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GPhA: FTC’s Misguided Policy on Patent Settlements Would Be Costly for Consumers and the Government

Patent Settlement Ban Would Delay Generic Versions of Most Needed Drugs

Washington, D.C. (October 25, 2011)—Generic Pharmaceutical Association (GPhA) President and CEO Ralph G. Neas today issued the following response to the Federal Trade Commission’s staff report regarding patent settlements.

“The FTC’s flawed policy on banning patent settlements would be costly for consumers, the health care system, and state and federal governments because it would result in delaying access to lower cost generic medicines. Indeed, the FTC continues to miss the fundamental point: Patent settlements speed up the availability of less costly generic drugs and save money for everyone; banning settlements and forcing drugs makers to continue lengthy litigation with uncertain outcomes will be costly.

“The facts are indisputable. Empirical data collected over the past decade show that generic companies win just 48 percent of the drug patent cases that are litigated to conclusion. This means that generics are delayed from entering the market until the brand patent expires in more than half the cases where there is no settlement. But, when companies enter into settlement agreements, the generic drug enters the market before patent expiration in 100 percent of the cases. Patent settlements have never delayed access to the generic past the patent expiration date, but instead provide the one sure way of getting the lower cost generic to consumers and patients before the patent expires on the counterpart brand drug.

“This year alone, 16 of the 22 first-time generic medicines that will become available in the U.S. are entering the market prior to patent expiration because of a settlement agreement. Included among these new products are generic versions of Lipitor®, Plavix® and Effexor XR®, three of the most-prescribed drugs in America. If settlements were banned, as the FTC wants to do, none of these medicines would be available as generics until next year or later.

“Furthermore, a number of recent studies conducted by Jonathan Orszag, former Director of the Office of Policy and Strategic Planning and member of President Clinton’s National Economic Council, and others (here, here and here) conclude that the savings projected by the FTC and the Congressional Budget Office are based on faulty assumptions.

“The generic industry supports current law that requires drug companies to submit patent settlements to the FTC and the U.S. Department of Justice for review. These government agencies are authorized to reject any patent settlement that they deem to be anti-competitive. But, as the federal courts have ruled in no fewer than five settlement decisions, it’s the patent that delays the generic from coming to market, not the settlement. Settlements allow generics to enter the market months and even years before patents expire.

“Instead of lobbying the Super Committee to ban these pro-competitive, savings-generating settlements, the FTC and Congress should focus on initiatives that would continue to dramatically reduce prescription drug spending; namely, promoting the increased utilization of generics for federal and state government funded health care programs and accelerating the approval of more affordable generics by increasing funding for the Office of Generic Drugs.”

Thanks to the 1984 Hatch-Waxman Act, generic pharmaceuticals constitute the quintessential American success story. An independent analysis released in September 2011, shows that the use of generic prescription drugs in the U.S. has saved consumers and the health care system $931 billion over the last 10 years, $158 billion in 2010 alone. That’s an astounding $3 billion in savings every week. Oftentimes, it is wise to heed the old adage: “If it ain’t broke, don’t fix it.”

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals, and suppliers of other goods and services to the generic industry. Generic pharmaceuticals fill 75 percent of the prescriptions dispensed in the U.S. but consume just 22 percent of the total drug spending. Additional information is available at