Drug-Makers Paying Off Competitors To Keep Cheap Generics Off Market | TPMMuckraker

Drug-Makers Paying Off Competitors To Keep Cheap Generics Off Market | TPMMuckraker

Republicans and their allies in the business community talk a good game about the virtues of free-market competition. But, as we've seen in the debate over the public option, that stance often goes out the window when corporate profits are at stake.

And now we've got another example -- one of the sleaziest and most blatantly self-serving yet.

Over the last few years, drug-makers have embraced a startlingly simple tactic for fending off competition from generic brands: paying them off. In a nutshell, the company that holds the patent on a profitable drug strikes a deal with the maker of the cheaper generic brand: you hold off on marketing your generic for several years, and in return, we'll give you a share of our profits on the drug.

So common have these deals become lately that they've been given a name: pay-for-delay. The approach -- a textbook anti-competitive tactic -- is worth billions to drug-makers, because it essentially allows them to buy more protection than their patent confers.

That was made more or less explicit by Frank Balsino, the CEO of Cephalon, which makes the sleep-disorder drug Provigil. In a 2006 interview, Baldino trumpeted recent deals with four generic drug-makers that kept generic versions of Provigil off the market until 2012, declaring: "We were able to get six more years of patent protection. That's $4 billion in sales that no one expected."

But pay-for-delay doesn't work out nearly so well for consumers. Generics are sometimes priced as much as 80 or 90 percent cheaper than the name brands. For instance, the cholesterol drug Zocor costs $164 a month, while a generic version costs just $12 a month. Pay-for-delay deals will cost consumers an extra $35 billion over the next decade, by keeping those cheaper generics off the market, according to a recent Federal Trade Commission study. And it's the uninsured, who pay out-of-pocket for drugs, that disproportionately pay those costs.

Part of the blame lies with the Bush administration. A series of court rulings in 2004 made pay-for-delay much more common, with the result that in 2006 and 2007, nearly half of all deals between generic brand-name drug-makers involved a payment to the generic maker in exchange for a promise to stay out of the marketplace, according to the FTC study. On several occasions, the Bush Justice Department declined to weigh in on the side of consumers by urging the Supreme Court to clarify the law, as it could easily have done.

Lately, the FTC, led on the issue by Commissioner Jon Leibowitz, has made ending pay-for-delay a priority, filing suit to block several such deals, including one struck by Solvay Pharmaceuticals, which makes a testosterone replacement drug worth about $400 million a year. The ultimate goal is to get a ruling from the Supreme Court declaring the deals illegal under existing antitrust law. ...