The US Federal Trade Commission's chairman Jon Leibowitz, along with key Democratic lawmakers from the House of Representatives, have stepped up their call for inclusion of a provision in the healthcare reform legislation that would ban so-called "reverse payment" or "pay-for-delay" deals – the arrangements surrounding patent litigation whereby brand companies allegedly pay off generic competitors in exchange for a delayed generic launch.

The FTC has for years been calling the deals anticompetitive, but both the innovator and generics industries assert they have the right to enter into settlements within the confines of the patent under dispute, and that many are an expedient way to resolve expensive and time-consuming patent litigation and are pro-competitive.

Now the FTC sees a solid opening for a "legislative solution" and a quick means to deter such agreements, according to the its new report Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions.

A provision is already included in the House version of reform which would ban most arrangements outright (scripnews.com, October 30th, 2009). But the provision for a ban is not included in the Senate healthcare reform bill. Those two bills are now in the process of being melded together, and it is not yet clear whether the ban will make it to final bill.

Speaking at a joint press conference on January 13th with key Democrats, Mr Leibowitz stated: "Pay-for-delay deals are a bad prescription for America: when drug companies agree not to compete, consumers lose. Ending this practice as part of health care reform is one simple, effective and straightforward way for Congress to help control drug costs." The chairman also put forward a new study claiming to show that the number of so-called "pay-for-delay" deals is on the rise, with 19 such deals in fiscal year 2009 compared with 16 in 2008 and zero in 2004.

The chairman went on to say: "The problem with these sweetheart deals is clear. Branded pharmaceutical companies are literally paying their generic competitors to stay off the market. Does it seem right that a company can make money by not selling its product? Of course not. Yet, beginning in 2005, a few misguided courts began to bless these deals. As today's study demonstrates, after those decisions the number of these agreements increased dramatically. In 2004, there were no pay-for-delay deals. Last fiscal year, there were a record 19." The new report touted by Mr Leibowitz also reiterates earlier estimates suggesting that a ban on deals could save consumers $35 billion over 10 years by assuming the cost difference between brand-name and generic medicines (about $12 billion of which would be savings to the federal government; scripnews.com, June 24th, 2009).

He maintained that adding a ban to the final bill is not a partisan issue, and he included a statement of support from his Republican colleague FTC commissioner Thomas Rosch to demonstrate the point.

Some Senators do support the ban. In late December, nine senators, including Senator Herb Kohl, wrote a letter to Senate leaders asking that the final healthcare bill include the House bill's ban. The senators cited the need to address rising costs of prescription drugs. (It was Senator Kohl who last year tried to get through the Senate a stand-alone bill prohibiting the deals.) Senator Kohl has not changed his view, and in response to the FTC's latest report he issued a statement: "Today's FTC report is proof that if we are serious about bringing down prescription drug costs, we must enact legislation now to end these anti-consumer, anti-competitive, back room deals." Senator Kohl serves as chair of the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights.

Several consumer advocacy groups also support the House ban. In a letter sent on January 11th to those leading the final bill's negotiations, the American Antitrust Institute said a ban was necessary. Co-signatories included Families USA, US PIRG, the Consumer Federation of America, Consumers Union, Community Catalyst and the National Legislative Association on Prescription Drug Prices.

Kathleen Jaeger, president of the Generic Pharmaceutical Association, told The New York Times that the association objects to the term "pay-for-delay". Settlements often award the generic challenger the right to enter the market before a brand's patent is due to expire (thus benefiting consumers), and compensation is often for legitimate side deals, like the generic company's supplying ingredients to the innovator, she claimed. She maintained that the FTC and others "can't sweep all the good, the pro-competitive, pro-consumer settlements out with the bad".

negotiations in secret

For the reform bill over all, it is of great significance how the process is playing out.

In a piece written for The Wall Street Journal, Karl Rove, the former advisor and deputy chief of staff to former President George W Bush, wrote: "The final negotiations on healthcare reform are being conducted behind closed doors and there's no formal legislative conference between the House and Senate, which would guarantee Republicans at least a few seats at the table. This bill is not only being written in secrecy, it is being written by an anonymous group of Democrats."