One reason US drug prices stay so high

Drugmakers "increase prices to consumers by billions of dollars a year" by paying potential rivals not to make cheap generic versions of popular medicines - and Congress, and now the courts, have been "walking away from aggressive scrutiny" of the practice, writes Rutgers-Camden law school professor Michael A. Carrier.

In April, Carrier wrote me in a note last night, "a panel of three Second Circuit judges upheld a settlement involving the antibiotic ciprofloxacin hydrochloride (Cipro), the blockbuster drug used to treat bacterial illnesses," but urged the plaintiffs to appeal to the full circuit.

"Bayer had paid $398 million to firms interested in making generic versions of Cipro in return for the generics agreeing not to enter the market during the term of Bayer’s patent." Citing an earlier case re the breast-cancer drug Tamoxifen, the New York-based circuit court approved of Bayer's Cipro deals. But "because of the ‘exceptional importance’ of the antitrust implications" of paying companies not to make drugs, "we invite plaintiffs-appellants to petition for rehearing" on the broader public issues.

They did - only to deny a full review in a decision yesterday. "The court did not give its reasons, but one judge, Rosemary Pooler, issued a blistering dissent that the issue 'deserves reexamination.'

"A major concern with the Bayer settlement is its inclusion of a 'reverse payment.' ... By delaying generic entry, the (original manufacturer) dramatically increases its monopoly profits and uses a portion of these profits to lavish windfalls" on generic drugmakers. Like paying farmers not to grow crops.

"A central policy behind the Hatch-Waxman Act, promoting generic competition and challenges to invalid patents, has been stymied by these pay-for-delay agreements. 

"In return for millions, if not hundreds of millions, of dollars, the only generic (drugmaker) able to receive exclusivity under the Act agrees not to challenge the patent and not to enter the market for years.

"Now that the full Second Circuit has closed the door on the issue, the available options are quickly disappearing... (One) option is for Congress to weigh in." But that's not promising: "Settlement provisions were dropped from health-care reform at the last minute.  And the substance has been watered down from the House’s initial ban on reverse-payment settlements to the Senate’s more flexible version that would allow the parties to explain their reasons for the agreement.

"In short, the Second Circuit’s denial of en banc review slams one of the last remaining doors on the American consumer.  As a result of today’s ruling, the increased prescription drug prices consumers have paid are more likely to continue."