|Business News - Press Release|
US and EU regulators close in on pharmaceutical pay-for-delay deals
The evolving relationship between branded and generics pharmaceutical companies is set to undergo considerable change as regulators in both the US and EU move to restrict 'pay-for-delay' deals in a bid to increase generics cost-savings. As deals that delay the market entry of generics come under increasing scrutiny, the industry may find that its best option is to cease such practices altogether.
Following its year-long pharmaceutical sector inquiry, the EC has asked a number of companies to provide information pertaining to generics settlement agreements in Europe between July 2008 and December 2009. Companies in the frame include AstraZeneca, Boehringer Ingelheim, GlaxoSmithKline, Novartis, Roche, Sanofi-Aventis, Teva, and Niche Generics.
The EC has also said that, from now on, it intends to gather these data on an annual basis, in much the same way as the US Federal Trade Commission (FTC), which produces annual reports detailing the type and frequency of settlement agreements undertaken by pharmaceutical companies in the US. The EC has said that although this will initially be a data-gathering exercise, it will investigate those agreements that raise anticompetitive concerns.
Settlement agreements between branded and generics companies have long been a means of minimizing the risk and cost associated with the often complex patent litigation that can precede generics entry. However, questions of competition emerge when such agreements result in pharmaceutical companies paying generics companies to delay the market launch of their generic drugs. These so-called 'pay-for-delay' agreements result in healthcare providers buying expensive branded drugs for longer than would otherwise be necessary.
Indeed, the EC estimates that delaying the market entry of generics cost at least E3 billion ($4 billion) between 2000 and 2007. While the EC ascribed delayed generics entry to a number of causes, pay-for-delay agreements represent one of the most amenable to regulation and enforcement. Consequently, the EC's decision to begin cataloguing agreements between branded and generics companies presages greater scrutiny, and potentially restrictions.
The situation in the US is considerably more advanced than in the EU, with the Federal Trade Commission's (FTC's) repeated calls for an end to pay-for-delay agreements likely to bear fruit under President Obama's healthcare reform drive. The healthcare reform bill passed by the House of Representatives contains a provision that would ban pay-for-delay agreements, although that passed by the Senate, with which it must be combined, does not. Nonetheless, the momentum behind such a ban is gathering pace. A number of competition and consumer watchdog groups, including the American Antitrust Institute and Consumer Federation of America, wrote to the US Senate this week, urging it to incorporate anti-pay-for-delay provisions, while the FTC is due to hold a press conference on January 13 to this effect.
Even in the event that the pay-for-delay ban fails to make it into the final bill, Datamonitor expects companies engaging in such settlement agreements to come under greater pressure from the US FTC, which now has the backing of the new administration, and potentially the judicial system. Moreover, with the EC now also scrutinizing branded-generic deals that delay generics entry, the wisest course for the industry may well be to desist from such practices.
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