California Moves to End Big Pharma ‘Pay-for-Delay’ Deals

(CN) – California Attorney General Xavier Becerra and Assemblyman Jim Wood introduced legislation Wednesday to thwart pay-for-delay agreements between drug companies, a move they say will rein in monopolistic drug prices in California. 

“It really is a scheme. Nothing quite tops drug companies that pay manufacturers not to produce lower priced generics after their patent runs out,” Wood, D-Santa Rosa, said at a Sacramento press conference Wednesday afternoon. “In this process generic companies make money for doing nothing. And what do patients get? Nothing but artificially increased prices for drugs.”

Woods’ bill, Assembly Bill 824, targets agreements by which pharmaceutical companies that produce brand-name drugs discreetly pay other manufacturers to wait sometimes years after patents expire to introduce their generic versions.

“When drug companies use these quiet pay-for-delay agreements with generic drug manufacturers it hurts consumers twice – once by delaying the introduction of an equivalent generic drug that is almost always cheaper than the brand name and again by stifling additional competition when multiple generic companies begin producing even less expensive generic equivalents,” Wood said. 

If passed, the bill will make these types of agreements pre-emptively illegal and allow the California Department of Justice to more easily investigate companies suspected of engaging in them.

“No pharmaceutical company should be able to game the system at the expense of hardworking California families,” Becerra said.

He added his department will still have to bring a case against the companies, but the law will shift the burden of proof from the state to the drug companies. If passed, the law will require the drug companies to prove their agreements are legitimate and not anticompetitive. 

Becerra said AB 824 will also allow his office “to go behind closed doors to see what they did,” adding, “It’s a lot easier to gather the evidence to prove whether this was a legitimate settlement or a collusive settlement.”

The attorney general stressed the state must still prove its case.

“Rather than The People having to prove that you were engaging in a practice that was harmful, you now have to substantiate that what you were doing was not only in your interest but the public’s interest as well,” Becerra said. “So the presumption switches over to them to make out their case first. It gives us a better opportunity to go and find out if these settlements are in the public’s interest or simply a way to hide their collusive activities.”

Wood said his bill will also be the end of drug companies gaming patent law.

“These drug companies have had these patents for years and years and years, and that was the purpose of patent law, to give protection during that time period. Now they’re going beyond that and trying to game the system for just a little while longer, for just a little more money,” Wood said. “And the longer you can delay it the more money you’re going to make. And that’s what we’re trying to end.”

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