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Are generic drugs being delayed to market by so-called "pay for delay" deals between drug companies? The deals happen after generic drug companies challenge the patents on brand-name drugs. The settlements include a date that the generic drug can enter the market, and in some cases, a payment from brand company to the generic company.
In 2004, Karen Winkler was diagnosed with multiple sclerosis, a debilitating disease affecting the nervous system. The 46-year-old mother of three, who lives in Clarkston, Michigan, struggles every day with numbness, pain and extreme fatigue.
It's so overwhelming. You wake up tired. And as the day progresses, it just gets worse and worse. And it's where you could fall asleep standing up.
In 2005, Winkler's doctor prescribed a brand-name medication called Provigil. It was one of the only drugs for fatigue on the market that had minimal side effects. It was made by a company called Cephalon, which earned $475 million dollars on Provigil that year. Winkler's doctor put her on a half pill, every day.
It was perfect, you know. I had three young kids and I could still do- pretty much do everything that I did. And, you know, if I had 10 things on the to-do list, you know, I could either get the 10 things done or at least eight or nine of them.
Better yet, Winkler says her doctor told her Provigil was expected to go generic soon – possibly within a year. And that could have saved Winkler more than a thousand dollars a year. The potential savings were especially important because her disease made it impossible to go back to work as she'd planned. And around that same time, her husband's pay was cut and the family had to dip into savings and a 401(k).
Then it didn't go generic. And it was a whole different story.
Not only did it not go generic … the price inexplicably started to rise.
It was six-something a pill. And then it was seven-something a pill. In 2010, it had gone up to, like, 16-something a pill. It was astronomical at the time.
Winkler's out-of-pocket cost for a six-month supply went from around $300 in 2008 to more than $700 in 2010.
So, could you afford that?
No. That was a car payment and plus. And with three young kids and, you know, feeding them, and I felt guilty that I was taking away from the family budget.
Her condition was getting worse and she couldn't afford to take a higher dose of Provigil. So she decided to try a less expensive generic version of a different drug. It turned out not to be as effective, and made her shaky and jittery. Her reaction to not getting the drugs she said she needed?
I thought, how can this be legal, how can this be – It's definitely not moral. It's not humane. It's not fair.
Why hadn't Provigil gone generic? And why was the price of it rising so sharply? As Winkler discovered through online research, the company manufacturing the drug, Cephalon, was using two common but little known business strategies that critics say end up costing consumers. First, there's something that opponents call, "pay for delay."
Here's how "pay for delay" works. According to the Federal Trade Commission, when generic manufacturers challenge a patent, the brand-name manufacturer sometimes pays to keep the generic version off the market.
In the case of Karen's drug, the company that makes Provigil paid a total of $200 million to four generic companies. That deal guaranteed no generic would come to market for another six years.
At its simplest level, we're talking about an agreement between a brand company and a generic company, in which the brand company pays the generic company not to launch a generic in competition with the brand.
Markus Meier is an assistant director in the Federal Trade Commission's Bureau of Competition. He says fighting these so-called "pay for delay" deals is one of the FTC's top priorities.
It brought a lawsuit in 2008, alleging "anticompetitive conduct by Cephalon to prevent lower-cost generic competition." The case has yet to go to trial. A separate class action lawsuit has been filed by health plans and drug wholesalers against Cephalon and the four generic manufacturers alleging "unlawful exclusion of generic competition from the market."
And just last summer, the Supreme Court issued a major ruling in another FTC case that could open the door for more lawsuits against drug manufacturers involved in similar practices.
If you can keep the generic out, the brand can continue to make all the sales at the monopoly price and still pay the generic to make it worthwhile for them to stay out of the market.
What does the FTC say is at stake for consumers?
Billions of dollars. We've done a study of this back in 2010 where we really studied this very carefully and we estimated that it cost American consumers about $3.5 billion a year.
Deals like this have affected the rollout of generic versions of popular drugs such as Tamoxifen for cancer, Lipitor for high cholesterol, and Nexium for heartburn.
It might not surprise you that what opponents call "pay for delay" deals, the drug companies describe completely differently. The generic manufacturers say the negotiated settlements they reach with brand -name drug manufacturers actually serve consumers well. How? Because, they say, under those deals, generic drugs hit the market before the brand drug's patent expires — and only because generic companies challenged those patents in the first place.
Do we work out compromise? Proudly, I say yes.
Ralph Neas is president and CEO of the Generic Pharmaceutical Association. Neas says the settlements help avoid costly and time-consuming court trials over the drug patent challenges. And, he points to one study showing generic manufacturers succeed less than half the time when they do end up in court.
RALPH G. NEAS:
We may have no better than a 50/50 chance of winning, maybe less. Maybe we can put something on the table that would be a bridge to a compromise. This has been part of the successful equation that have gotten affordable medicines to consumers sooner.
Your opponents would say that if it weren't for these payments that were being made, these drugs may have come to market even sooner.
On average, a patent settlement will get the medicine to the market 60 months in advance of the patent expiration. Sometimes you go all the way and you might get ten years or eight years sooner. But if you are pretty sure you can get five or six or seven years, it's better taking that five or six or seven years rather than rolling the dice and getting nothing for the consumers you're trying to serve.
In each of these cases, the generic does end up coming to market months, sometimes even years before that patent in question expires. So, isn't that good for consumers?
Well, the fact that the generic comes in earlier could, in theory, be better, but you have to compare it to the likelihood that the generic would have come even earlier. So, take, for example, Provigil. It's true that there is a generic in the market today. But we contend that but for this agreement, consumers would have had access to a generic all the way back in 2006. And there would have been years and years of savings that consumers would have enjoyed had they launched in 2006.
But because of what critics describe as those "pay for delay" deals, Provigil didn't go generic. So Karen Winkler and other consumers paid the price. And it turns out she paid even more because of that second controversial business strategy that Cephalon used then and other drug manufacturers continue to use today — something opponents call "evergreening." The idea is to get consumers off the drug they're taking and on to another brand drug the same company is making.
In Winkler's case — off Provigil whose patent was about to expire. — and onto Nuvigil, whose patent had several years to run. Companies sometimes do this by jacking up prices on the first drug. That's what happened to Winkler when, seeking relief from the rising price of Provigil, her doctor offered her Nuvigil.
So, I thought, "Great. You know, here's a solution." Came home and I started taking the pills for two or three days and got a pounding, pounding headache from it. And- To the point that it was almost like having a migraine.
That's when Winkler went online and figured out what was going on.
And what they were trying to do was to get patients off of Provigil, because they knew it was going to be going generic shortly, to start taking this Nuvigil that had this new, extended patent period. And then obviously once Provigil went generic, everybody on Nuvigil would not be going to a generic drug. They would be still on the Nuvigil.
It's very rare for patients to switch back once the generic comes into the marketplace. So, it's a strategy for the brand to be able to hold on to the market longer- even after there's a generic in the marketplace.
This is one area where the Generic Pharmaceutical Association and the FTC find common ground.
That's keeping affordable medicine from people who desperately need it. And we're very much against it and it's a big issue.
What does Provigil's manufacturer, Cephalon, have to say about the two business strategies? The company was acquired by another drugmaker, Teva, in 2011. In a statement to NewsHour about the first, so-called "pay for delay" strategy," that company said:
"Teva believes that the PROVIGIL® settlement agreements are lawful and served to increase competition, and the Company intends to defend them vigorously."
In response to the second strategy of "evergreening," Teva had no comment.
When Provigil finally went generic in 2012, the price for Karen Winkler fell from more than $700 to around $16 for a three-month supply. Winkler was able to go back on the drug … and take the full dose. She says it's made all the difference.
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