CBO Says Bill to Curb Pay-for-Delay Would Cut the Deficit by $613 Million Over 10 Years

The bill seeks to prohibit brand-name drug makers from delaying the entry of generics or biosimilars by compensating competitors to keep their products off the market for a period of time in so-called pay-for-delay arrangements.
Kelly Davio
May 10, 2019
The Preserve Access to Affordable Generics and Biosimilars Act, first introduced to Congress in January 2017 as the Preserve Access to Affordable Generics Act, was recently reintroduced by Senators Amy Klobuchar, D-Minnesota, and Chuck Grassley, R-Iowa.

The bill seeks to prohibit brand-name drug makers from delaying the entry of generics or biosimilars by compensating competitors to keep their products off the market for a period of time in so-called pay-for-delay arrangements.

While such deals are illegal under antitrust law, the proposed legislation would specifically target these agreements, especially as they arise to settle patent infringement cases. The bill would require that agreements that result from United States Patent Trial and Appeal Board proceedings be reported to the Federal Trade Commission (FTC) and the Department of Justice, and would establish the authority to levy penalties if a settlement is found to violate the law.

This week, the nonpartisan Congressional Budget Office (CBO) released its cost estimate for the bill as reported by the House Committee on the Judiciary, and it finds that enacting the legislation would reduce the deficit by $613 million by 2029. Those reductions include $520 million in reduced direct spending and $93 million in increased revenues.

The CBO also estimates that the bill would reduce direct spending subject to appropriation by $24 million by 2024 as a result of lower estimated drug prices for discretionary health programs.

In terms of how prevalent such pay-for-delay deals are in the US market, the FTC’s most recent staff report on branded drug makers’ settlement with generic competitors found that, during fiscal years 2014 and 2015, there were 14 deals—involving 11 different products with combined annual US sales of approximately $4.6 billion—that were potentially anticompetitive. That number was down from 21 such deals the year prior, and down substantially from the record high of 40 such deals in the financial year 2012.

Among those deals, 10 included compensation solely in the form of a cash payment for litigation fees. Those fees ranged from $15,000 to $9.5 million. Four of the deals included compensation in the form of a branded drug manufacturer promising not to market an authorized generic that would compete with the generic manufacturer’s product for some period of time.

Despite the fact that such deals appear to be on the decline, pay-for-delay settlements have been increasingly in the public eye as US stakeholders seek extra scrutiny of deals involving such high-cost therapies as adalimumab (Humira). In 2018, Klobuchar and Grassley asked the FTC to investigate whether AbbVie, maker of Humira, had engaged in pay-for-delay settlements that mean biosimilars of adalimumab will not reach the US market until 2023, despite the fact that these drugs reached European patients in October 2018.

However, AbbVie has consistently opposed using the term pay-for-delay to describe its settlements with biosimilar developers, noting that its competitors will be paying royalties to AbbVie once their products launch, and that AbbVie will not compensate the biosimilar product sponsors.

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