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Pay for Delay

August 2013

Sidney M. Wolfe, M.D.

The more we learn about the lucrative scheme of “pay for delay,” in which brand-name drug companies pay generic companies to delay marketing of a drug, the more outrageous it becomes. In the scheme, generic companies profit by agreeing to delay the introduction of their lower-priced version, and brand-name companies profit by having an artificially prolonged time to maintain their market exclusivity, at much higher prices. But what is lucrative for these companies is extremely costly, even unaffordable, for patients who must pay higher prices for an extended time.

A new report by the nonprofit advocacy organizations California Public Interest Group and Community Catalyst examines the consequences for patients of 20 widely used drugs for which pay-for-delay schemes were employed. Among the drugs studied were Cipro (ciprofloxacin), Lipitor (atorvastatin) and Nexium (esomeprazole). For the 15 medications studied for which the delay is now over, the price disparity after the delay period shows the extent of savings that are unavailable while the delay period is in place. For example, a prescription for brand-name antibiotic Cipro costs $346, but generic ciprofloxacin costs only $23, and a prescription for Lipitor costs $205, while generic atorvastatin is only $18. The brand-name drugs studied cost an average of 10 times more than their generic equivalents, but as much as 33 times more, and the payouts on these drugs have delayed the introduction of generic versions for an average of five years, but for as long as nine years. Since 2005, generic versions of 142 drugs have been delayed this way.

Although many federal bills banning pay for delay have been proposed since 2006, none of them have succeeded, largely due to drug industry opposition. But a vital ray of sunshine comes via the recent Supreme Court decision in Federal Trade Commission v. Actavis. This ruling upheld the Federal Trade Commission’s right to challenge patent settlements that would result in pay-for-delay deals because of the significant anticompetitive effects these schemes can have. In this case, the payment from the brand-name company to the generic company was said to be between $19 million and $30 million annually until 2015. The decision did not flatly ban any such payment by brand-name companies, but it implied that much smaller payments might be allowed.

The decision stopped short of an outright ban but is likely to significantly reduce the size and occurrence of pay-for-delay deals and thereby hasten the time for less-expensive generic drugs to reach the millions of patients who will be much more able to afford them.

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