company that holds a patent on a brand-name drug pays a generic drug maker to not sell a competing product. The brand name company profits so much by delaying competition that it can easily afford to pay off the generic company. The only losers are the American people, who continue to pay unnecessarily high drug prices for years to come.
Our legislation is basically very simple it will make these anti-competitive, anti-consumer patent payoffs illegal. We will thereby end a practice seriously impeding generic drug competition, competition that could save consumers literally billions of dollars in health care costs. When we first introduced this legislation to ban these pay-off settlements in 2007, it had broad support from those concerned with rising health care costs, including the AARP. The New York Times editorialized in January 2007 in support of legislation to ban the pay-off settlements, pointing out that the settlements ``are a costly legal loophole that needs to be plugged by Congressional legislation.''
Despite the opposition of the Federal Trade Commission to these anti-competitive patent settlements, two 2005 appellate court decisions have permitted these backroom payoffs. And the effect of these court decisions has been stark. In the two years after these two decisions, the FTC has found, half of all patent settlements involved payments from the brand name from the generic manufacturer in return for an agreement by the generic to keep its drug off the market. In the year before these decisions, not a single patent settlement reported to the FTC contained such an agreement.
When brand name drugs lose their patent monopoly, this opens the door for consumers, employers, third-party payers, and other purchasers to save billions--30 percent to 80 percent on average--by using generic versions of these drugs. A recent study released by the Pharmaceutical Care Management Association showed that health plans and consumers could save $26.4 billion over 5 years by using the generic versions of 14 popular drugs that are scheduled to lose their patent protections before 2010.
The urgency of the need for this legislation was highlighted just yesterday, when the FTC filed an antitrust case challenging the latest ``pay for delay'' settlement. The FTC's Complaint alleges that Solvay, the brand name manufacturer of a hormone-boosting drug, entered into an agreement with two generic companies to delay the entry of their generic version of the drug for nine years. The FTC alleged that Solvay agreed in 2006 to share its profits with the generic competitors as long as they did not launch their generic versions until 2015. If these allegations are true, this is exactly the anti-consumer, anti-competition agreement that would be rendered illegal by our bill.
We introduced this bill in the last Congress and it passed out of the Judiciary Committee without a dissenting vote. Nonetheless, we heard from some in the generic drug industry that on occasion these patent settlements may not harm competition. That is why this year's version of the legislation includes a new provision not contained in the bill introduced in the last Congress. This new provision would permit the Federal Trade Commission the guardians of competition in this industry to exempt from this amendment's ban certain agreements if the FTC determines such agreements would benefit consumers. This provision will ensure that our amendment does not prevent any agreements which will truly benefit consumers.
It is also important to note that--contrary to the arguments made by some--our amendment will not ban all patent settlements. In fact, our bill will not ban any settlement which does not involve an exchange of money. This legislation will do nothing to prevent parties from settling patent litigation with an agreement that a generic will delay entry for some period of time in return for ending its challenge to the validity of the patent. Only the egregious pay-off settlements in which the brand name company also pays the generic company a sum of money to do so will be banned.
In closing, we cannot profess to care about the high cost of prescription drugs while turning a blind eye to anticompetitive backroom deals between brand and generic drug companies. It is time to stop these drug company pay-offs that only serve the companies involved and deny consumers to affordable generic drugs. I urge my colleagues to join me in this effort by supporting this legislation.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.
There being no objection, the text of the bill was ordered to be printed in the Record
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