‘Pay-for-delay’ going away

Opinion: August 8, 2012 at 12:00a.m.

Chicago Tribune: For years now, the makers of brand-name and generic prescription drugs have worked together in a collusive practice that adds billions of dollars to the cost of health care.

The practice is nicknamed pay-for-delay — the “delay” being the longer stretch of time before cheaper generic drugs arrive on the market as patents expire.

In essence, the big companies that develop branded drugs pay off their rivals to slow the introduction of generic equivalents, which sell for much lower prices. The two sides agree to share the proceeds from the continued sale of the branded drug at the much higher price it can command without any competition.

From the drug industry’s point of view, pay-for-delay works well. It heads off risky and disruptive legal challenges. The branded drugmakers can keep charging high prices, and the generic drugmakers can make money by agreeing not to roll out a low-cost rival for a time.

Consumers are losers

That, of course, doesn’t work well for you. Pay-for-delay depends on monopoly pricing power. It puts health care consumers at a disadvantage.

A recent ruling by the Third Circuit Court of Appeals in Philadelphia rejected the practice as an unlawful restraint to trade, setting the stage for a likely showdown before the U.S. Supreme Court. Meantime, regulators in the U.S. and Europe have stepped up efforts to crack down on pay-for-delay. Legislation putting an end to it also has gathered some support, despite Big Pharma lobbying.

Pay-for-delay is unlikely to continue as is forever. Instead of fighting to the bitter end, the drug industry should help to determine how generics can come to market without prompting court fights and without soaking consumers.