FTC Report on Generic Drug Deals

No doubt the latest report from the Federal Trade Commission (FTC) Bureau of Competition is going to set the hair of several congresspeople on fire and will perhaps result in a hearing on the matter. 

The subject of the report are agreements between brand name and generic manufacturers to delay the entry of generics to the market.  Quoting the release, "In fiscal year 2007, there were 33 final settlements, nearly half of which (14, or 42%) included both compensation to the generic company and a restriction on the generic’s ability to market its product. Of those 14 settlements, seventy-nine percent involved agreements with first-filer generic companies. Unlike FY 2006, however, most of the FY 2007 agreements involving restrictions on generic entry did not include a side deal involving elements not directly related to the resolution of the patent dispute. Instead, the majority involved compensation to the generic firm through an agreement by the branded firm not to sponsor or compete with an authorized generic product for some period of time. "

The press release quotes FTC Chair William E. Kovacic as saying “This report confirms that settlements with potentially anticompetitive arrangements continue to be prevalent.  The Commission remains committed to ensuring that brand and generic companies do not use such settlements as a way to deny consumers the benefits of competition.”

Commissioner Jon Leibowitz added, “As our report today sadly demonstrates, pay-for-delay settlements continue to proliferate. 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.”

While proposed legislation would ban such agreements, so far it has not advanced.  However, with the election cycle heating up and Congress holding an increasing number of hearings on just about any development that occurs, it is reasonable to expect a Hill reaction to the FTC report.  Note that this year in April and May, the FDA has been up to the Hill no less than 10 times.  In all of 2006, there were only 12 such episodes for the entire year.  Companies involved in these agreements might begin work now on the development of messaging in the face of hostile questioning regarding generic delays to market.