Some members of Congress believe pharmaceutical companies are colluding to keep cheaper, generic versions of drugs off the market.
In half of 28 recent settlements on challenges to drug patents, brand-name companies gave some form of compensation to generic challengers that agreed to delay production, according to the Federal Trade Commission.
"It is critical to eliminate the pay-for-delay settlement tactics employed by the pharmaceutical industry," FTC Commissioner Jon Leibowitz recently told the Senate Judiciary Committee.
"Companies should be not be able to play 'deal or no deal' at the expense of American consumers."
The committee could vote as soon as today on a bill to prevent such settlements. It would ban generic companies from settling for "anything of value" when agreeing not to develop or market a product.
Both sides have an incentive to settle patent challenges this way because the brand-name company's payment is less than it would lose in sales, but it's more than the generic maker could make selling the drug at a discount.
"Congress never intended for brand-name companies to be able to pay off generic companies not to produce generic medicines," said Sen. Patrick Leahy, D-Vt., who heads the committee.
Some drugs are so popular that delaying generic competition can save a company $1 mil lion a day, according to antitrust lawyer Merril Hirsh. The cost of a generic drug can be as much as 80 percent less than the brand-name alternative.
Consumers and health plans spend more than $100 billion a year on prescription drugs.
Generic competition to four major brand-name drugs, including Eli Lilly and Co.'s Prozac, saved consumers more than $9 billion, according to the Generic Pharmaceutical Association.
Best-selling drug patents being challenged by generic companies include the ulcer medication Nexium, the anti-psychotic Seroquel and the cancer drug Gemzar.
Congress passed a law in 1984 aimed at striking a balance between letting brand-name companies benefit from patents they earned through hundreds of millions of dollars in research and preventing them from unfairly extending the patents. Part of the law made it easier for generic companies to challenge invalid or narrow patents.
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