Pharmaceutical brand-name companies and generic producers often compete with each other, but they also reach agreements that can delay when inexpensive generic prescription drugs will enter the market.
Senate Bill 764 would end that practice, called “pay to delay,” with the goal of putting affordable prescriptions in the hands of consumers more quickly.
Advocates for inexpensive prescriptions and Oregon patients say the measure is needed to help curb soaring prescription drug costs, which can run in the thousands of dollars for a one-month supply. The pharmaceutical industry’s trade group is staunchly opposed, saying the bill would thwart the federal regulatory and court framework that lets brand-name pharmaceutical companies and generic producers negotiate settlements for how and when they release drugs into the market.
Settlement agreements between drug companies are complex, but they usually are tied to patent infringement litigation based on whether a generic drug violates the patent for a brand-name drug. Federal patent law generally gives drug producers a set number of years when they have exclusive rights to produce and sell a drug, after which competitors can use the production formulas to manufacture generic versions.
In 1984, Congress passed legislation that grants generic drug manufacturers a quicker approval process through the U.S. Food and Drug Administration and created a mechanism for the generic producers to challenge patents for innovative drugs.
When litigation emerges from this process, the settlements can include conditions on when the generic drug will enter the market. Sometimes, the manufacturer with the patent pays the generic manufacturer to delay producing the drug.
A delay of just months can mean millions more in profits for pharmaceutical manufacturers -- and millions more in costs for prescription holders and insurers. The bill would not prevent settlements entirely but it would prevent deals that delay the entry of generic drugs into the commercial market.
Under the bill, Oregon courts could determine if a generic manufacturer had accepted payment in order to delay making and selling a drug, and if this had an anticompetitive effect. The attorney general could seek substantial financial penalties on the generic manufacturer.
“Pharma manufacturers will often work behind the scenes to delay the distribution of generic drugs, aka, the less expensive drug,” said Sen. Deb Patterson, D-Salem, and chair of the Senate Health Committee. “This gives the larger companies the ability to hold a monopoly on their drug, preying on Oregon seniors and families who struggle to afford their medications. This bill would hold these companies accountable for this predatory practice.”
The price differences are stark between brand name and generic drugs. The five most expensive drugs in 2020 ranged from about $23,000 to $43,000 per prescription, according to the state’s drug transparency report. For generic drugs, the most expensive prescriptions ranged from $1,200 to $2,800. The prescriptions can cover a range of complex health conditions such as viral infections, cancer and others.
Michael Nielsen of Bend told the committee his wife, Jacki, was diagnosed with hepatitis C and last year and her doctor prescribed Mavyret, a patented drug that can cure it. But a 90-day supply of the medication was unaffordable: more than $13,000 — or $433 per pill.
“It’s wrong what the drug companies are allowed to get away with by playing the system and preventing more affordable generics from coming to market,” Nielsen, 69, told the committee. “I am asking our legislators to fight for patients like us.”
The pharmaceutical industry generally defends a strong patent system, saying drug makers spend heavily to develop new, innovative drugs and need to be able recoup their investment.
The pharmaceutical industry maintains that the Oregon legislation would have a chilling effect on settlement agreements that allow generic drugs to enter the market. The Pharmaceutical Research and Manufacturers of America, also called PhRMA, is the trade organization for major pharmaceutical companies. In testimony Wednesday, the group said the bill improperly inserts state authority into these so-called patient settlement agreements.
“Patent settlements generally permit generic drugs and biosimilar products on the market earlier than patent expiration, generating significant savings for consumers,” Asher Lisec, deputy vice president of state policy for PhRMA, told lawmakers. “Patent settlements do not extend the patent term of an innovator’s drug and therefore, do not lead to generic entry past patent expiry of the innovator’s drug.”
Lisec also said the legislation circumvents the Federal Trade Commission’s role in policing patent settlements. That leads to potential inconsistencies and uncertainty with different standards between Oregon and the federal agency, Lisec argued.
Lisec also said there are jurisdictional concerns, such as how Oregon could regulate agreements between two out-of-state pharmaceutical companies.
The committee heard testimony but didn’t take action on the bill.
You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.
