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More Trouble for Big Pharma Stocks: AMA Calls for an End to Pay-to-Delay Deals

In the latest attack on pay-to-delay deals, the policymakers at the American Medical Association have voted to support an end to the controversial agreements on the grounds that they contribute to a limited number of prescription options available for patients, as well as a rising growth in health care costs.

“Pay for delay keeps quality, low cost generic drugs out of the marketplace and unnecessarily drives up costs for patients,” says AMA board member Patrice Harris in a statement issued at a delegates meeting this week. “In order to ensure the most cost-effective treatment options, this practice must stop.”

Major pharmaceutical companies -- including Pfizer (PFE), Merck (MRK), Eli Lilly (LLY), Sanofi (SNY) and GlaxoSmithKline (GSK) -- are having a hard time generating revenue growth, as patents expire on existing drugs and the companies’ labs fail to develop enough new drugs.

PFE Revenue TTM Chart

PFE Revenue TTM data by YCharts

In seeking to make these deals illegal, the AMA cites a broader policy that physicians should have the freedom to prescribe the most appropriate drugs and to use or prescribe either generic or brand name medicines for their patients, although the AMA encourages physicians to supplement medical judgments with cost considerations in making these choices (here is the resolution).

The move comes shortly after the US Federal Trade Commission asked the US Supreme Court to review pay-to-delay deals in which a brand-name drug maker agrees to pay a settlement to a generic rival in exchange for ending patent litigation and launching a copycat medicine at a future date. The agreements, however, have been widely criticized for delaying the availability of lower-cost generics.

The FTC, as we have reported previously, has regularly maintained these deals are anti-competitive and its forecasts show they force consumers to pay $3.5 billion a year in higher health care costs. As a result, the FTC has repeatedly tried to convince Congress to pass legislation that would impose restrictions (see prior Pharma news).

Drugmakers, though, defend patent settlements as not only lawful, but also valuable methods for bringing lower-cost generics to market sooner than otherwise might be possible. The generic industry trade group argues the settlements have never prevented competition beyond a patent’s expiration and made it possible for generics to become available months or years before patents have expired. This, in turn, saves consumers considerable money.

To read the remainder of this article, go to Pharmalot.

Ed Silverman is the editor of Pharmalot and a contributor to YCharts, which includes the just-released YCharts Pro Platinum for professional investors.

Read more articles about: Company Analysis  

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