SENATE JUDICIARY COMMITTEE HOLDS HEARING ON REVERSE PAYMENTS

A panel of drug industry representatives presented their views on the effects of reverse-payment deals before federal lawmakers at a Senate hearing called to consider proposed legislation that could stop the practice of paying generic drug companies to limit market competition.

Sen. Herb Kohl (D-Wis.) and Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) are introducing the "Preserve Access to Affordable Generics Act," a bill that would explicitly prohibit brand drug manufacturers from using reverse payments to delay generic entry. A reverse payment is the practice where a brand company pays a generic firm to delay the launch of a competing generic product.

At the Jan. 17 hearing, Sen. Orrin Hatch (R-Utah) asked a panel of pharmaceutical industry representatives to comment on two ways -- a bright-line rule or using a case-by-case basis -- to address certain anticompetitive concerns related to the practice raised by the FTC. A bright-line rule is a blanket approach that would prohibit the use of all reverse-payment deals, unlike a case-by-case approach that would approve or eliminate deals based on certain criteria.

In response to questions raised by Hatch on how to remove the unintended negative consequences of reverse payments, FTC Commissioner John Leibowitz said he supports the bright-line rule approach. He said applying that rule would not stop legitimate patent settlement agreements. It would, however, shorten the delayed entry of generic products -- a timeline usually agreed upon under terms of a reverse-payment agreement. Leibowitz also said that reverse payments, other than expediting the patent litigation process for drug companies, do not provide consumers with a needed service.

Panelist Merril Hirsh, a partner with Ross, Dixon & Bell, who also testified against the practice of using reverse payments to settle patent litigation lawsuits between brands and generics, said a bright-line rule should be imposed to bar these settlements under the Hatch-Waxman Act. "I think everyone agrees that there is a potential problem in having a brand company pay a generic company to agree not to compete or to withdraw a patent challenge," Hirsh said. "The question is how do you deal with that."

"These settlements are not likely enough to be competitive that they are worth having, and there are dramatic downsides to permitting these types of settlements," Hirsh said.

Billy Tauzin, CEO of PhRMA, voiced strong support for the use of reverse payments, saying that blocking them would hurt consumers.

"If you don't allow reverse-payment settlements, you may have the reverse effect of hurting consumers," he told committee members. Tauzin acknowledged the importance of generic drugs to the pharmaceutical industry and agreed with calls to modify how these settlements move through the federal review process. (http://www.fdanews.com/did/6_13/)