Some big pharmaceutical companies, makers of brand-name medicines, pay off smaller generic drug manufacturers to keep them from releasing more affordable products that compete with theirs.
California wants to pass a strong law to prevent the practice often called “pay for delay.”
“These dark, illegal, collusive agreements that drug companies devise not only choke off price competition but burden our families and patients – they force every Californian to shoulder higher prices for life-saving medication,” said Attorney General Xavier Becerra. “It’s nothing less than playing with people’s lives.”
The expanded availability of generic alternatives has been shown to produce significant cost savings. In 2018, 90% of prescriptions in the US were dispensed as generics but only represented 22% of the total amount spent on prescriptions.
The Association of Accessible Medicine reported that California alone was able to save a total of $26.1 billion last year by paying for generic drug substitutes over their brand name counterparts.
That is why some critics worry that, while passing the law may seem like the right thing to do, the proposed measure could actually drive up costs for Californians by making it harder for generic drugs to actually enter the market.
“The last thing we need now is legislation that will harm the ability for companies to bring new generic medications to market,” wrote William “Bill” Remak in the Capitol Weekly. He is a cancer and twice liver transplant survivor who lives in Petaluma and advocates for medical research on chronic diseases.
Remak says the law would establish “a new burden on generic drug manufacturers that forces them into lengthy, expensive lawsuits that they risk losing.
Generic manufacturers lost more than half of the cases they brought against large pharmaceutical companies, says Remak.
Attorney General Becerra is backing AB 824, a bill Assemblymember Jim Wood (D-Santa Rosa) introduced that would prohibit settlement deals between drug companies.
The Assembly voted to pass the bill in May. It is currently making its way through the Senate where it has been approved by the Health, Judiciary and is set for a vote in Senate Appropriations tomorrow.
While many agree on the need to bring more lower cost generics to the market quicker, opponents see the overly broad nature of AB 824 as counter-productive, arguing that the legislation does not allow settlements that would deliver generics to the market faster.
Critics of the bill, like Wayne Winegarden, senior fellow and director of the Center for Medical Economics at the Pacific Research Institute in San Francisco, argue, “Assemblyman Wood’s bill reflects a fundamental misunderstanding of the pharmaceutical market,” says Winegarden.
“Instead of encouraging settlements, AB 824 encourages a potentially long and costly litigation process,” says Winegarden. “Ironically, this process will increase the costs of medicines and delay when generic medicines will be available to patients compared to the current system.”
For African Americans in California, keeping the cost of co-payments for drugs low is important. Generic medications allow federal and state health insurance programs to more easily afford paying the bulk of the costs for the drugs doctors prescribe for patients. More than a million Black Californians are enrolled in Medi-Cal, the state’s Medicaid program, according to the Henry J. Kaiser Family Foundation. And more than 300,000 more African Americans in California receive insurance coverage through the federal Medicare program. That’s more than one-half of the state’s total Black population.
In June, Attorney General Becerra announced that he reached a deal with two pharmaceutical companies, Teva and Endo,that required them to pay the state $70 million for using “pay-to-delay” tactics intended to prevent generic drug manufacturers from competing with them.
If AB 824 passes, Becerra says, the state will be in a stronger position to fight more anti-trust violations like the ones he alleges Teva and Endo committed. The companies did not plead guilty in the case.
Under existing law, Winegarden says, when generics sue companies that hold the original patent for a drug, they immediately get exclusive rights to bring their version of the drug to market for 180 days. He also argues that not all settlements are meant to delay entry of generics. Some of them benefit both parties, he says.
“Once it is understood that the current policy framework intentionally encourages litigation, and therefore manufacturer settlements, to encourage the introduction of cheaper generics, faster, it becomes clear that Wood’s bill will not improve this system,” says Winegarden. “The bill will establish a standard that effectively assumes patent settlements are “anti-competitive” unless they can be proven otherwise – guilty until proven innocent.”
By Tanu Henry | California Black Media
