Jon Leibowitz, who has emerged as US President Barack Obama’s choice to lead the Federal Trade Commission (FTC), says the new administration will take tougher action to stop brand-name drugmakers paying generics firms to delay cheaper medicines coming to market.

“Eliminating these pay-for-delay settlements is one of the most important objectives for antitrust enforcement in America today” and will help ensure that the nation can afford health care reform, says Commissioner Leibowitz, a Democrat who was first appointed as a member of the FTC in 2004.

“Denied the possibility of the dramatic savings brought by generic competition - which can drive prices down to as little as 10% of the brand price - American consumers, especially the elderly and the uninsured, are the victims here. So is the federal government, which pays nearly one-third of the nation’s prescription drug costs overall,” he said.

Now however “there seems to be a growing recognition, especially by this administration, that these deals need to be stopped," he told CongressDaily, and forecast that the Justice Department will now be “much more supportive” of legal challenges brought by the Commission against such deals that the Bush administration had been. In 2005, attempts by the FTC to have two such cases sent to the Supreme Court were not supported by the Department, and the deals’ legality were upheld in appeals courts. In the following two years, nearly half of all patent settlements involved payments from the brand-name to the generic manufacturer in return for an agreement by the generic to keep its drug off the market, yet in 2004, before those decisions, no patent settlement reported to the FTC contained such an agreement. This represents “a very worrisome trend,” says Commissioner Leibowitz.

However, earlier this month, as the FTC and the state of California launched a lawsuit seeking to block a “pay-for-delay” agreement between Belgian drugmaker Solvay and three generics makers – Watson, Par and Paddock Laboratories – relating to Solvay’s AndroGel (testosterne gel), Commission officials said they hoped this case would make it to the Supreme Court.

The FTC will now take a two-pronged approach to the problem, said Commissioner Leibowitz. This will involve continued court challenges, plus support for legislation to outlaw these “unconscionable deals,” such as the bill introduced last Congress by Senators Herb Kohl (Democrat), Chuck Grassley (Republican), and others including Senator Barack Obama, and which was reintroduced this month by Sens Kohl and Grassley as The Preserve Access to Affordable Generics Act.

Announcing the bill, Sen Kohl said that pay-for-delay deals “only serve the profits of the companies involved and deny consumers access to affordable generic drugs,” while Sen Grassley added that they “appear to simply line the pockets of the companies and leave the bill to the consumer.”

The senior Senate Judiciary Committee members noted that, according to a recent report from the Pharmaceutical Care Management Association (PCMA), health plans and consumers could save $26.4 billion over the next five years by using the generic versions of 14 popular drugs that are scheduled to lose their patent protections before 2010. If the allegations made by the FTC in the Solvay case are proven true, this “represents the exact type of agreement that would be rendered illegal by The Preserve Access to Affordable Generics Act,” they added.

A House version of the Kohl/Grassley bill is expected to be introduced shortly by Democrat Henry Waxman, chairman of the House Energy and Commerce Committee, and the FTC is also set to publish an investigation into “pay-for-delay” agreements.

- Addressing the American Antitrust Institute during his election campaign, then-Senator Obama said that his administration would “ensure that the law effectively prevents anticompetitive agreements that artificially retard the entry of generic pharmaceuticals onto the market, while reserving the incentives to innovate that drive firms to invent life-saving medications.”