Bill Prohibiting Reverse Payments Voted out of Committee

By Donald Zuhn --

On Thursday, the Senate Judiciary Committee reported the Preserve Access to Affordable Generics Act (S. 27) out of committee without amendment by a 10-8 vote.  The bill, which was introduced by Senator Herb Kohl (D-WI) (at right) in February (see "Sen. Kohl Introduces Bill to Prohibit Reverse Payments"), is designed to prohibit brand name drug companies from compensating generic drug companies for delaying the entry of generic drugs into the market.  Senator Kohl was joined by Judiciary Committee Chairman Patrick Leahy (D-VT) and Senators Chuck Grassley (R-IA), Dianne Feinstein (D-CA), Chuck Schumer (D-NY), Richard Durbin (D-IL), Sheldon Whitehouse (D-RI), Amy Klobuchar (D-MN), Al Franken (D-MN), and Richard Blumenthal (D-CT) in voting in favor of the bill.  Voting against the bill were Senators Orrin Hatch (R-UT), Jon Kyl (R-AZ), Jeff Sessions (R-AL), Lindsey Graham (R-SC), John Cornyn (R-TX), Michael Lee (R-UT), Christopher Coons (D-DE), and Tom Coburn (R-OK).

The bill passed out of committee would allow the Federal Trade Commission to initiate an enforcement 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."  In such proceedings, "an agreement shall be presumed to have anticompetitive effects and be unlawful if -- (i) an ANDA filer receives anything of value; and (ii) the ANDA filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the ANDA product for any period of time," unless "the parties to such agreement demonstrate by clear and convincing evidence that the procompetitive benefits of the agreement outweigh the anti-competitive effects of the agreement."  The bill lists a number of factors to be considered in determining whether the parties to the agreement have met the above burden.  The bill also provides a number of penalties for violating the Act, including a civil penalty in the amount of three times the value received by an NDA holder or given to an ANDA filer that is in violation of the Act.

On Friday, S. 27 was placed on the Senate Legislative Calendar and is now eligible for Senate floor consideration.

Following last week's committee vote, Sen. Hatch (at right) issued a statement in which he noted that he could not support legislation that "would give unprecedented authority to unelected Washington bureaucrats" to settle patent-infringement cases out of court.  Sen. Hatch's complete statement, which is not available on his website (due to a incorrect link), states:

HATCH OPPOSES MISGUIDED PATENT SETTLEMENT LEGISLATION

WASHINGTON – Sen. Orrin Hatch (R-Utah), a former chairman of the Senate Judiciary Committee, issued the following statement today after the Judiciary Committee reported the deceptively-named Preserve Access to Affordable Generics Act (S. 27), which effectively bans patent settlements between brand and generic pharmaceutical manufacturers:

"As someone who has been a longtime proponent of allowing businesses to settle patent-infringement cases out of court, I cannot support legislation that would give unprecedented authority to unelected Washington bureaucrats to perform this role, as this bill seeks to do.  This legislation stifles innovation and would make both name brand and generic drugs much more expensive.  Patent holders, generic drug manufacturers, and the American people, deserve better.  The bill passed the committee by a near party-line vote and in its current form will not become law."

In a letter sent to Chairman Leahy and Ranking Member Grassley last Tuesday, the Intellectual Property Owners Association (IPO) expressed its opposition to S. 27 and urged the two Senators to vote against the bill.  The group said it did not believe that consumers are harmed by reverse payment settlements, and "[i]n many instances, consumers benefit by such settlements, which provide for certain generic products to launch before the expiration of the litigated patent."  The letter suggested that "[s]ettlement agreements may promote competition because they may provide market entry of a generic before the generic company would otherwise have been able to enter, that is, at the expiration of a valid and enforceable patent."  With respect to the bill, the IPO stated that "[b]y imposing a presumption of anti-competition and illegality, S. 27 undermines and devalues pharmaceutical patents by imposing a presumption that any settlement involving a payment to the generic applicant is to protect an undeserved pharmaceutical patent."  Contending that "current antitrust laws are adequate to challenge settlement agreements that are truly anticompetitive," the IPO noted that "[t]he FTC already has broad powers to monitor Hatch-Waxman settlement agreements and enforce its powers when warranted," and "[t]he courts also have the power under existing antitrust law to hold the settlement unlawful when warranted."

The Generic Pharmaceutical Association (GPhA) issued a press release following the Judiciary Committee's vote, expressing its disappointment with the Judiciary Committee's decision to "once again controversially report[] out this misguided legislation," which the GPhA said constituted "a legislative ban on pro-consumer patent settlements."  The group predicted that the legislation, if enacted, "would cost consumers and the government billions of dollars and potentially force the removal of lifesaving generic medications from the market."  The GPhA also noted that "the Courts have consistently held that these settlements are pro-consumer and pro-competitive" (see "Reverse Payments in Generic Drug Settlements," - Part I, Part II, Part III, and Part IV).  Stating that "[p]atent settlements have never prevented competition beyond a patent's expiration, and in many cases have resulted in making lower-cost generics available months and even years before patents have expired," the group pointed out that "of the 23 new generic drug launches expected in 2011, settlements made 17 of these possible where the generic will launch prior to a patent's expiration."

For additional information regarding this and other related topics, please see:

• "Sen. Kohl Introduces Bill to Prohibit Reverse Payments," February 2, 2011
• "Pay-For-Delay Provision Added to Senate Appropriations Bill," August 5, 2010
• "Senate Removes Pay-For-Delay Provision from Appropriations Bill," July 29, 2010
• "House Slips Pay-For-Delay Provision into Appropriations Bill," July 7, 2010
• "Consumer Groups Ask Congress to Add Pay-for-Delay Provision to Health Care Bill," January 13, 2010
• "Senate Judiciary Committee Acts on Reverse Payments," October 20, 2009
• "Bill to Prohibit Reverse Payments Introduced in the Senate," February 4, 2009

Comments

[Greed is Not Good]

They should make it a criminal offense, just to weed out all those executives who have no ethical compass anymore.

[Dan Feigelson]

Leahy supports this bill? I'm shocked, SHOCKED, I tell you. What's next, a patent "reform" bill that discourages innovation and games the patent system in favor of large, established players?

/sarcasm off/

[6]

So let me get this straight.

They introduce legislation that is to fight generics making an agreement to delay entry into the market.

The people supposedly "against" the bill argue: "but but but sometimes agreements don't delay entry into the market!"

Are the people supposedly against the bill [Redacted]? Or do they just not understand the bill? Or are they in pharma's back pocket?

[Matthew Avery]

This bill is a terrible idea. It's treating the symptom rather than the cause of the problem. The better solution is to revise Hatch-Waxman so that the first Paragraph IV ANDA filer's 180-day exclusivity period is forfeited if it enters into a reverse payment settlement. And even better would be to have the exclusivity period roll over to the next filer if there is such a settlement.

[6]

"The better solution is to revise Hatch-Waxman so that the first Paragraph IV ANDA filer's 180-day exclusivity period is forfeited if it enters into a reverse payment settlement. And even better would be to have the exclusivity period roll over to the next filer if there is such a settlement."

Lulz.

[patent litigation]

Since the feds seem pretty determined to do away with pay-for-delay settlement agreements in their current form, it seems rather futile to fight this apparently-inevitable trajectory. Instead, pharma companies should probably put their legal counsel to work on demonstrating how "the procompetitive benefits of the agreement[s] outweigh the anti-competitive effects."
http://www.generalpatent.com/blog/