By
Donald Zuhn —

Ordinarily,
the passage of a supplemental appropriations bill would likely go
unnoticed by those in the pharmaceutical industry.  Last week, however, the House of Representatives passed the "2010 Supplemental
Appropriations Act" (H.R. 4899) after inserting a provision (among a host
of other provisions) that would allow the Federal Trade Commission (FTC) to
"initiate a proceeding . . . against the parties to any agreement
resolving or settling, on a final or interim basis, a patent infringement
claim, in connection with the sale of a drug product," wherein the
agreement has "anticompetitive effects."  The pay-for-delay or reverse payment provision, entitled the
"Preserve Access to Affordable Generics Act," also provides a number
of factors to be considered when determining whether an agreement has
anticompetitive effects.

The full text of the House amendment
to the appropriations bill has been made available on the House Committee for
Appropriations website.  According to an Intellectual Property
Organization Association (IPO) report,
the House pay-for-delay provision is "almost identical" to the
standalone "Preserve Access to Affordable Generics Act" (S.369)
introduced by Sen. Herb Kohl (D-WI) in February of 2009 (see "Bill to Prohibit Reverse Payments Introduced in the
Senate").  The Senate bill states that
"settlements which include a payment from a brand name manufacturer to a
generic manufacturer to delay entry by generic drugs are anti-competitive and
contrary to the interests of consumers," and therefore, was intended "to
prohibit payments from brand name to generic drug manufacturers with the
purpose to prevent or delay the entry of competition from generic drugs."

In
a press release
issued by the House Committee on Appropriations, the Committee noted that the
House amendment would add an extra $22.8 billion to the Senate appropriations bill,
which would provide a total of $45.5 billion in discretionary funding for FY 2010.  According to the Committee's release,
the Senate's $45.5 billion would include $37.12 billion for U.S. troops in Iraq
and Afghanistan, $5.1 billion for FEMA disaster relief, $2.9 billion for Haiti,
$162 million for the Gulf Coast oil spill, $13 billion in mandatory funding for
Vietnam veterans exposed to Agent Orange, and over $600 million for other
domestic needs.  The $22.8 billion
provided by the House amendment would provide $10 billion for an Education
Jobs Fund to help save 140,000 education jobs for the next school year, funding
for Pell Grants, summer youth jobs, the Pigford and Cobell settlements, border
security, innovative technology energy loans, schools on military
installations, additional Gulf Coast oil spill funding, emergency food
assistance, a new soldier processing center at Fort Hood, and program integrity
investments.  The House amendment
also calls for $23.5 billion in offsets to hold spending over the next ten years
to the level requested by President Obama.

The
House Committee on Appropriations also provides a summary
of the House amendment on its website.  Among
the "Other Provisions" slipped into the bill via the House amendment is the Preserving Access
to Affordable Generic Drugs provision, which the Committee contends will:

[S]trengthen
the Federal Trade Commission's ability to restrict lucrative "pay for
delay" payments by brand-name drug manufacturers to their generic
competitors to delay the manufacture and marketing of more affordable generic
drugs to consumers.  In 2009, an
FTC study found that a ban on these lucrative sweetheart drug industry deals
would save American consumers $35 billion over 10 years.  CBO estimates that with the provision
in this bill, the federal government will save more than $2.4 billion over 10
years in lower drug costs for Medicare, Medicaid, military and veterans' health
programs.

The
IPO noted in its report on the House appropriations amendment that the
organization opposes legislation banning pay-for-delay agreements because "existing
antitrust case law is sufficient to protect competition against the improper
expansion of a patent owner's right to exclude as a result of a settlement."  A recent Patent Docs series on pay-for-delay agreements reaches a similar
conclusion (see "Reverse
Payments in Generic Drug Settlements" – Part I,
Part II,
Part III,
Part IV).  The IPO also notes in its report that
the Senate is likely to take up the appropriations bill, with the House amendment,
after returning from its July 4th recess on July 12.

On
Friday, the Generic Pharmaceutical Association (GPhA) released
a statement saying that the organization was "extremely disappointed that the
U.S. House of Representatives adopted language in the War Funding Bill (H.R.
4899) that will delay consumer access to affordable medicines by severely
restricting drug patent litigation settlements."  Noting that "[m]ore than a decade of evidence shows
that patent settlements actually help bring lower-cost generic drugs to market
much sooner than patent expiration dates," the GPhA declared that "add[ing]
a drug patent settlement restriction to the must-pass War Funding Bill is a
clear display of politics over policy."  The group warned that "[t]he unintended consequence of
these restrictions on settlements will significantly harm the millions of
Americans who rely on generic drugs and are awaiting the availability of new
generics," and urged the Senate to remove the provision and instead give
it the "serious, thoughtful consideration" it deserves.