Legislation that would prohibit brand companies from compensating generic companies to delay entry of their generic drugs cleared the House Subcommittee on Commerce, Trade and Consumer Protection with a caveat: a Government Accountability Office report will keep tabs on whether the act results in earlier or delayed entry of generics to the market.

The stipulation was the result of an amendment tacked onto the Protecting Consumer Access to Generic Drugs Act, ¹ H.R. 1706, by Rep. George Radanovich, R-Calif. Specifically, the amendment calls for a report to be compiled for four consecutive years - beginning two years after the act is enacted - to analyze its effect on the number and frequency of settled claims, whether it has caused earlier or delayed entry for generic drugs, and whether it has resulted in any harm or benefits for consumers.

"The GAO will be able to provide Congress with a clear, unbiased analysis," said Radanovich. "The more data we gather the better picture we will have."

But the amendment was the only wiggle room Chairman Bobby Rush, D-Ill., and other Democratic subcommittee members allowed their counterparts, who argue that "pay for delay" or "reverse payment" settlements are actually pro-competitive and the proposed act would hinder competitiveness.

"Reverse payments do not keep generics off the market, but sometimes allow them to come before the market," Radanovich said.

Settlement Ban Gains Momentum

Rep. Cliff Stearns, R-Fla., endeavored to piggyback an amendment on Radanovich's GAO success, recommending a sunset clause for the act after six years if the report shows it is not benefiting consumers by increasing the availability of generics.

That was voted down, 15-10, despite pleas: "We are saying let's give it a chance and let the GAO audit it," said Stearns. "If it comes out that the bill is not working, then why not let the bill sunset?" The panel approved the bill as a whole on voice vote.

The markup and a simultaneous hearing in another subcommittee demonstrate that a ban on reverse settlements may finally be gaining momentum despite opposition from both the brand and generic industries.

Generic firms, for their part, hope that if a bill passes it also includes a ban on authorized generics (² Also see "Brand/Generic Settlement Bill May Need Help From Authorized Generics Limits" - Pink Sheet, 6 April, 2009., p. 21). Prospects for that likely depend to a large degree on the Federal Trade Commission's soon-to-be released report on the competitive impact of authorized generics (³ Also see "Authorized Generics Study From FTC To Be Released Shortly" - Pink Sheet, 4 June, 2009.).

The markup saw another amendment from Radanovich, one aimed at rewriting the heart of the bill. Instead of prohibiting settlements that involve "anything of value" aside from quicker launch, the amendment would create a six-prong test that FTC would need to use to assess the appropriateness of a settlement. The tests, based on court rulings that tossed out previous FTC cases, focus on assessing the strength of the patent and "the likelihood that the agreement will increase the ANDA filer's ability to enter the market earlier and more effectively."

FTC Still Making Its Case In Courts and Congress

While the markup session took place on the third floor of the Rayburn House Office Building, another hearing on reverse settlements was held on the second floor by the House Judiciary Committee's Subcommittee on Courts and Competition Policy.

There, the Federal Trade Commission's Director of Bureau Competition Richard Feinstein argued that "the enormous costs that result from unwarranted delays to generic entry burden consumers, employers, state and local governments, and federal programs already struggling to contain spiraling costs."

Given the FTC's track record on appellate decisions, a legislative ban on reverser settlements seems the only clear way to end the practice, but the commission continues to fight them in court.

Feinstein outlined the two pending FTC suits against Cephalon and Solvay as well as a cert petition on a case currently pending before the Supreme Court (⁴ Also see "Supreme Court Asked to Rule on Legality of Reverse Settlements" - Pink Sheet, 11 May, 2009., p. 20).

Feinstein emphasized that the FTC wants these "pay for delay" payments to be prohibited and stressed that since the issue first arose in 1998, every member of the Commission, no matter what party affiliation, has supported its challenge of these deals.

- Lauren Smith (lauren.smith@elsevier.com)

Reverse Settlement Bill Clears House Subcommittee With GAO Report Attached

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