No “Pay-to-Delay” For Pharma

The Senate Appropriations Committee approved adding language to restrict this practice to a spending bill.  Will it ultimately pass?  I’m not sure.

What is it?  The way a generic drug comes to market is that generic manufacturers (e.g., Teva) will wait for a patent to expire and/or challenge the patent.  They do this by filing an ANDA (Abbreviated New Drug Application).  Manufacturers obviously want to enjoy the exclusivity of their patent(s) as long as possible.

My understanding is that “pay-to-delay” is when:

  • The brand manufacturer knows that someone is going to challenge their patent and try to get a generic to market before the patent expires.  They pay the generic manufacturer not to do this and in return might allow them to offer an “authorized generic” before the patent expires.

On the one hand, my reaction to this potential legislationis a “finally”.  On the other hand, this is a defeat for creative capitalism.  Does a company have to launch a product?

If Ford wanted to pay Toyota to delay the launch of a new car such that they both made more money, would the government step in and tell them they had to launch it.  Perhaps that’s apples to oranges.

The problem here is that while the brand manufacturer made more money and the generic manufacturer made money for doing nothing (other than getting the right to launch it) the public (i.e., consumers) and payers lost since they had to wait to save money.

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