US senators are introducing legislation to end pay-off deals that keep generic drugs off shelves and give pharmaceutical giants market exclusivity that costs consumers billions of dollars per year.
The bid follows Thursday's release of a Federal Trade Commission report documenting a significant rise in the number of so-called "pay-for-delay" agreements that smother competition in the massive drug industry.
The FTC determined that 40 patent dispute resolutions between brand name drugs and generics in 2012 may involve pay-for-delay payments, a year-on-year rise of 40 percent.
Those deals, the commission said, involve products with combined US annual sales of $8.3 billion.
"Drug manufacturers are using pay-off agreements to keep cheaper generic drugs off the market while raking in huge profits, and it has to stop," said Senator Amy Klobuchar, a Democrat who will introduce the legislation together with Republican Chuck Grassley.
The FTC expressed similar concerns and has argued that such deals violate US anti-trust law, delay generic drug entry to the market by an average of 17 months, and cost US consumers $3.5 billion annually.
"Sadly, this year's report makes it clear that the problem of pay-for-delay is getting worse, not better," FTC chairman Jon Leibowitz said in a statement.
"More and more brand and generic drug companies are engaging in these sweetheart deals, and consumers continue to pay the price."
Prescription generics often cost just a fraction of their brand-name equivalents.
The Generic Pharmaceutical Association on Friday dismissed the FTC report as perpetuating the "myth" that such settlements are bad for consumers, and said the deals were a necessary evil of a competitive industry.
Banning the settlements would "put a chill on patent challenges" and further delay generic drug entry to the market, costing consumers billions of dollars, GPhA spokesman Greg Howard told AFP.
"The more you limit the options that companies have, the more likely they'll say: we just won't bother trying to challenge the patents."
The pay-for-delay deals usually originate from lawsuits which question patents of the original drugs, a process eased by a 1984 law which encourages generic manufacturers to challenge patents for brand-name drugs.
Such litigation is costly and uncertain, and a branded firm often pays generic companies to drop or postpone their challenges, figuring that the payoff for delaying the generic drug would be less than the profit it can generate from extended market exclusivity.
The debate comes as the US Supreme Court is due to hear arguments in March on a case in which the FTC accuses generic drugmakers of accepting hefty payments in exchange for agreements to drop until 2015 legal challenges to the patents on a brand of testosterone gel.
[Image via Gage Skidmore, Creative Commons licensed]