Controversial ‘Pay For Delay’ Provision Attached To Financial Services Bill

Controversial legislation that would limit brand-name and generic drug makers from reaching deals to delay generic drug marketing was attached to a Senate appropriations subcommittee’s financial services spending bill on Tuesday, sources say. The measure has been briefly attached to several other bills over the past year, including health reform legislation, only to be dropped prior to final passage. The Congressional Budget Office says the measure will save $2 billion over 10 years, making it an attractive funding “offset” for those who support it.

But even if the so-called “pay for delay” provision remains in the final Senate appropriations bill, Congress may ultimately pass a continuing resolution instead of individual spending bills, which would leave the measure’s latest legislative vehicle permanently derailed.

Several versions of the pay-for-delay bill have been in play, but the one attached to the financial services appropriation bill is more or less the legislation championed by Sen. Herb Kohl (D-WI), sources say. Kohl’s amendment would apply a presumption of illegality to the pharmaceutical marketing settlements but give the parties a chance to prove, with “clear and convincing evidence,” that individual settlements would benefit consumers. Both the brand-name and generic drug industries oppose the measure and say the settlements benefit consumers because generics still reach the market before brand-name drugs’ patents expire.

Last month — when the Senate was working on passing the provision via a tax extenders bill — the senior’s group AARP offered its support of the policy. “Consumers and health care payers benefit when generic competition enters the marketplace,” AARP said in a letter to Sens. Kohl and Charles Grassley (R-IA). “When the patent for a brand name drug has expired or is ruled invalid, generic manufacturers are able to bring their product to market. However, there has been a disturbing trend among settlements between generic and brand name prescription drug manufacturers. … Unfortunately, when brand name and generic drug manufacturers conspire to delay market entry of a generic drug, consumers, health plans, and taxpayers are forced to continue to pay for the higher cost brand name drug for a longer period of time.”

But, drug industry stakeholders strongly disagree.

Bill Head, senior vice president of government affairs for the Generic Pharmaceutical Association (GPhA), says that there are currently only three ways that generics can get to market: win litigation, settle or wait for the patent to expire. He added that the legislation would take away one of the avenues, which he says is bad for industry and consumers. Read more.