New Powers Would Let FTC Regulate Pharma Deals

President Obama's new health proposal would give the Federal Trade Commission more regulatory power over certain deals that the pharmaceutical industry cuts with its competition. These deals artificially keep the costs of prescription drugs high, and cost consumers billions.

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ROBERT SIEGEL, host:

Another element of the president's proposal would make it harder for brand name drugmakers to protect their medicines from competition. And that in turn could save consumers billions of dollars.

Here to tell us about it is NPR digital correspondent and health blogger, Scott Hensley. Welcome to the program once again.

SCOTT HENSLEY: Thanks.

SIEGEL: This provision that we haven't heard a lot about would fix a practice that's common in the prescription drug industry, a practice called Pay-for-Delay. What exactly is Pay-for-Delay?

HENSLEY: Well, a generic drugmaker challenges the patents of the big brand name drug company and says we think your patents are no good and we want to start selling a generic version of that drug, years before the big drug ever thought it would be possible. They try to persuade a court to see it their way. And the big drug company is so worried, they say, hold on a second, let's not go to a legal conclusion on this case. Why don't we make a deal. We'll give you a little something if you'll hold off on doing that and maybe we'll allow generics a little earlier, but not tomorrow.

SIEGEL: We'll pay you not to go ahead with your plan (unintelligible) generic drug.

HENSLEY: Exactly.

SIEGEL: I understand that the brand name drugmakers are a pretty well defined community.

HENSLEY: Right.

SIEGEL: The generic drugmakers as well? There are a set limited number of companies that would engage in this sort of deal?

HENSLEY: There are a lot of generic drug companies, but almost by definition, you wouldn't know their name. The largest of the bunch is an Israeli company, Teva. They're one of the biggest sources of prescription medicines in the country when you look at the number of pills dispensed. So, these companies are not household names. But if you check the medicine cabinet, in total, these companies account for a majority of the pills that are dispensed in the United States now.

SIEGEL: At some point these patents expire, don't they? I mean, after some number of years, the generics may come in...

HENSLEY: Right.

SIEGEL: ...and make a generic competitor.

HENSLEY: That's right. It's usually between 10 and 20 years. It depends on some of the specifics of the patent.

SIEGEL: And the drugmakers would say, look, we spent a lot of money researching this product and testing the product. Why shouldn't we get exclusive time to market the products without generic competition?

HENSLEY: They do. And the patent system allows them quite a bit of time to do that. What the generics companies have said, and said often quite successfully in court, is all those patents aren't exactly what they're cracked up to be. Some of them shouldn't be in effect, and there have been many cases where the generic drug companies win. And then, very shortly, they're able to go to market with a cheap drug. So, they say, let's go to court and decide and sometimes, often, we win.

SIEGEL: Now when you say the patent isn't what it's cracked up to be, do you mean that the new improved polarbarium(ph) really is no different from the polarbarium drug that already - whose patent expired already?

HENSLEY: Right. It's a minimal improvement or, in fact, there's some legal flaw in the argument. It's a whole arcane world unique to patent lawyers. But that's the idea.

SIEGEL: So what does President Obama want to do about Pay-for-Delay?

HENSLEY: The problem is that the Federal Trade Commission, which has opposed a lot of these deals has gone to court to say, hey, this is not good for consumers. It's anti-competitive. But they've been losing. The courts have been siding with the deals cut by these companies. And what the proposal that the president has outlined would be make it much, much more difficult for the drug companies to cut these deals.

SIEGEL: And given the politics of the situation and the economics, what are the chances of this actually becoming law?

HENSLEY: Well, I have to see what happens after Thursday's summit. I think it's interesting to note that neither the generic drugmakers nor the brand name drugmakers support a change. And they're very powerful interests here in Washington.

SIEGEL: Scott Hensley, NPR digital correspondent, thank you for talking with us.

HENSLEY: Thank you.

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