Kohl, Leahy, Grassley, Schumer, Feingold introduce bill to stop ‘payoffs’ that delay generic drugs

Washington, D.C. - Top Senate Judiciary Committee members Herb Kohl (D-WI), Patrick Leahy (D-VT), Chuck Grassley (R-IA), Charles Schumer (D-NY) and Russ Feingold (D-WI) will introduce the "Preserve Access to Affordable Generics Act" in the 110th Congress to explicitly prohibit brand-name drug manufacturers from using pay-off agreements to keep cheaper generic equivalents off the market.

Leahy, chairman of the Judiciary Committee, held a hearing today to examine the issue. Federal Trade Commissioner Jon Leibowitz and former-Congressman Billy Tauzin, now CEO of Pharmaceutical Research and Manufacturers of America (PhRMA), were on hand to discuss the impact these agreements have on the pharmaceutical market.

"When big brand-name drug companies pay generic manufacturers to stop generic drugs from reaching pharmacy shelves, consumers lose big-time," Kohl said. "We can't say we care about the high cost of prescription drugs while turning a blind eye to backroom deals between brand and generic drug companies. This practice has got to stop."

Leahy said, "Some drug firms have colluded to pad their profits by forcing consumers to pay higher prices than they would pay for lower-cost generics. Now that this sweetheart dealing has been uncovered, we owe it to consumers to end it. Our bill is a clear-cut opportunity to remove an impediment to competition that prevents the marketplace from working as it should -- to benefit consumers, and not just the drug companies."

In 2005, two appellate court decisions overturned Federal Trade Commission's (FTC) long-standing position against this practice and upheld settlements that include such pay-offs. Last year's Supreme Court dismissal of the FTC's latest appeal prompted lawmakers to introduce this important bill.

"Recently, the dramatic increase in wheeling and dealing between brand name and generic pharmaceutical manufacturers have only ended up delaying the entry of less costly medicines in the marketplace, leaving the bill to the consumer. These deals also threaten the sustainability of federal health care programs, such as Medicare and Medicaid. It's important that the Federal Trade Commission have as many tools as possible in its arsenal to protect the American public from these types of anti-competitive agreements," Grassley said.

"When consumers have access to lower-cost drugs, we all win," Schumer said. "But as long as we let stand the appellate court decisions that encourage brand and generic companies to split up the pie between them and not give the consumer a fork, we are accepting higher drug prices for the average American."

"The current high prescription drug prices take a particularly heavy toll on sick and low-income individuals who desperately need life-saving medicines. It is time for Congress to ensure that a truly competitive marketplace for prescription drugs is in place -- one that will help bring down the skyrocketing prices in this country," Feingold said.

A FTC report found that in the six months following the 2005 court decisions, there were three settlement agreements in which the generic company received compensation and agreed to a restriction on its ability to market the product. Additionally, the FTC found that at least seven settlement agreements made in 2006 included a pay-off from the brand manufacturer in exchange for a promise by the generic company to delay entry into the market.

According to a study released last year by Pharmaceutical Care Management Association (PCMA), health plans and consumers could save $26.4 billion over the next five years by using the generic versions of 14 popular drugs that are scheduled to lose their patent protections before 2010.

Kohl and Leahy have also introduced S. 25, Citizen Petition Fairness and Accuracy Act of 2007, legislation that prohibits brand name drug companies from abusing the Food and Drug Administration's (FDA) "citizen petition" review process.

In 2003, Senators Grassley and Leahy were able to include their Drug Competition Act in the Medicare Modernization Act. The Drug Act required companies such as Schering-Plough to report all proposed deals with potential generic competitors, which were often previously worked out in secret, to the federal antitrust law enforcers - the FTC and the Justice Department.

Sen. Schumer is also the author of the Greater Access to Affordable Pharmaceuticals Act with Senator John McCain (R-AZ). The Schumer-McCain law, which was enacted in 2003, shut down loopholes that drug companies created in Hatch-Waxman law, enabling generic drugs to be brought to market sooner, and lowering the cost of prescriptions for millions of Americans.