Today the U.S. Senate Appropriations Committee voted to pass Senator Herb Kohl's bill intended to reduce the number of pay-for-delay settlements that keep generic drugs off the market. The Preserve Access to Affordable Generic Drugs Act (S. 369), included in the Financial Services and General Government Appropriations bill reported out of the Senate Appropriations Committee, combats the anti-consumer practice of brand-name drug manufacturers using pay-off agreements to keep cheaper generic equivalents off the market. Under these pay-off agreements, brand name drug companies settle patent disputes by paying the generic drug manufacturer millions of dollars in exchange for a promise that it will keep its version of the drug off the market. The companion bill, H.R.1706, was recently passed by the U.S. House of Representatives as part of H.R. 4899, the Supplemental Appropriations Act of 2010.
"The cost of brand-name drugs rose nearly ten percent last year. In contrast, the cost of generic drugs fell by nearly ten percent. At this time of spiraling health care costs, we cannot turn a blind eye to these anticompetitive backroom deals that deny consumers access to affordable generic drugs," said Kohl.
The Congressional Budget Office estimates that the legislation would save the federal government $2.6 billion over 10 years by reducing drug costs. The Federal Trade Commission estimates that stopping these types of settlement agreements would save consumers at least $3.5 billion each year. The compromise measure passed by the Judiciary Committee, in a bi-partisan vote of 12 to 7, reflects a change to the original bill that would allow settlement agreements between drug companies if they can prove to a judge by clear and convincing evidence that the deal will not harm competition. The bill also contains significant penalties to serve as a strong deterrent against these anti-consumer agreements.
Kohl introduced S. 369 in February 2009 with Senators Chuck Grassley (R-IA), Russ Feingold (D-WI), Dick Durbin (D-IL) and Amy Klobuchar (D-MN) as original cosponsors. Senators Tim Johnson (D-SD), Byron Dorgan (D-ND), Sherrod Brown (D-OH), Al Franken (D-MN), Susan Collins (R-ME), and Bill Nelson (D-FL) have since signed onto the legislation. Kohl serves as chair of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights.