GPhA: FTC’s Flawed Understanding of Patent Settlements Misleads Consumers

Published Online: Thursday, January 17, 2013
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PRESS RELEASE

WASHINGTON, D.C. (JANUARY 17, 2013) – The Generic Pharmaceutical Association (GPhA) today issued the following response to the Federal Trade Commission's latest press release:

"The FTC is wrong on the facts, wrong on the public policy and wrong on the law. If successful, the FTC position would dramatically undermine the law of the land and cost patients and consumers billions of dollars every year,” said Ralph G. Neas President and CEO of the Generic Pharmaceutical Association (GPhA).

“The FTC is continuing to perpetuate the myth that pro-competitive, pro-consumer patent settlements are harmful to consumers - an unsubstantiated position that has repeatedly failed to receive support in both Congress and the Courts. Patent settlements have never prevented competition beyond the patent expiry, and generally have resulted in making lower-cost generics available months and even years before patents have expired.

"And it is important to note that the FTC already has the authority to review and reject any patent settlement that it deems to be unlawful. If the agency thought any one of the settlements it is now criticizing did not pass legal muster, the time to act was as it was considering the settlement, not by a press release after the fact.

"A 2011 analysis by the Royal Bank of Canada (RBC) found that the ability to settle patent challenges dramatically increases opportunities for consumer savings. The RBC analysis demonstrated that in cases where companies litigated to a conclusion, generic medicines came to market prior to patent expiration in only 48 percent of cases. In those cases where settlements resulted, generics came to market prior to patent expiration in 76 percent of cases.

"Furthermore, an August 2010 analysis conducted by Jonathan Orszag, former Director of the Office of Policy and Strategic Planning and member of President Clinton's National Economic Council, concluded that the Congressional Budget Office (CBO) used faulty assumptions to support its own estimate of the savings a ban on settlements would bring.

"Instead of concentrating their efforts on banning these pro-competitive settlements, those in Washington should focus on initiatives that would continue to dramatically reduce prescription drug spending; namely, promoting the increased utilization of generics for federal and state government funded health care programs and accelerating the approval of more affordable generics by increasing funding for the Office of Generic Drugs."

"GPhA feels compelled to set the record straight. The fact is that it is patents, not settlements, that protect the brand drugs from generic competition. Despite claims to the contrary, settlements actually help bring affordable generic medicines to market sooner, to the benefit of consumers and the health care system.

“Over the past 10 years, patent settlements have enabled dozens of first-time generics to come to market many months before patents on the counterpart brand drugs expired, including the top selling medicines Lipitor, Effexor and Lamictal. These early launches saved patients hundreds of billions of dollars.

“Additionally, the federal courts have repeatedly recognized that settlements can be desirable options in patent litigation. The record is clear: settlements allow generic drugs to come to market long before patents on the counterpart brands expire, resulting in billions of dollars in annual savings. Year after year, settlements have proven to be pro-consumer and pro-competition. Our shared goal must be to ensure that patent settlements benefit, not harm consumers and the health care system. To accomplish this, we must avoid against an outright ban on settlements as a means of resolving patent litigation.

“Like the FTC, we oppose anti-competitive and anti-consumer settlements. That's why we support provisions in the 2003 Medicare Modernization Act that require FTC review of all brand-generic patent settlements. An outright ban would have the unintended consequence of preventing pro-consumer settlements that actually allow generic competition sooner than if the generic company took the case to conclusion and lost - which is a possibility in every single patent case," Neas concluded.

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