Posts Tagged ‘Pharmaceuticals’

Pay-for-Delay Pharma Deals Not Banned

Wednesday, March 24th, 2010

The Financial Times reports that “a proposal backed by President Barack Obama that would have banned multibillion-dollar deals between big pharmaceutical companies and their generic rivals was stripped out” of the health care legislation days before it was passed by the House. “The agreements have come under scrutiny from antitrust officials in the United States and Europe because they say the arrangements essentially allow branded drugmakers to pay off potential generic competitors, thereby keeping them out of the market,” according to FT.

Below, Smeal’s Daniel Cahoy, a patent lawyer and associate professor of business law, explains the special circumstances of these deals and why it was a good idea to remove this seemingly logical provision from the legislation:

Among the many provisions added to the health care reform bill was one that seemed eminently sensible and extremely popular: preventing branded pharmaceutical companies from paying generic companies to delay entry into the market.  Yet this provision was excised before the House of Representatives’ historic vote on Sunday.  What possible objection could anyone outside of the pharmaceutical industry have to precluding this behavior, known colloquially as “pay-for-delay”?  In fact, the situation is a bit more nuanced than many news reports suggest.  Even a skeptic of these arrangements might conclude that a total ban is a bad option.

The so-called “pay-for-delay” deals arise in the context of a very narrow and complex set of cases known as ANDA (Abbreviated New Drug Application) litigations. Essentially, generic companies file such cases to obtain the right to market their drugs early by establishing that a branded pharmaceutical company’s blocking patent (or patents) is invalid or not infringed. Commonly, the branded company vigorously opposes these assertions, as early generic entry can cause a significant reduction in expected profits. Unless there is a settlement, a court must sort it out. But this is where the confusion often begins, as ANDA settlements are different than those in most patent cases. Most importantly, the generic company has usually sold no product and would suffer no damages if it lost the case—it would simply be prevented from entering the market before the patent expires. To encourage settlement, the branded company may be compelled to offer the generic company something more than the option of simply walking away. So, reverse payments or some other kind of inverse incentive may be exchanged.

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Tags: Cahoy, Health Care, Pharmaceuticals, Politics
Posted in News | 11 Comments

Easing Drug Patents

Tuesday, July 21st, 2009

The Economist reports that drugmakers GlaxoSmithKline, Novartis, and Roche are relaxing patent restrictions on their pharmaceuticals to allow for greater access to the drugs in poorer countries. “Health care activists have long maintained that the system for granting patents on drugs denies the poor access to essential medicines and discourages pharmaceutical firms from collaborating to develop new ones for neglected diseases.”

According to Smeal’s Daniel Cahoy,the  international rules outlining when and how governments may “break” pharmaceutical patents also reduce incentives for innovation, in addition to failing to increase access to medicines in poor nations. In his 2007 paper “Confronting Myths and Myopia on the Road from Doha,” Cahoy proposes a new, compensation-based approach to drug patent compulsory licenses, which force drug patent holders to relinquish their property rights during a time of crisis.

Cahoy’s proposed licensing regime keeps innovation incentives intact, but also ensures that developing countries have access to pharmaceuticals.

During public health crises, he argues for a three-tiered arrangement, in which remuneration is based on the economic status of the country issuing the compulsory license. Industrialized nations will be required to pay full market price, even during a pandemic. Developing countries would be allowed a limited free ride, with royalties based on the individual country’s ability pay. Finally, the world’s least developed countries would be granted the ability to issue royalty-free compulsory licenses during health emergencies.

More on Cahoy’s plan is online here.

Tags: Business Law, Cahoy, Globalization, Health Care, Pharmaceuticals
Posted in News | 4 Comments