Commentary: Here’s how policymakers can make prescription drugs more affordableOctober 08, 2021
BY LOU KENNEDY
When Bill Clinton ran for president in 1992, he made reining in prescription drug prices a core promise of his candidacy. Since then, drug pricing has been at the top of the to-do list for every U.S. president.
Nearly 30 years later, Washington still hasn’t answered the question of how to keep prescription drug prices low for people who need them. This is due in part to a fundamental flaw in the marketplace, known as “pay-for-delay.” Pay-for-delay agreements keep prices high by keeping generic drugmakers out of the marketplace. It’s time for Congress and regulators to lower prices, welcome more competition and remove the barriers that protect big drugmakers at the expense of patients.
Today, American patients pay more than 2½ times as much for the same prescription drugs as patients in our peer countries. Pharmaceutical price increases surpassed inflation once again last year. This isn’t a new problem: Previous administrations, from Clinton to Trump, have explored voluntary price restraints from drug manufacturers to keep costs down. Those efforts have had little long-term effect. The Kaiser Family Foundation Health Tracking Poll found that a quarter of adults taking prescription medications have difficulty paying for them.
Pay-for-delay patent settlements fuel the drug affordability problem by creating a lack of competition in the marketplace. Brand-name pharmaceutical companies use these agreements to delay generic competition, keeping drug prices higher for longer. They stem from patent settlements between brand-name companies and major generic manufacturers.
When a generic manufacturer files a new patent for an existing drug, the brand-name company will pay the generic drugmaker to keep its product off the market. The Federal Trade Commission has called such arrangements a “win-win” for the two parties involved in the agreement: The brand-name company keeps prices inflated while the generic manufacturer profits off a monopoly it agrees to keep in place.
But these agreements also have a big loser: consumers. Americans who rely on prescription drugs may face prices that are as much as 90% higher than they would in an open market with multiple generic manufacturers. One FTC study estimated that pay-for-delay agreements cost consumers as much as $3.5 billion per year.
The study also found that these agreements typically keep generic drugs off the market for an extra 17 months. Smaller drug manufacturers that lack the financial, legal and organizational heft of large brand-name and generic companies essentially can get to market only if a patent is defeated multiple times.
That becomes nearly impossible with pay-for-delay agreements in place. Given the decades-long push to rein in the rising costs of prescription drugs for consumers, it’s perplexing that these agreements, which do nothing more than protect monopolies, are still allowed to exist.
The Federal Trade Commission clearly recognizes the problem with pay-for-delay and similar patent agreements.
Now it’s time for the agency to step in on behalf of consumers and ban these agreements in order to foster real competition in the pharmaceutical industry.
President Joe Biden notably called on the commission to ban pay-for-delay in his executive order promoting competition in the American economy. In a truly open and competitive pharmaceutical market, multiple generic manufacturers can apply for a brand-name drug’s patent, which would lower the price of that drug by 60% to 80% over time.
This is a straightforward solution to a persistent problem and would finally lower prescription drug costs for consumers after decades of debate and false-start policy solutions. Without a change to this policy, weak and unchallenged patents will continue to artificially control the pricing dynamics of the prescription drug market.
More affordable prescription drug pricing is within reach. By opening up the market and allowing real competition — instead of allowing the biggest players to make mutually beneficial arrangements that keep prices artificially high — policymakers can finally make a real dent in prescription prices.
The FTC should end pay-for-delay and deliver a win for consumers across the country.
Lou Kennedy is the CEO of Nephron Pharmaceuticals.