House Subcommittee Hearing Scheduled Today: The End of “Pay to Go Away” Deals Between Drugmakers?

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A House Energy and Commerce subcommittee hearing was scheduled for today regarding the practice of brand-name pharmaceutical companies paying generic drugmakers to delay the launch of their drugs.  These agreements, sometimes known as “pay to go away” arrangements, allow the brand-name pharmaceutical companies to benefit by keeping the cheaper generic drugs off the market for a period of time,  and essentially holding a monopoly on the drug for longer.  The generic drug company also benefits, as they are paid to simply delay their drug’s entrance into the market.

The Wall Street Journal reported that the FTC has fought these payments for years, Democrats have discussed passing legislation to forbid such deals, and President Obama has promised to stop the arrangements in his budget.  Senator Herb Kohl (D-Wis.) introduced a bill in February to abolish these deals and Rep. Bobby Rush (D-Ill.) introduced a comparable bill in the House last week.

The WSJ states that generic drugs can cost as little as a quarter of the brand-name drug, which can ultimately save billions of dollars in drug costs.  Eliminating the deals that keep the generic drugs off the market would therefore create significant savings to the country’s health care system.  Scott Hemphill, associate Professor at Columbia Law School, told the WSJ that ten brand-name drugs with about $17 billion in annual sales are now protected by the agreements, including Pfizer’s Lipitor.  Pfizer said that this was not the case.

Since 2001, the FTC has filed six suits to stop these deals, with little success.  However, in February, FTC Commissioner Jon Leibowitz said that he believed Obama’s administration was going take action to stop the “pay to go away” deals.  According to Medical News Today:

Leibowitz said “The new administration does seem to recognize that this is a real problem.”  He added that “fixing it … would actually help pay for health care reform.” Leibowitz said FTC will take a two-pronged approach to stopping “pay-for-delay” settlements. First, the agency will challenge the most anti-competitive settlements in court, and secondly, it will support legislation against such deals. Leibowitz said he expects the Obama Department of Justice to be “much more supportive” of legal challenges to the settlements than the Bush administration. He added that it also is possible “the-pay-for delay settlement issue or problem will get resolved in health care reform, and … if that happens, then it will presumably get resolved more expeditiously.”

Bill Would Require Transparency of Physician Relationships with Pharma, Medical Device Companies

Yesterday Sens. Chuck Grassley (R-Iowa) and Herb Kohl (D-Wis.) announced a bill (S 301) that would require pharmaceutical and medical device companies to publicly disclose any gifts and payments to physicians valued at $100 or more per calendar year, according to CQ Healthbeat.

The bill introduced yesterday requires companies to report such gifts and payments to the U.S. Department of Health & Human Services once per year. Similar legislation introduced last year would have required quarterly disclosure of gifts or payments over $25 per year.

Additionally, if passed, the legislation would pre-empt state laws that require disclosure of gifts and payments to physicians.

So far, the bill has gathered support from various sectors. Proponents of the bill argue that it will allow patients to “fully trust the relationship they have with their doctor.”

Representatives of the pharmaceutical and medical device industry have expressed support for a “uniform national standard . . . [as opposed to] a patchwork approach by all 50 states.”

It seems that the only group unlikely to support the proposed legislation is physicians. However, the bill allows for physicians to contest the reports made by pharmaceutical and medical device companies, which would be reviewed by Health & Human Services.