AARP endorses amendment banning collusion between brand-name, generic drug makers

June 14, 2010

The Honorable Herb Kohl

United States Senate

330 Hart Senate Office Building

Washington, D.C.  20510

The Honorable Charles Grassley

United States Senate

135 Hart Senate Office Building

Washington, D.C.  20510

Dear Senators Kohl and Grassley:

AARP is pleased to endorse your amendment (SA 4332) to the American Workers, State, and Business Relief Act (H.R. 4213).  Your amendment will help to bring lower cost generic drugs to market sooner by preventing abuses in patent settlements between generic and brand name prescription drug companies. 

With the downturn in the economy, many consumers experience difficultly in making ends meet and in some cases are forced to cut back on their prescription drugs.  While manufacturer prices of brand name prescription drugs continue to rise at more than twice the rate of inflation each year, generic drugs offer consumers a lower-cost alternative.  The popularity of generic drugs is increasing every year, and generics now account for more than half of all prescriptions filled in the U.S.  Unfortunately, delays in getting some generic drugs to market means that consumers – and public programs like Medicare and Medicaid – don’t realize important savings.  

Consumers and health care payers benefit when generic competition enters the marketplace.  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.  According to the Federal Trade Commission (FTC), between 2006-2007 fifty percent of the settlement agreements between brand name and generic manufacturers resulted in some form of payment to the generic manufacturer and a delay of market entry of the generic drug.  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. 

Your amendment seeks to prevent these abuses by making clear that these pay-for-delay agreements are presumed illegal.  If the FTC determines that these settlement agreements are anti-competitive, it can bring suit against the pharmaceutical companies who would have to demonstrate to a judge by clear and convincing evidence that the agreements are pro-competitive.  If these companies are unable to prevail, the FTC would have the authority to assess civil penalties.

Enactment of your amendment would save consumers and other health care payers millions of dollars each year.  According to estimates by the Congressional Budget Office, your amendment is expected to reduce federal spending by approximately $1.8 billion over the next 10 years and increase revenue by $200 million over the same period. 

Thank you again for your leadership on this issue, and we look forward to working with you and your colleagues on both sides of the aisle to enact this needed legislation.

Sincerely,

David P. Sloane

Senior Vice President

Government Relations and Advocacy