How come I’ve never heard of this practice before:
It would seem a business executive’s dream: legally pay a competitor to keep its product off the market for years.
Congress has failed to stop it, but for more than a decade generic drug makers and big-name pharmaceutical companies have been winning court rulings that allowed it.
Until this month. Now, a federal appeals court in Philadelphia has rejected the arrangements by ruling that a payment aimed at keeping a low-priced generic copy of the drug off the market for a certain period of time is anticompetitive on its face.
The Philadelphia ruling conflicted with decisions from at least three other federal circuit courts of appeal, setting up the issue for possible review by the Supreme Court within the next few years, if it accepts the case. A decision either way could profoundly affect drug prices and health care costs.
“The Third Circuit has rebalanced the issue and teed it up for the Supreme Court,” said Eleanor M. Fox, an antitrust expert and professor at the New York University law school. The agreements between generic and branded drug manufacturers “are cases of competitor collaboration, which the Supreme Court has called ‘the supreme evil of antitrust.’ ”
The stakes are enormous for brand-name drug makers, which would face lower profits, and for pharmacies, insurance companies and patients, who could benefit from the savings. In the case of Cipro, a powerful antibiotic with annual sales exceeding $1 billion, Bayer paid $400 million to a generic drug maker, Barr Laboratories, and other companies. In exchange, the generic makers said they would withhold their own lower-priced generic versions of the drug until 2003, when Bayer’s patent on the brand-name drug expired.
Last year, the Congressional Budget Office estimated that a Senate bill to outlaw such payments would save the federal government $4.8 billion over 10 years and would lower drug costs in the United States by $11 billion. The legislation remains stalled in the Senate. The federal government is a major buyer of drugs through Medicare and the Veterans Administration.
There is literally nothing that corporate America will not do to screw their customers for another nickel.
NonyNony
This is unpossible. I’ve been assured that we pay high prices on our drugs because the filthy Yuropeans and Canadians have their so-sha-mal-ist gubbmints strong arm the pharmaceutical companies to force them to sell drugs at below cost.
the Conster
Those drug companies need less regulation and tax cuts.
BGinCHI
There is no such thing as a free market.
In a truly free market, there would be no market. Without the balance of regulation it would collapse faster than you can say market Darwinism.
Hugerat
You should have heard of this before, because it’s been known for a while. It’s just that.. well… our media or politicians never punish outright wrongdoing by corporations. A Wapo article from a couple of years ago:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/28/AR2010072805158.html
jl
Only quibble is that this is corporate culture, period. Not just corporate America.
Bayer is a German company, and now part of IG Farben, which is headquartered in Germany. And Barr Laboratories is now owned by an Israeli pharma (Teva?), though think Barr was independent US corp when the deal was made.
Mart
In Bayer’s case, nice we let corporate Germany screw Americans.
Mart
Speaking of Bayer… they sell a pesticide here that is linked to all the bees dying off. Of course the pesticide is banned in Europe.
Davis X. Machina
Anything that is, can be bought and sold.
Anything that can be bought or sold, shall be bought and sold.
Anything that cannot be bought or sold, is not.
Baruch atah ha Shuk, ha dayan emet.
Blessed be the Market, the righteous judge.
That’s your new Doxology.
Klaus Kinky
Reason #549 why conservatarians are clueless schmucks.
butler
Yet more proof that the “free market” fantasy is just that: a fantasy.
Davis X. Machina
@butler: It’s the free-est damn market money can buy.
Yutsano
@BGinCHI: This.
Bill
We should all be a slave to the “free market,” unless of course said market actually benefits indivdual humans over corporations, in which case monopolization is fine.
Unreal.
El Cid
The best newspaper in the world:
whiskey
It’s called a reverse payment settlement, and here’s how it works:
A generic manufacturer can file what’s known as an ANDA at the FDA for their drug. This allows generic manufacturers to bypass needing clinical testing for their drugs by relying on the original manufacturer’s clinical trials upon a showing that the generic is shown to work in the same way as the original drug.
The caveat is that filing an ANDA during the term of the patent on the original drug inherently creates a cause of action for patent infringement under the Hatch-Waxman Act (which established the ANDA procedure in the first place).
A possible defense to this claim of patent infringement is that the patent is invalid, and therefore unenforceable. Should a generic manufacturer win the lawsuit on this basis, they get a short period of exclusivity for the generic version of the drug to compensate them for the risk that they took in getting sued in the first place.
So, when these infringement cases go to trial and it looks like the generic manufacturer/infringement defendant looks like they’re going to win, the patent-holder can approach them and offer to settle: the patent-holder will pay the generic manufacturer something on the order of their expected profits off their period of generic exclusivity, and in exchange, the case is dismissed, leaving the patent enforceable against other parties. This is important, as once a patent is struck down, it is struck down with respect to all possible infringers. So the generic manufacturer gets their money, and the patent-holder gets to still assert the validity of a patent that should have been held invalid based on the evidence.
MonkeyBoy
I’ve heard that this sort of practice happens with hiring lawyers/law firms.
If company A fears that some legal action may be taken against it then they will often determine the best law firms to take that action and put them on retainer, thus making it a conflict of interest to take on the action.
Lol
Why are you complaining? It sounds like it worked out for everyone. Bayer gets to charge higher prices without the threat of competition and Barr gets paid to not produce anything. Sounds like a win/win to me.
Mino
I wonder when Americans are going to get a clue about multinationals that qualify as US citizens via SCOTUS and can buy up our politicians if a single American owns one piece of stock, I guess.
I sure haven’t heard of any restrictions on just what it takes to be a corporation with full rights and benefits other than just being licensed to operate in one of our states. Anyone?
Mike E
@El Cid: Word. The Onion and Stephen Colbert: The wind beneath my wings.
jl
@El Cid: When I taught community college in OC, I heard from the students how the Anaheim Police used ‘gang’ to excuse any damn thing they wanted to do. Sad to see they are still at it, maybe even worse than when I was there.
For God’s sake, look at the tear gas and pepper spray shot into the demonstration. What I heard on the news was the police chief say, basically, we thought we maybe mighta saw a gang member with warrant someplace in the dmonsontration, so of course we unloaded on the whole crowd.
If what I heard from kids involved in the mess down there is still going on, all the demonstrators, from age 80 on down can now be declared gang members and put on some list. Handy for pressuring the younger Hispanic and Asian chicks into putting out. Yeah, the stories I heard were that bad.
Edit “put out and get off” (the list) was what I heard the racket was.
scav
What a day. even the purported emergence of Sandusky Victim 2 (the one in the shower) get’s lost in the scramble. shamble. :)
Joseph Nobles
Teed up? More like pitched the softball over the plate for the Roberts Court to send over the fence. It might stifle corporate profit, for Pete’s sake!
Shawn in ShowMe
Honey, if you won’t give me lovin’ I’ll just have to fire on some hot chick’s grandfather. This is all YOUR fault.
Brachiator
Variations of this in many industries. Even on a trivial level, a movie studio will pay to prevent a European film from being distributed in the US because they plan on doing an American version.
Software companies buy a company because they are developing a similar product and don’t want the competition.
And all the patent war BS between Apple, Samsung and other companies is about profits, market share, etc.
Yeah, it’s crappy, but not unusual behavior. Carve out an exeception for drug companies. What minimum profit do you want to guarantee? Or do you want to nationalize drug companies and remove all profit?
muddy
@scav: That’s such a relief to me, I have been possessed with the idea that Sandusky did away with him that night, I couldn’t stop thinking about him. The line about how the abuse continued after the shower incident is just chilling. I’ve been in that position and the fact that a supposedly decent person wouldn’t help me was somehow worse than what the rapist did. You expect the rapist to be bad. The utter hopelessness when you find out the nice people are bad as well can be quite overwhelming. That’s about the time that you feel sure you must be the bad one. The poor child.
Thank you for posting this, indeed I had not heard it amongst the chaff. Sorry to be long and OT.
polyorchnid octopunch
Well, duh. They’re businesses. It’s why you have anti-trust etc. The fact that you guys let Milton Friedman talk you out of all that doesn’t change their nature. It just makes you fools.
Brachiator
@scav:
Very sad stuff.
Another sad story about abuse is also making the news today.
It is appalling that the family would be involved in the cover-up.
AnonPhenom
This is chump change.
You should check out how Big Pharma adds YEARS to their patents by resubmitting the same drug to the FDA, mere months before the patent expiration, for a new medical indication. Particularly pediatric indications, they love resubmitting for a new pediatric indication.
Raven
@Brachiator: Emergency discipline with a dull deer antler.
Mino
@jl: The poors outnumber them. 56% is what I read. Where’s that power of the ballot?
burnspbesq
@NonyNony:
That happens to be true, and that fact and the practice complained of here are not mutually exclusive.
Something about this write-up makes no sense. Why would you pay somebody not to compete with you until your patent expires? The patent is all you need to keep them from competing with you.
JWL
There is literally nothing that corporate America [won’t kill] for another nickel.
Fluke bucket
@whiskey: I love this kind of shit. And I appreciate it .
The Right Honorable Member for, the Very Reverend Mother, Her Duchal Serene Highness. Dr. Hortense Sussudio Fuuckerfaaster
its kind of funny that on day2 of apple’s virginal fanbase’s future of copyright infringement masturbation feast that someone might post something like this with zero cognitive dissonance whatsoever.
i am personally humbled and ashamed that it took me this long to realize that this place is really the christwire style mockery of a left wing site that it is.
The Right Honorable Member for, the Very Reverend Mother, Her Duchal Serene Highness. Dr. Hortense Sussudio Fuuckerfaaster
its kind of funny that on day2 of apple’s virginal fanbase’s future of copyright infringement masturbation feast that someone might post something like this with zero cognitive dissonance whatsoever.
i am personally humbled and ashamed that it took me this long to realize that this place is really the christwire style mockery of a left wing site that it is.
scav
To keep up the Geek rating here and continue with OT news, Mary Tamm (Romana 1.0) died today. Reportedly of earthy humor and loved all animals, so doubly worthy of a lowering of the green balloons.
muddy
@Brachiator:
Some parents are procurers. I guess in nature these bitches just eat their young.
Comrade Dread
I have little faith in SCOTUS to uphold this ruling, but I’ll be pleasantly surprised to be proved wrong again.
Dennis SGMM
@whiskey:
Thank you for the short and simple of the situation.
Seems to this Old Guy that the people who are intent on screwing us are way better organized, way better connected with the gov, and way better lawyered-up than we who are being screwed.
trollhattan
@muddy:
Methinks that’s how Michael kept getting fresh kids to Neverland. As a parent, mere words fail me….
Quicksand
Can someone translate this for me please?
AHH onna Droid
The court needs to catch up to the cool crowd on BJ. Those payments are free speech and Big Pharma should not face fascist government restrictions on their pursuit of profit. Those unBrodery, unserious sick people and pharmacies whining about costs don’t understand that theyre paying the price of a free society.
Arclite
I want my generic v1@gr@. Six pills for $100 is extortion.
cathyx
@Quicksand: I can. It says, I’m a crazy person with nothing of quality to add.
cathyx
@Arclite: Those are the little green pills. They’re $1.95
chopper
@Davis X. Machina:
blessed is the farmer’s market? I wish.
muddy
@trollhattan: As a child I had been convinced that it was my fault and my shame. I never heard of anyone else it happened to. As a parent, when my son reached each of these “milestones” it just boggled my mind, from a parent’s point of view. That was what helped me realize it was not my fault. I’m proud to have stopped the cycle in my family. I had such a perfect example of what parent *not* to be.
+1 with my new recipe, “Cheaty-rita”.
scav
@cathyx: Ahh. I thought maybe we’d lucked across one of the popped cogs or missing components of the RommBott that was nattering on unattached and unattended.
burnspbesq
You would never know it from the excerpt from the NYT article that Cole chose to reproduce here, but Ba**r is not a party to the suit, and the case has nothing to do with Ci**o. The drug at issue is a sustained-release formulation of potassium chloride, made by Schering.
For the record, I am fully in favor of vigorous enforcement of the antitrust laws, and this practice fails every smell test I can think of.
That said, it is somewhat ironic that the same guy who 31 days ago was telling everyone who would listen that the entire process of judging was inherently indeterminate and illegitimate is now asking the Supreme Court to protect him from the big, bad drug companies.
burnspbesq
@Quicksand:
Please forward the translation if you ever get one.
burnspbesq
@Comrade Dread:
You might want to start by explaining why the Third Circuit is right and the Second, Eleventh, and Federal Circuits are wrong.
The Third Circuit opinion (PDF) is here.
trollhattan
@muddy:
I’m toasting you and your son as soon as I get home. Channeling Dubya, “Parenting is hard. Screwing up parenting is easy.”
gluon1
The phrase you want is “pay-for-delay”, and a web search will bring up lots of information. The House actually took a crack at this in the 111th Congress and one of my favorite charts on the subject is on page six of: http://judiciary.house.gov/hearings/pdf/Vaughan090603.pdf It really is an amazingly devious scheme, but it’s not just about screwing the consumer by making themselves rich; they also keep lots of drugs off the market that would make people healthy.
The Obama FTC has also been trying desperately to stop what was created under Bush and the Republican Congress: http://www.ftc.gov/opa/reporter/competition/payfordelay.shtml
Jay in Oregon
@The Right Honorable Member for, the Very Reverend Mother, Her Duchal Serene Highness. Dr. Hortense Sussudio Fuuckerfaaster:
Sarah Palin called to tell you your diploma from her Advanced Word Salad class is in the mail.
trollhattan
@burnspbesq:
Looks like Mittbot got hold of one of his handlers’ ipads. The interwebs should be extra-wacko tonight.
muddy
@trollhattan:Well, thanks! I’m sure I made plenty of mistakes, but at least they were different ones.
I had occasion to rummage in my keepsakes box recently, and found a regular treasure trove of cards saying things like, Thanks for bringing me up right, Thanks for being the strictest mom at the same time as the coolest mom, etc. I had some from his girlfriend and other friends too, I was kind of everyone’s mom. I was in tears and called some people being sentimental on voicemail after that. I know the young people love that sort of thing.
I found in parenting him, I was parenting myself (I was 19 when I had him). We both came up okay.
Mnemosyne
@scav:
Overly cynical me hopes that it’s actually the right kid and not someone trying to exploit the publicity. I’ll feel better if the prosecutor’s office agrees he’s the right one.
burnspbesq
@trollhattan:
Or something. It’s pretty early for DougJ to be +8 if he’s on Pacific time.
muddy
@Mnemosyne: I can imagine Sandusky saying, that’s not the kid I was attracted to. I was attracted to some total other kid. SO that’s okay then.
Mnemosyne
@muddy:
Oh, I’m pretty sure the prosecutors have enough information that they will be able to determine if they have the right victim. But high-publicity trials like this do tend to bring out the con artists, especially when there is the potential for large financial settlements, so hopefully prosecutors won’t have been so eager to find someone, anyone to be Victim 2 that they get fooled.
scav
@muddy: I think her point is there has to be additional evidence before we can accept either statement.
Joel
@burnspbesq: Sustained release potassium chloride? There’s a scrip for that?
Mark S.
@Mnemosyne:
I’d be shocked if the prosecutors didn’t know who Victim 2 is.
Triassic Sands
Like many important issues this one is severely under-covered by the American media. Still, I am surprised you’ve never heard of this little gem before, because it has been around for years.
For a brief period in 2006, a generic version of the Bristol-Meyers-Squibb anti-platelet drug Plavix was available in the US. BMS sued the Canadian company, Apotex, while the Justice Department launched a probe of BMS for anti-competitive practices. It seems BMS paid Apotex $40 million to delay entry into the market until 2011 with a generic version of Plavix. BMS was simply protecting an estimated $30 billion in profits. BMS paid $2.1 million to settle the case. $2.1 million versus $30 billion — not a bad deal for BMS. (Note: that’s a ratio of >14,000 to 1)
True enough as a general statement, but Big Pharma deserves special recognition, since they often make decisions that result in the direct deaths of the people affected. Courts fine guilty parties hundreds of millions of dollars (sometimes even more), but the fine is often inconsequential compared with the profits the drug companies rake in with blockbuster drugs. BMS enjoyed another five plus years to profit from Plavix.
Instead of fines, what companies found guilty of anti-competitive practices (and other even more serious infractions) should face is not some pesky fine, but loss of their patent. In the most egregious cases, the loss should be complete and immediate; in less serious infractions, the courts could simply reduce the company’s protection period.
It also might be nice to bar guilty companies from making future political contributions.
But I doubt any of that will ever happen.
(The generic version of Plavix — clopidogrel — finally appeared in the US in 2012.)
burnspbesq
@Joel:
Apparently (go figure). The patent covers the coating that allows for timed release. I’m neither an IP lawyer nor a chemist, but FWIW my lay-person’s reaction when I read the Third Circuit opinion was that it’s a pretty damn weak patent that might not survive a prior art/obviousness claim. Which would explain why Schering was willing to pay what amounts to extortion money to not one, but two generic companies.
Caz
If the courts are upholding this practice, then it must not be illegal. And if the high court can uphold Obamacare’s personal mandate which you all praise, then why can’t numerous courts uphold this without you crying foul?
If a company is offered money to keep a product out of the market, that company will have to consider what will yield more benefit: the amount of money being offered by the other company, or the amount to be gained from consumers purchasing their product in the marketplace. If the consumer profit outweighs the offered payment from the other company, then the offer will be declined. However, if they think the offer is more than they’d make from purchases of their product, they’ll take the offer.
It doesn’t seem to have anything to do with extortion or bribery or hurting consumers. It deals with generic drugs, which means the drug will be available to consumers no matter what – either the name brand or the generic, but it’s the same substance. The only difference is the cost that might be incurred since generics are cheaper. Well guess what? Consumers can set the price of goods like this through the fundamental principles of supply and demand. If there are three companies with the same drug on the market, then there is already competition yielding the lowest possible price already, and adding a fourth option won’t affect that. If there’s only one brand of that drug on the market, then the company being offered the “bribe” undoubtedly won’t accept the offer because basic economic principles will make market profits more attractive than the “bribe.” And the company offering the “bribe” won’t be able to make an offer high enough offer that the other will accept, again because of economics 101.
I suspect that if you read any of the court rulings, you’ll see a more detailed, explanatory version of what I’ve said.
In my prior work for a private law firm, I dealt with pharmaceutical companies and the problems with costs of drugs are not from “bribes” like these or lack of options. The problems with drug costs arise from government regulations that unnaturally alter the normal supply and demand forces. For example, politicians take huge money from pharma companies, and in return support overdiagnoses of certain conditions in addition to other things that create huge demand, or restrict supply. As a result, prices can soar. But it has nothing to do with the number of drug options on the market.
ADHD and ADD are perfect examples. The numbers would say that the incidence of these disorders among children has skyrocketed in recent decades, as if something in the world changes dramatically and suddenly, causing many times more children to have these disorders. In reality, it’s simply the overdiagnosing of these conditions that increases the demand for the drugs, and pharma companies receive a large payday in return for their bribes of politicians.
Corruption and greed among politicians is what fuels the problems in pharma markets, not agreements between private companies regarding which products come to market.
But I know you all feel much better blaming all the problems on private corporations rather than your trusted, benevolent, altruistic politicians who are only looking out for your best interests. LOL, yeah right!
Dream on, dreamers.
Caz
@BGinCHI: Without regulations, the free market would be truly free and consumers would get the lowest possible prices and the market would work as efficiently as possible.
You can see this at work in the one market that is totally unregulated: illicit drugs. Prices are driven by only supply and demand, and prices are as low as possible, with no added taxes, regulatory fees, costs of regulatory compliance, legal fees arising from regulatory complaints, etc.
In fact, the only thing that does cause the cost to be higher than it should be is the government’s making them illegal. By criminalizing drugs, the govt has caused prices to be much higher than they should be if the drugs were legal.
Other than the illegality of them and resulting higher prices, the illegal drug industry works very efficiently and buyers and sellers are free to bargain without any government interference. Lower quality goods receive lower prices, sellers with lower quality goods get fewer customers, easy to make drugs are cheaper, harder to make/obtain cost more. There are no delays in delivery caused by regulations, no increases in costs of production or bringing to market caused by regulations, etc.
And since they are illegal and the govt doesn’t recognize it as a valid market and regulate it, the parties police themselves. The market works great, all without any “help” from the government.
So there! Ha ha, yeah.
Caz
And the govt actually works for the big pharma companies to protect their market share. There is a doctor in Texas who has come up with a novel treatment for all types of cancer, and it has better results than current treatments of chemo and radiation.
But since the big pharma companies make so much money from their chemo drugs, they pay good money to the govt to have the govt protect their profits. So the govt has basically shut down the TX doctor, and he’s only allowed to run small clinical trials with limited number of enrolled patients. He has filed suit after suit, complaint after complaint, but of course the govt wins and he stays small and out of the main market. The govt concocted fake studies to prove his treatment doesn’t work, which he has proven false, and the govt has not been able to shut him down completely.
The govt also has prevented him from patenting his treatment, all for the benefit of the pharma companies that pay for this protection. And while the govt continues to claim that his treatment doesn’t work, denying him patents and continuing to cost him millions in defense fees in suits to shut him down, the govt, unbeknownst to him for a long time, was actually trying to steal his treatment and patented it themselves!! The govt basically partnered with a big pharma company to give them the patent and keep it out of the market.
Why do you think that chemo treatments today still use drugs that were invented in the eighties?? You think there hasn’t been any improvement in cancer treatment in thirty years?? No, it’s because if there is a better treatment available, then all those billions of dollars these companies make off chemo drugs will disappear, and we can’t have that!
It’s big pharma and the FDA colluding to keep a better treatment choice away from those dying of cancer. It’s criminal what the govt is doing!
You can see the whole story in a documentary called “Burkowski.” It’s truly eye-opening, and I think everyone should watch it. Don’t worry, it won’t turn you into a republican, but it might provide some information and education that you wouldn’t otherwise get. I think you will all find it very worthwhile.
Check it out. Burkowski. I had no idea the corruption was that blatantly evil!
Sister Rail Gun of Warm Humanitarianism
@Joel: There are quite a few people who are so potassium depleted that we could eat bananas 24/7 and not get enough. To get the quantity of potassium that I take daily would require six of the highest potency OTC supplements on the market, assuming that the OTC labels are accurate.