By Kevin E. Noonan --
H.R. 3995), was introduced "[t]o prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market, and for other purposes." The two Congressmen were also joined by Reps. Chris Van Hollen (D-MD), Frank Pallone (D-NJ), G.K. Butterfield (D-NC), and fellow Illinois Rep. Jan Schakowsky.
Rep. Rush describes the intent of these provisions on his home page. "Currently," he explains, "these arrangements have generally been held to be legal but they hurt consumers and increase the cost that taxpayers pay to fund Medicare and Medicaid." These settlements "cost consumers billions of dollars" (noting that the Congressional Budget Office estimates that the cost "could be" "roughly 3 billion dollars over ten years" to taxpayers, raising the (unanswered) question of why that estimate is so carefully qualified. The Congressman also believes that:
We should be concerned about what patients and the federal government are not getting out of these anticompetitive arrangements. Consumers and patients, a good many of whom are elderly and on fixed incomes are not getting access to more affordable generic drugs to help treat their conditions. And, the government is not getting the benefit of lower drug prices and related cost savings for Medicare and Medicaid that would help significantly in reducing our federal deficit.
His intention is clearly stated: "My bill would outlaw these settlement abuses and work to reverse the heavy tolls that they take on consumers' wallets and the Federal treasury from having to pay more money over a longer period of time for brand name drugs and authorized generics."
While certainly heart-felt, these sentiments fly in the face of careful economic analyses by several Federal Courts of Appeal that (in individual cases) lawful reverse payments actually reduce costs for consumers (in the long run) and avoid wasteful investment by innovator companies in litigation rather than innovation (see "Reverse Payments in Generic Drug Settlements" - Part I, Part II, Part III). Indeed, the only governmental agency more committed than some Congressmen to the need to eliminate the "scourge" of reverse payment settlements is the Federal Trade Commission, which posits that reverse payments only occur when the underlying patents are invalid or unenforceable (thus cynically refusing to consider that sound economics rather than nefarious lawyering is the basis for innovator companies to enter into reverse payment settlements).
The bill stands a chance of passage if only because it seems to promise reduction in drug prices and in the cost of drugs to the Federal government. As with much of what is happening in the country these days, it is long on short-term gain and short on long-term consequences, and contrary to the overwhelming experience of these agreements when scrutinized by courts in the context of antitrust litigation. While restricting enforcement to the FTC may prevent every state attorney general or aggrieved citizen from filing a lawsuit based on the Sherman Act (and avoid except for the perjury provisions the threat of criminal sanction), the bill represents another piece of political drama that may actually have much more negative consequences economically than the benefits it purports to pursue. Perhaps the improbability of its passage in view of the current political climate is a blessing. But it should not be too much to ask that our representatives actually consider all the consequences before they attempt to impose limits on the flexibility of innovator and generic companies to iron out their differences and provide both new drugs and generic copies of old drugs within the prevailing regulatory regime.