Americans struggling to meet health care costs know first-hand expensive prescription drugs can be. They may not know how drug companies often work together to keep costs artificially high.
The scheme is called “pay for delay.” Essentially, makers of brand-name drugs pay the makers of generic drugs not to challenge their patents or delay their attempts to make less-expensive alternatives. The brand-name makers then get to continue to charge whatever they want for the medicine, and the generic firms get a little cash for standing on the sidelines. The only losers in the deal are the patients who need the drugs and increasingly can’t afford them.
Writing in the Huffington Post, Laura Etherton, U.S. PIRG’s health care policy analyst, explained how the deals work:
“Brand name Plavix costs about $205 for a 30-day supply,” Etherton wrote. “The generic, not that it’s available, costs about $13. But consumers were stuck paying the higher price for far longer than they otherwise might have.
“That’s because in 2006, Bristol-Myers Squibb paid the generic drug maker Apoti to delay bringing the generic to market for five years,” Etherton continued. “Without competition, Bristol-Myers Squibb was able to keep making $3.4 billion a year in sales on the brand-name drug.”
The Federal Trade Commission says such deals violate the Sherman Antitrust Act and cost patients billions of dollars a year. In a case argued before the Supreme Court last week, the FTC argued that when Solvay Pharmaceuticals paid another company, Actavis, not to produce a less-expensive version of Solvay’s low-testosterone drug AndroGel, it constituted an unlawful restraint of trade. Not surprisingly, brand-name and generic drug makers have united to fight the lawsuit.
The pay for delay practice developed as a way to get around the 1984 Hatch-Waxman Act, which prodded generic drug makers to challenge patents on brand-name drugs, in the hopes of lowering costs for consumers.
Senators Al Franken, D-Minnesota, and David Vitter, R-Louisiana, have cosponsored legislation to fight pay for delay, as have their colleagues Chuck Grassley, R-Iowa, and Amy Klobuchar, D-Minnesota. That kind of bipartisan cooperation will be needed to close the loopholes in Hatch-Waxman, especially if the Supreme Court sides with the drug makers.
Brand-name drug makers should certainly be able to protect their patents for a reasonable amount of time. Their innovations and discoveries save lives, and at the very least make day-to-day living easier and more comfortable. The companies spend millions of dollars in research, development and testing before a drug comes to market. Often, that research doesn’t pay off, and that increases the cost of successful drugs. It is a fair trade for innovation.
It is not fair, however, for brand-name and generic companies to collude to keep prices artificially high. Pay for delay deals aren’t about research or innovation. They are about profit – money taken directly from ailing consumers who have no choice but to pay or suffer.