Why Drugs Cost More Than They Should: The $3.5 Billion Dollar Reason

Pharmaceutical Companies Offer Pay-for-Delay Deals to Generic Drug Manufacturers

Anyone needing prescription medications that are required for an illness or chronic health condition is probably shocked by the high cost of brand-name drugs. To avoid losing massive amounts of profits from new medications, pharmaceutical companies have offered pay-for-delay plans to generic medication manufacturers. The average generic medication is significantly less expensive than its name-brand counterpart is, and most medical insurance providers will only reimburse for the least expensive medication. Anyone paying out-of-pocket for prescription medication will request generic brands in order to save money. Because pharmaceutical companies have these pay-for-delay deals with generic drugmakers, Americans are spending an additional $3.5 billion on essential prescription medications to maintain or improve their health.

What are Pay-for-Delay Plans?

Reverse payment patent settlements are designed to prevent competitors from developing and marketing a product such as prescription medications. A pharmaceutical company will create a written contract with a generic drug manufacturer to delay selling a medication. The length of delay time varies, depending on the particular contract and is often kept confidential. While the U.S. Patent and Trademark Office will permit a generic drug manufacturer to challenge a pharmaceutical company’s patent with a court case, a pay-for-delay plan is designed to stop this action. A pharmaceutical company might pay a generic drug manufacturer millions of dollars with a pay-for-delay plan because a manufacturer is able to recoup the cost for the plan in addition to making millions more from customers. Unfortunately, these reverse payment patent settlements can lead to medications that are too expensive for many individuals to buy.

The Public is outraged by Pay-for-Delay Offers

In 2013, the U.S. Supreme Court decided that the Federal Trade Commission could take legal action against the pharmaceutical companies that are offering generic drug manufacturers a pay-for-delay plan. The first antitrust lawsuit was against Solvay Pharmaceutical concerning its new medication AndroGel that was developed to help males stabilize or increase their testosterone levels because of a medical condition. Solvay Pharmaceutical offered a pay-for-delay plan to the generic drug manufacturer Actavis to prevent the manufacture of a lower priced generic version of AndroGel. The publicity from this case helped to alert the public and medical practitioners about reverse payment patent settlements that are keeping affordable medications from people needing the drugs.

A Court Case Leads to Changes

Fortunately, the bad publicity about pay-for-delay plans along with the first court case about the practice is helping to stop the practice. The FTC has completed a study to determine if pharmaceutical companies are still offering reverse payment patent settlements to generic drug manufacturers, and there has been a significant reduction of pay-for-delay plan offers since 2014. In addition, several senators have requested that government agencies make pay-for-delay plans illegal to help the public have affordable medications. If a bill to prevent pay-for-delays is approved, then it could lead to more individuals being able to afford the vital medications needed to cope with a lifelong medical condition or temporary illness.