US branded drug makers pay to prevent generic competition

BMJ 2008; 336 doi: (Published 05 June 2008) Cite this as: BMJ 2008;336:1266
  1. Janice Hopkins Tanne
  1. 1New York

Companies that make branded drugs make payments or beneficial agreements called “side deals” to prevent or restrict marketing of a generic form of a patented drug, the US Federal Trade Commission (FTC) reported last month.

The commission reported that there were 33 final settlements in the fiscal year 2007. Fourteen included payment to the aspiring generic manufacturer and a restriction on the generic company’s ability to market the generic drug, a number similar to the previous year. The report did not name the companies involved.

“‘Pay for delay’ settlements continue to proliferate,” said the commissioner Jon Leibowitz. “That’s good news for the pharmaceutical industry, which will make windfall profits on these deals. But it’s bad news for consumers, who will be left footing the bill. These agreements inflict special pain on the working poor and the elderly, who need effective drugs at affordable prices.”

A spokesman for the commission, Mitchell Katz, explained that a quirk in the law regarding the introduction of generic drugs may unintentionally allow companies that make branded drugs to permanently prevent generic competition.

Mr Katz told the BMJ that a branded drug manufacturer’s patent gives it the right to sell the drug for a set number of years. A generic manufacturer may challenge the patent. “If the generic company wins, they get to enter the market,” he said. The generic company is legally allowed 180 days of marketing exclusivity for the generic drug. Afterwards, other drug companies can enter the generic market.

Mr Katz said that the commission was particularly troubled by the “first filer” situation, which can permanently block marketing of a generic drug. This happens when the first company to gain approval from the Food and Drug Administration for a generic drug challenges the patent of the company that makes the branded drug. The branded company may then make a payment to the generic company or give it other incentives or benefits not to enter the market.

No other generic company can enter the market until the first generic company has entered the market and completed its 180 day period of marketing exclusivity. Because of the settlement the 180 day period never begins and never ends, meaning no other generic company can enter the market.

It costs the branded drug maker little to prevent generic competition compared with the money it makes from its branded product, Mr Katz said.

“The FTC does not believe that that was the intention of the law . . . This is multibillion dollar business. It’s not a joke . . . When we started bringing cases alleging they were making direct payments to keep [generic drugs] off the market, they stopped doing that and went to side deals” and other agreements to prevent marketing of the generic, he said.

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