Legislation aimed at speeding the availability of cheaper generic drugs has stalled in Congress in the face of major lobbying by the drug industry.
The Senate bill would ban most settlements known as “reverse payments,” in which a brand-name company pays a generic manufacturer to delay the introduction of the generic drug. The Federal Trade Commission, which has called on Congress to take action, says such settlements could cost American consumers billions of dollars.
An Associated Press review of lobbying reports, from July 1, 2006, through June 30, 2007, found that $38.8 million was spent by at least a dozen generic and brand-name companies and their trade associations on issues including the Senate legislation. The lobbying reports do not specify how much of that money was directed at the reverse payment bill, and they are not required by law to do so.
More than half of those expenses were piled up by the Pharmaceutical Research & Manufacturers of America, or PhRMA, which represents brand-name drug companies. PhRMA spent $19.5 million in the 12-month period ending June 30 on in-house lobbying expenses, an increase of about $3 million over the previous 12-month period.
And the Generic Pharmaceutical Association reported lobbying expenses of around $420,000 for the first six months of this year. It did not report lobbying on the bill in its year-ending 2006 report. The remaining $19 million was spent by a variety of drug companies, including Bayer Corp., Schering-Plough, Pfizer and Teva Pharmaceuticals USA.
“Lobbyists have a lot of influence in Washington,” said the bill’s sponsor, Sen. Herb Kohl, who chairs the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights. “If we can just get this to a vote, it will be pretty hard for people to vote against it. A vote against this is a vote against consumers.”
Kohl, D-Wis., also chairs the Senate Special Committee on Aging, where he has pushed for generic drugs as a way for seniors to save money on their medications. Generic drugs are 30 to 80 percent cheaper than brand-name drugs, according to the Generic Pharmaceutical Association.
Kohl has offered the reverse payment legislation for the past two sessions of Congress. This year, House supporters introduced a similar bill, which remains in committee. Neither bill has come up for a vote, although the Senate bill did make it through the Judiciary Committee a few months ago.
In May, Kohl tried to get a vote on the Senate floor under a procedure known as unanimous consent, but Republicans objected. Sen. Mike Enzi, R-Wyo., said Sen. Jon Kyl, R-Ariz., and others involved with the legislation wanted more time to work on it.
Kyl asked the Justice Department’s antitrust division for its views on the bill and is waiting for a response, said Kyl spokesman Andrew Wilder. The antitrust division declined to comment.
Sen. Orrin Hatch, R-Utah, has expressed concerns about Kohl’s bill. Hatch issued a statement saying he voted to move the bill through committee this year “with the reservation that we find a balanced solution, one that bars anticompetitive settlements without jeopardizing the very kind of settlements that are critical to consumers and taxpayers.”
“We haven’t reached that balance yet, so it’s understandable this bill has not moved forward,” Hatch said.
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.
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.”
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.”
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.