Return of the Drug Company Payoffs - New York Times
The New York Times

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January 24, 2007
Editorial
Return of the Drug Company Payoffs

Two excessively lenient court decisions have allowed the manufacturers of
brand-name drugs to resume the underhanded practice of paying generic
competitors
to keep their drugs off the market. It is a costly legal loophole that needs
to be plugged by Congressional legislation.

The problem arises when a generic manufacturer tries to take its drug to
market before the patent on a brand-name drug has expired by arguing that
its product
does not infringe upon the patent or that the patent is invalid. Huge sums
of money are at stake, especially with blockbuster drugs whose annual sales
can exceed a billion dollars.

Rather than risk it all, a brand-name manufacturer may choose to pay its
generic competitor substantial compensation to drop its challenge and delay
marketing
its drug. Both companies make out handsomely. The big losers are consumers
and the public and private insurers that must continue to pay monopoly
prices
for the brand-name drugs.

The Federal Trade Commission, which has been waging a valiant fight,
succeeded for several years in eliminating such settlements. But two appeals
court
decisions in 2005 held that they are a legitimate way to resolve patent
disputes. And sure enough, the F.T.C. reported last week that - after a
five-year
hiatus - brand-name companies made 3 such do-not-compete settlements in
fiscal year 2005 and 14 more last year.

The pharmaceutical industry contends that the settlements are a reasonable
way to resolve disputes and that they often result in bringing generic drugs
to market before a patent has expired, albeit not as soon as the generic
company wanted. The industry argues that regulators and the courts should
judge
such settlements on a case-by-case basis.

Our own hunch is that the better approach for Congress to take as it moves
toward corrective legislation would be a "bright line" prohibition against
making
any payments to delay introduction of a generic drug. That would set a clear
standard and enhance the likelihood that consumers would get a chance to
benefit
from real competition in the pharmaceutical market.

Copyright 2007
The New York Times Company

Posted by Miriam V.