Pay-To-Delay on Generics

AMA Wants To Stop Pharma Pay-To-Delay Tactic on Generics

Bruce Japsen
November 13, 2012

Putting the nation’s largest doctor group on record against a controversial drug industry practice known to thwart the introduction of cheaper generic drugs for consumers, the American Medical Association officially supports federal legislation to “end the practice of pay for delay in prescription medicine.”

The move this week by the nation’s largest doctor group, meeting in Hawaii to set its policy and lobbying agenda for the future, comes as Congress and the White House are looking at ways to save money given the threat of a “fiscal cliff.” In addition, federal lawmakers are also expected to look to slow spending on entitlements, particularly the federal Medicare health insurance program for the elderly – a large buyer of prescription drugs.

An end to the drug industry practice that leads to drug makers legally paying a competitor to keep a cheaper generic off the market for potentially years would be bad news to drug makers like Abbott Laboratories (ABT), Pfizer (PFE), and others, but good news for companies that operate pharmacies like Walgreen (WAG), CVS/Caremark (CVS) and Wal-Mart (WMT) which try to get consumers to switch to less expensive prescriptions.

Many doctors see a lot of brand name drugs that treat most, if not all, chronic conditions like high cholesterol, hypertension, asthma and diabetes available in cheaper generic form but paying to delay generics is unnecessarily keeping certain brand names on the market. As the nation’s largest doctor group, the AMA’s lobby has considerable clout in Washington and its support of the Affordable Care Act was seen as key to President Obama winning Congressional approval of that landmark legislation two years ago.

The AMA said pay-to-delay practice limits options available to patients and contributes to rising health costs, saying “Pfizer alone made $10.7 billion in one year on Lipitor with this arrangement.” The Congressional Budget Office has said ending the practice would save the federal government $5 billion over 10 years and could save consumers more than twice that during the same time frame.

“Pay for delay keeps quality, low cost generic drugs out of the marketplace and unnecessarily drives up costs for patients,” said Dr. Patrice Harris, an AMA board member. “In order to ensure the most cost-effective treatment options, this practice must stop.”

There has already been bipartisan support to end pay-to-delay, led by Iowa Republican U.S. Sen. Chuck Grassley and Democrat U.S. Sen. Herb Kohl of Wisconsin. Though Kohl is retiring, his successor, the newly elected Tammy Baldwin, a Democrat, has a record of examining certain drug industry business practices designed to save consumers money.

Drug makers have won several court cases that have allowed the practice to continue but may soon face a potential Supreme Court challenge that could end pay-to-delay. A federal appeals court in Philadelphia in July ruled an industry strategy to pay competitors keep generics off the market is anticompetitive, adding the industry worries about patent expiration should the Supreme Court agree, according to a New York Times story.

“Every FTC commissioner since 1998 has challenged ‘pay for delay’ settlements,” the AMA’s California delegation said in a resolution that passed the AMA’s policy-making House of Delegates this week.