• Drug company shenanigans

    Earlier in the week I highlighted a study showing that a measure of pharmaceutical innovation was associated with increased longevity. I knew the honeymoon couldn’t last; we’re back to shenanigans. For years, big drug companies have been paying their competitors to keep cheaper generic competition off the shelves. That way the larger company can keep charging really high prices for their drug without competition. The smaller companies get big payoffs, and don’t have to do anything at all. Everyone wins. Well, except the rest of the country:

    Last year, the Congressional Budget Office estimated that a Senate bill to outlaw such payments would save the federal government $4.8 billion over 10 years and would lower drug costs in the United States by $11 billion. The legislation remains stalled in the Senate. The federal government is a major buyer of drugs through Medicare and the Department of Veterans Affairs.

    Such agreements were just ruled illegal by the Third Circuit Court of Appeals because they are anticompetitive. The drug companies disagree, of course. They say these agreements are a way to settle lawsuits about patents.

    I’m just struck by the fact that these kind of actions seem to cost the federal government more than $400 million a year. That’s just a bit more than the entire budget for AHRQ, which would be the first place I’d go to get funding to show just how much this kind of thing is costing Americans each year. But we need to gut AHRQ because we “don’t have the money“.

    I’m just saying.

    @aaronecarroll

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    • Wonderful article! Shenanigans, indeed!

      btw, “That’s just *about more than the entire budget for AHRQ”

    • Sorry, but I have a hard time understanding how “settling a lawsuit” is anti-competitive. Sometimes the patents are frivolous, sometimes they are strong. But any generic company would make more money selling products than the amount of these payoffs, if they in fact won the patent challenge. They settle because they don’t have confidence they can win the lawsuits.

      So how is this anti-competitive? I believe that, if such payments are outlawed, the pharmaceutical companies will generally let the suits go forward, and I expect that they will mostly win the suits — which prevents the generics companies from competing until the contested patent expires.

      In fact, this outcome could actually delay the introduction of generics, since the settlement agreements sometimes allow the generics companies on the market a bit before the contested patent expires.

      I think we have a real problem with the patent system, and that big pharma gets far too many frivolous patents approved. We should fix that. One step would be making the position of patent examiner more attractive to highly-talented people. Another would be to have some kind of financial penalty if companies submit patents that are found to be “obvious to one skilled in the art” as they say.

      • That isn’t how I read the NY Times article. Simply because a company obtains a patent to treat Condition X doesn’t mean that the patent gives them the sole right to sell products that treat Condition X.

        It seems to me that it’s entirely possible that Condition X could be treated using several methods and one doesn’t have to break a patent to do so.

        Perhaps I’ve read too far into the article, but it certainly seems like big pharmaceutical companies are using these pay-to-delay tactics to secure a gaurenteed market for the duration of the patent as opposed to preventing infrigement on the patent.

    • What can one expect when there is so much profit in keeping us sick. White collar mafia. lol