Saturday, 5 December 2009

Drug-Makers Paying Off Competitors To Keep Cheap Generic Drugs Off the Market

Just when you think you’ve heard all the wheezes that some pharmaceutical companies get up to to ensure that conventional medicine continues to buy their expensive products, along comes another one. This report comes from .

Over the last few years, some drug-makers have embraced a startlingly simple tactic for fending off competition from generic brands: paying them off. In a nutshell, the company that holds the patent on a profitable drug strikes a deal with the maker of the cheaper generic brand: you hold off on marketing your generic for several years, and in return, we’ll give you a share of our profits on the drug.

So common have these deals become lately that they’ve been given a name: pay-for-delay. The approach — a textbook anti-competitive tactic — is worth billions to drug-makers, because it essentially allows them to buy more protection than their patent confers.

That was made more or less explicit by Frank Balsino, the CEO of Cephalon, which makes the sleep-disorder drug Provigil. In a 2006 interview, Baldino trumpeted recent deals with four generic drug-makers that kept generic versions of Provigil off the market until 2012, declaring: “We were able to get six more years of patent protection. That’s $4 billion in sales that no one expected.”

But pay-for-delay doesn’t work out nearly so well for consumers. Generics are sometimes priced as much as 80 or 90 percent cheaper than the name brands. For instance, the cholesterol drug Zocor costs $164 a month, while a generic version costs just $12 a month. Pay-for-delay deals will cost consumers an extra $35 billion over the next decade, by keeping those cheaper generics off the market, according to a recent Federal Trade Commission study. And it’s the uninsured, who pay out-of-pocket for drugs, that disproportionately pay those costs. In the UK, it would indirectly be every taxpayer who funds the NHS, or those going private.

The Federal Trade Commission is belatedly looking into this practice and hoping to get a ruling from the Supreme Court declaring the deals illegal under existing antitrust law. Meantime, if they wanted them, consumers can’t get cheap drugs.
I would have thought that it would have been a no brainer that the practice was against competition laws, but apparently the point is not settled yet, at least in the US. I wonder which UK companies have made such deals and whether the Office of Fair Trading has made enquiries?

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