Lobbying stalls generic drug legislation

In 1984, Congress passed the Hatch-Waxman Act, which established procedures to encourage generic companies to challenge patents before their expiration. In recent years, generic companies have increasingly resolved such challenges through settlements in which the generics receive cash or lucrative licensing and marketing agreements.

The drug companies are required to file their settlements with the FTC. Two federal appeals court rulings in 2005 upholding the legality of reverse payments have made it more difficult for the agency to block them.

In one of those cases, Barr Laboratories Inc. abandoned its successful challenge to AstraZeneca PLC's patent for the breast cancer drug tamoxifen. In exchange, Barr received a $21 million payment and entered an agreement with AstraZeneca under which Barr sold tamoxifen provided by AstraZeneca.

Canadian drug imports
Consumers filed a lawsuit. The 2nd U.S. Circuit Court of Appeals upheld a federal judge who had concluded that the agreement did not violate federal antitrust laws. In June, the Supreme Court refused to take up an appeal.

A plaintiff in that case, Helen Donega of North Adams, Mass., said she was saving only about 5 percent off the brand-name price when she purchased the Barr generic tamoxifen in 1998 and 1999. Donega, who had insurance through Medicare but no drug coverage, said she had to pay between $85 and $90 a month for the drug.

She eventually bought tamoxifen in Canada for about one-10th of the price she was paying in the U.S.

Donega, 75, who had a mastectomy and has been cancer-free for several years, said she was amazed when she learned of the deal between Barr and AstraZeneca, which sold tamoxifen under the brand name Nolvadex. AstraZeneca's patent on the drug has since expired.

"I must have been naive. I thought the government was on our side," she said. "No, the government isn't on our side. Big PhRMA is powerful and has a lot of money. That's whose side they're on."

Patent dispute or delay?
AstraZeneca spent just under $2.4 million in lobbying expenses over the 12-month period ending July 1 on issues including the reverse payment bill.

In an e-mail statement, AstraZeneca spokesman Tony Jewell said the settlement with Barr Laboratories was meant to resolve a patent dispute, not to delay the generic tamoxifen.

Barr spent $660,000 in the same 12-month period. At a Senate Judiciary Committee hearing this year, Barr Chairman and CEO Bruce L. Downey said the company settled the case with AstraZeneca because it thought it would lose its patent challenge on appeal.

"We took payment, we took a license, and we entered the market early with tamoxifen," he said. "And over the course of our license, we saved consumers about $300 million on that product."

Working toward a compromise
Not all patent litigation settlements between generic and brand name companies involve payments, and Kohl's bill bans only those where the generic company receives something of value. The legislation would allow, for example, a deal in which the two sides merely compromise on the date that a generic can enter the market. And Kohl recently agreed to add a provision that would exempt some reverse payment settlements if the FTC determines they would benefit consumers.

The FTC has called on Congress to pass legislation to crack down on the reverse payment settlements, although it hasn't endorsed any specific bill.

"Such settlements restrict competition at the expense of consumers, whose access to lower-priced generic drugs is delayed, sometimes for many years," FTC Chairwoman Deborah Platt Majoras said in testimony before a House task force in September.

Generic and brand name drug companies argue that a ban would be counterproductive. PhRMA senior vice president Ken Johnson said in a statement that pharmaceutical research companies invest billions of dollars developing new medicines, and that patent rights help the companies recoup those investments and fund new research.

Jake Hanson, a lobbyist for Barr Laboratories, said that the settlements are sometimes necessary when a generic company considers all the ramifications behind a patent challenge.

"Sometimes as you're moving through discovery and different levels of a court case, you realize that it may not be a slam dunk," Hanson said.

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