FTC Testifies Before Senate Armed With New Pharmaceutical Patent Report: Paying Off Generics To Prevent Competition With Brand Name Drugs Should Be Prohibited

Continuing with its efforts to prevent “exclusive payment settlements” (aka “reverse payments”) by name brand drug manufacturers to keep generic competitors from entering the market, the Federal Trade Commission (FTC) brought its case to the Senate Committee on the Judiciary today. Exclusive payment settlements occur where a brand name manufacturer settles a patent dispute with a generic manufacturer by paying a specified amount in exchange for an agreement that the generic manufacturer will not enter the market for a period of time. According to 2005 court decisions, these settlements are perfectly legal as a valid exercise of patent power. Jon Leibowitz, Commissioner of the FTC, testified that the court decisions protect patent rights at the expense of consumers, because they provide a roadmap for pharmaceutical companies to share monopoly profits instead of competing.

An FTC study also issued today reveals that in recent years, the number of exclusive payment settlements is on the rise. Specifically, the FTC’s FY 2006 report on pharmaceutical patents, found that in 14 of 28 final settlements, generic manufacturers received compensation from brand name manufacturers and agreed to stay out of the market for a period of time. In prior years, the numbers were significantly lower: 3 of 11 in FY 2005 and 0 of 14 in FY 2004.

Mr. Leibowitz testified that “[t]he increased costs resulting from anticompetitive agreements that delay generic competition harm all those who pay for prescription drugs: individual consumers; the federal government, which spends substantial sums under the new Medicare Part D program; state governments trying to provide access to health care with limited public funds; and American businesses striving to compete in a global economy.”

The Senate Committee on the Judiciary also heard from those on the other side of the debate, including the CEO of PhRMA, Bill Tauzin. The text of his statement is not yet available.