The War on Prescription Drugs Will Hurt America’s Health Care

Sometimes we do things to make ourselves feel better, even when it makes things worse. Legislation being championed by some Democrats in California, Oregon and other states, which would make presumptively illegal a useful way to transition branded prescription drugs to generics, is a perfect example. Taking on drug companies may scratch a political itch, but these actions could make it needlessly more difficult for Americans to access affordable medicines.

 

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The federal government’s system for transitioning prescription drugs to generic is certainly messy. It starts with a generic drug company asking the Food & Drug Administration (FDA) for approval to market an existing drug. Then the company which holds the patents to the drug (and its processes and methods) files a lawsuit asserting its patent rights. Federal law then mandates a pause on FDA approval of the generic for 30 months while the companies try to agree to terms for a transition.

Litigation is rarely a good way to make public health decisions, and these settlements involve complex legal and health matters. But, like making sausage, the outcome usually works.

The problem for some Democrats is this litigation process underscores what they hate about the way the federal government manages prescription medicines. In 1984, led by liberal Congressman Henry Waxman and conservative Senator Orrin Hatch, Congress decided to use economic incentives and patents to facilitate the development and sales of prescription drugs. Today, some legislators prefer instead to implement price controls and eliminate drug patents.

Because their policy goals do not have broad support at the federal level, champions of these policies are trying to pass legislation in some states to make it harder for the federal system to function.

The key to the federal regime is the ability of companies to settle many moving parts of the transition under a single agreement. First, a drug’s initial patent may be expiring, but there may be active patents on other technologies that improve the drug’s efficacy, make it easier to administer, or reduce side effects. The generic manufacturers usually want access to all of this technology.

Second, the two sides have to come up with a fair date for the generic to enter the market given that some patents have expired and others may not for years. Picking a date for all of the patents to transfer simultaneously helps get generic drugs to patients quicker than if the full legal process had to play out.

Third, they need to decide if either side gets money in the settlement. The generic may pay the branded manufacturer for early access to the full set of patents, or the branded may pay the generic based on other facts, such as avoiding litigation costs or getting help distributing the branded drug.

Some Democrats are using payments from brandeds to generics to attack the federal regime. When a branded manufacturer plaintiff pays a defendant generic company, it is called a “reverse payment”—in normal litigation, plaintiffs do not pay defendants. But, this is not normal litigation (the generic firm triggers the action), and the practice of issuing reverse payments is not a problem needing a solution.

Nevertheless, California made these reverse payments presumptively illegal under its state antitrust laws in 2019. Oregon, Illinois and Connecticut are considering similar legislation. Politicians deride these reverse payment settlements as “pay for delay,” even though payments to generics may have nothing to do with the date for them to enter the market.

Outlawing such legitimate avenues to settlement is wrong for America’s health care. It throws needless roadblocks into the transition to generics—just ask the liberal justices of the U.S. Supreme Court who wrote the landmark 2013 ruling in Federal Trade Commission v. Actavis on reverse payments in drug patent litigation.

The liberal Justices—Breyer, Ginsburg, Sotomayor, and Kagan—held that although some reverse payments can be anticompetitive, many have “value” in dealing with “the patent litigation problem.” The relevant antitrust question is: What are [the] reasons” for the payments? Only those that are actually anticompetitive should be overturned.

We Democrats used to pride ourselves on being capable of looking at the facts and making nuanced public policy decisions. Governing America’s health care based on slogans—whether they’re misleading, like “pay for delay,” or derisive, like “Obamacare”—is counterproductive. Facts, not slogans, should dictate access to life-saving and life-enhancing medicines.

Notably, the FTC and states already are on this beat to ensure patent settlements are not anti-competitive. The FTC reviews some 140 drug settlements every year for anti-competitiveness. States can also sue to stop a prescription drug settlement they believe is problematic. But, as the liberal Justices warned in their majority Actavis decision, whether a payment violates antitrust laws “is a conclusion that flows from the analysis and not . . . its starting point.”

Those of us who care about America’s health care should support fair, quick patent settlements so more people can access less expensive medicines. Governing by slogan and division in the face of the facts must never become the Democratic way.

Philip S. Goldberg is the Office Managing Partner of Shook Hardy & Bacon, LLP in Washington, D.C. He previously worked for three Democratic members of Congress and has spent the past twenty years advocating for commonsense liability public policies.