Ending Pay-For-Delay Deals Could Raise over $5 Billion

The deficit reduction “super committee” charged with coming up with $1.2 trillion in budget reductions over the next decade shouldn’t let this one pass. The Congressional Budget Office today estimated that ending drug industry “pay for delay” deals with generic manufacturers will save the federal government over $5 billion over the next decade.

The “Preserve Access to Affordable Generics Act,” sponsored Sen. Herb Kohl, D-Wis., with eight co-sponsors, including two Republicans, requires that any deal between two companies that delays production of a generic drug after a patent has expired must show that the deal is “pro competitive,” which would effectively ban the practice. The Federal Trade Commission issued a report a year ago that found 66 of these deals reached over the past half decade were costing consumers about $3.5 billion a year.

Pharmaceutical industry lobbyists succeeded in stripping an earlier version of Kohl’s bill from the health care reform law. At the time, CBO had estimated it would save the government about $2.8 billion. Now, with Lipitor coming off patent and several more blockbusters to follow, the stakes are considerably higher. The latest CBO report estimates the legislation will save Medicare and Medicaid $4 billion by lowering drug prices between 2012 and 2021. Over the same time period, the government would generate about $800 million in additional taxes and reduce administrative expenses by about $400 million.

This bill’s a no brainer. If the Super Committee recommends further cuts to Medicare and Medicaid without ending pay for delay deals or requiring drug and biotech companies to offer Medicare the same low prices they offer Medicaid, consumers and patients will know who won the behind-the-scenes lobbying battle now raging on Capitol Hill.