People in Illinois with various medical conditions have had to fork over 10 times more on average than what’s necessary for at least 20 brand name drugs, according to a report from Illinois PIRG and Community Catalyst.
Costs for these 20 drugs, including Lipitor and Cipro, were kept high, because brand name pharmaceutical companies paid generic makers to keep cheaper versions off the market for a time. These agreements are known as “pay for delay.”
“It’s outrageous that drug companies are paying off the competition to keep prices high,” said Illinois PIRG State Director Brian Imus in a statement. “Because of this, people in Illinois pay inflated drug prices, or go without necessary medication. This needs to stop.”
Since 2005, generic versions for up to 142 different drugs have been delayed as part of pay-for-delay agreements, according to the report. Taxpayers are on the hook for $3.5 billion in higher drugs costs each year due to these deals, the Federal Trade Commission (FTC) estimated in 2010.
Patent protection allows pharmaceutical companies to haul in a bunch of money over time without competition, and these pay-for-delay arrangements further extend their ability to charge drugs at a premium rate without competition, explained Simon Pickard, associate professor of pharmacy practice at the University of Illinois at Chicago.
The report lists 20 specific drugs that have been the subject of pay-for-delay deals, putting off generic versions for an average of five years. While the generics have been delayed, the brand name drug makers have made a collective $98 billion in total sales of the drugs.
The report cites the case study of Provigil, which is prescribed for sleep disorders and fatigue among people with multiple sclerosis. The drug's generic version was expected to hit the market in late 2005. The brand name drug company, Cephalon, paid four different generic drug makers a total of $200 million to keep their versions off the market until 2012. While people were waiting for the generic to be available, which costs $520 for a month's supply, they had to pay about $1,200 each month for Provigil, the report showed.
Another drug that made the list is Lipitor, which is used to treat high cholesterol. Lipitor can cost up to $205 for a 30-day supply, but the generic version, which was delayed for nearly two years, is now available and costs just $18.
In June, the U.S. Supreme Court took up the pay-for-delay issue in the case of FTC v. Actavis. In a 5-3 decision, the high court ruled that some of these agreements may violate antitrust laws, opening the possibility for lawsuits, but it did not declare the deals outright unlawful.
A draft version of the Affordable Care Act included a provision that prohibited these pay-for-delay deals, but that measure was not included in the final bill that was signed into law.
There are two pieces of federal legislation in the U.S. Senate, however, that seek to put an end to the pay-for-delay practice. U.S. Sen. Dick Durbin (D-IL) has cosponsored both of the measures, while Sen. Mark Kirk (R-IL) has not signed on to either nill.
One bill, the Preserve Access to Affordable Generics Act, S. 214, would require that the deals be considered anticompetitive and unlawful. The FTC would be allowed to sue companies that take part in such agreements under the measure, which is sponsored by U.S. Sens. Amy Klobuchar (D-MN) and Chuck Grassley (R-IA).
The other bill, the FAIR Generics Act, S. 504, would cut back the incentive for pay-for-delay agreements. Under the legislation, a second generic drug company would be able to enter the market if another generic drug maker accepts a pay-for-delay deal. U.S. Sens. Al Franken (D-MN) and David Vitter (R-LA) are the bill’s main sponsors.
The Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on the pay-for-delay issue over the summer.
AARP Board President Robert Romasco was among those who testified at the hearing and urged Congress to address the pay-for-delay agreements. Specifically, he noted that putting an end to these agreements would save taxpayers, businesses and the overall health care system money.
Courtney Hedderman, associate state director for advocacy and outreach at AARP Illinois, said the industry practice drains the pocketbooks of people across the age and income spectrum and prevents competition, she said.
“I’d be surprised if people weren’t very supportive of finding these agreements illegal, because that’s what I hear all the time, so much of their money goes out for prescription drugs, and they need help,” Hedderman. “So who’s going to help them?”
If these arrangements were ultimately deemed unlawful, consumers would benefit in the short-term, because they would end up paying less for drugs, both directly and indirectly, Pickard said.
But the pharmaceutical industry will likely argue that less revenue for the brand name companies in the long-term means consumers may see fewer life-saving or maintaining drugs emerge on the market, he added.
Overall, there has been a “longstanding attempt” by pharmaceutical companies to preserve their revenue streams. Specifically, the brand name companies have become especially determined to do so in reaction to the initial aggression by generic companies over the previous decade, he explained. In response, brand name drug makers have also emerged with their own generic companies.
“From the pharmaceutical industry perspective, (a pay-for-delay arrangement) generates more money for their shareholders and also for their coffers so that they can do other strategic things with it, whether it's research or development or otherwise,” Pickard added.
But Hedderman said it's “hard to believe” that brand name drug makers would be hurt financially if pay-for-delay deals were deemed illegal.
“I’d be very shocked if they couldn’t do what they currently do,” she added.
Other drugs that saw their generic versions delayed, according to the report, include: Adderall XR (attention deficit hyperactivity disorder), Altace (high blood pressure), Cipro (antibiotic made by Bayer), Lamictal (epilepsy) Tamoxifen (breast cancer), Wellbrutrin XL-150 mg (major depressive disorder) and Zantac (digestive disorders), among others.
Pay-for-delay deals are currently blocking the generic versions of at least these five drugs: Aggrenox (stroke prevention), AndroGel (synthetic testosterone), Nexium (heartburn), Niaspan (high cholesterol), and Nuvigil (narcolepsy).