The US government plans to plug a loophole in its laws to prevent patent deals between drug companies and generics makers, many of them from India, that appear to delay availability of cheaper, non-patented versions to American patients.
The move follows concerns raised by the US Federal Trade Commission (FTC), the chief anti-competitive watchdog for companies there.
Any such move will have a significant impact on Indian drug companies. Two of the largest domestic firms, Ranbaxy Laboratories Ltd and Dr Reddy’s Laboratories Ltd, for instance, have signed a spate of such patent dispute settlement agreements with large drug firms that hold the patents.
The US remains the world’s biggest market for pharmaceuticals.
FTC’s report, released on Wednesday, was silent on the specific measures that it might seek in light of its concerns.
But it appears that the measures will be multi-pronged, involving legislation, monitoring, and enforcement for better control on availability and prices of medicines in the US. FTC is worried that private settlements in legal disputes between branded and generic drug companies were simply delaying availability of cheaper generic versions of branded drugs sold in the US.
“We are working with the (US) Congress on a Bill that could patch the hole in the Hatch Waxman Act. Simultaneously, we will keep monitoring the agreements being done,” said Mitchell J. Katz, a spokesman for FTC, in a telephone interview with Mint.
The Hatch Waxman Act, a 1983 law named after US lawmakers Henry Waxman and Orrin Hatch, is aimed at encouraging generic drugs or copies of patented medicines but, it doesn’t specifically address patent settlements.
A new legislation, the Preserving Access to Affordable Generics Bill, is being discussed by US law makers in an effort to clamp down on patent settlements between patent-holding drug multinational corporations and generic pharmaceutical firms, who often settle patent disputes with significant revenue benefits.
According to the FTC report, of the 33 final settlements between October 2006 and September 2007, 14 deals included both compensation to the generics drug makers and a restriction on the generic drug firms’ ability to market its product.
In 11 of these, the branded company agreed not to launch or sponsor an authorized generic drug for some time after the entry of the generic drug companies product. In the rest, direct compensation flowed to the generic firm.
Separately, 16 deals involved agreements with first-to-file generic companies, which stand to gain a six-month market exclusivity in the US if they prevail in the lawsuit under the Hatch Waxman Act.
In such settlements, both partners benefited: for the patent holder, generic competition was staved off, while the generic firm got a certainty of launch that was mutually agreed upon.
The FTC report has also marked an increasing trend of what it calls “pay-for-delay” settlements, which have more than doubled since fiscal 2004 when only 14 final deals were struck between drug makers.
Commenting on the findings, FTC commissioner Jon Leibowitz said in the statement that pay-for-delay settlements were “good news for the pharmaceutical industry, which will make windfall profits on these deals. But, it’s bad news for consumers, who will be left footing the bill”.
“This report confirms that settlements with potentially anti-competitive arrangements continue to be prevalent,” FTC chairman William E. Kovacic said in a statement, adding the agency remained “committed to ensuring that brand and generic companies do not use such settlements as a way to deny consumers the benefits of competition.”
Indian drug industry representatives, such as the secretary general of Indian Pharmaceutical Alliance, a lobby of big drug firms here, D.G. Shah, noted that while patented drug makers would be scrutinized more, Indian firms would too come under the FTC scanner.
“The impact will be greater on the brand name (innovator) companies,” said Shah, without elaborating.
In the last two years, Hyderabad-based Dr Reddy’s had settled on pain drug Imitrex and Exelon used in treating dementia, while Ranbaxy has been on a recent lawsuit settlement spree.
In less than a year, the Gurgaon-based Ranbaxy has reached agreements with various global drug companies to dismiss litigation on Imitrex, prostrate drug Flomax, anti-Herpes Valtrex and, most recently, on the $3.4 billion (Rs14,552 crore) ulcer drug Nexium.
Ranbaxy’s chief executive officer Malvinder M. Singh was not immediately available for comment.