US Senators and state Attorneys General have launched new bids to ban “pay-for-delay” deals between brand-name and generic drugmakers.

Republican Chuck Grassley and Democrat Herb Kohl have reintroduced into the Senate their Preserve Access to Affordable Generics Act - which would presume such deals to be illegal and give the Federal Trade Commission (FTC) authority to stop them - while 32 state Attorneys General are urging the Supreme Court to review whether such deals violate state and federal antitrust laws.

A compromise version of the Kohl/Grassley bill passed the Senate Judiciary Committee in late 2009 and was included in the Financial Services and General Government Appropriations bill reported out of the upper house’s Appropriations Committee last year. However, final passage of the bill stalled when the House and Senate failed to agree on an Omnibus Appropriations package in December.

The Congressional Budget Office (CBO) estimated recently that the federal government could save $2.68 billion over ten years, should this bill become law.

Meantime, California’s recently-elected Attorney General Kamala Harris has filed a friend-of-the-court (amicus) brief in a Supreme Court case that seeks to end pay-for-delay agreements. AG Harris’s brief, which has been signed by 31 other AGs, supports a private antitrust lawsuit filed by direct purchasers of Bayer’s antibiotic Cipro (ciprofloxaxin) - including large drug wholesalers, pharmacies, unions and health care plans – and concerns allegations that Bayer paid generic drugmakers $400 million in exchange for agreements not to market their versions of the drug.

In 1997, several generic companies sought approval from the Food and Drug Administration (FDA) to market generic versions of Cipro, a product which was bringing Bayer around $1 billion in annual sales. Bayer sued the generics firms for patent infringement, and then paid them $400 million under the cover of settling the patent litigation, with the companies agreeing not to market generic versions of Cipro for six years, says AG Harris’s office. In 2000, class-action lawsuits were filed in New York on behalf of consumers against Bayer, as well as the companies with which it entered pay-for-delay agreements, including Barr Laboratories, Watson Pharmaceuticals, Hoechst Marion Roussel and the Rugby Group. The rulings in those suits allowed drug companies to pay one another not to compete if done in the context of settling patent litigation, even if the patents involved were not necessarily valid or infringed upon.

Brand-name and generic drugmakers routinely enter into settlement agreements to end patent litigation but, until 2005, none of them included pay-for-delay provisions - companies had assumed such agreements violated antitrust law, the Senators point out. However, in 2005 three appeal court decisions allowing such deals changed all that, and in the following four years, 63 out of 194 patent settlements included payments to delay generic competition.

2009 saw a record 19 such deals and then, last August, the Federal Trade Commission (FTC) told a hearing of the House Judiciary Committee subcommittee that, according to preliminary figures, there had been 21 brand-generic settlements involving some sort of compensation in the first nine months of fiscal year 2010, more than any prior full fiscal year, and protecting $9 billion in prescription drug sales.

“At the same time, the settlement filings confirm that brand and generic companies can settle their disputes without brand companies paying their generic competitors not to compete. 75% of all final patent settlements - 63 - did not involve compensation from the brand company to the generic combined with a delay in generic entry,” FTC chairman Commissioner Jon Leibowitz told the panel.

The FTC has repeatedly said that stopping pay-for-delay deals is one of its top priorities, and that doing so would save consumers at least $35 billion over the next ten years, plus around $12 billion for the federal government, which pays approximately one-third of all prescription drug costs.