[Congressional Record Volume 152, Number 85 (Tuesday, June 27, 2006)]
[Senate]
[Pages S6577-S6579]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL (for himself, Mr. Leahy, Mr. Grassley, and Mr. 
        Schumer):
  S. 3852. A bill to prohibit brand name drug companies from 
compensating generic drug companies to delay the entry of a generic 
drug into the market; to the Committee on Commerce, Science, and 
Transportation.
  Mr. KOHL. Mr. President, yesterday, the Supreme Court refused to 
consider an appeal by the Federal Trade Commission to reinstate 
antitrust charges against a brand-name drugmaker. This decision leaves 
the FTC powerless to stop one of the more egregious tactics used by 
brand name drug companies to keep generic competitors off the market, 
leaving consumers with unnecessary high drug prices.
  The way it is done is simple--a drug company that holds a patent on a 
blockbuster brand-name drug, pays a generic drug maker off to delay the 
sale of a competing generic product that might dip into their profits. 
The brand name company profits so much by delaying competition that it 
can easily afford to pay off the generic company, leaving consumers the 
big losers who continue to pay unnecessarily high drug prices.
  Since the appeals court decision, there has been a sharp rise in the 
number of settlements in which brand-name companies payoff generic 
competitors to keep their cheaper drugs off the market. In a report 
issued earlier this year, the FTC found that more than two-thirds of 
the 10 settlement agreements made in 2006 included a pay-off from the 
brand in exchange for a promise by the generic company to delay entry 
into the market.
  Yesterday's decision by the Supreme court is a blow to consumers who 
save billions of dollars on generics every year. Today I am joined by 
Senators Leahy, Grassley, and Schumer, to introduce the Preserve Access 
to Affordable Generics Act. This legislation will prohibit these pay-
off settlement agreements that only serve the drug companies involved 
while denying consumers access to cost-saving generic drugs.
  According to the Congressional Budget Office, generic drugs save 
consumers

[[Page S6578]]

an estimated $8 to $10 billion every year. And, a recent study released 
earlier this year by Pharmaceutical Care Management Association, showed 
that health plans and consumers could save $26.4 billion over the next 
5 years by using the generic versions of 14 popular drugs that are 
scheduled to lose their patent protections before 2010.
  Just last week, I was successful in including an additional $10 
million in the fiscal year 2007 Agriculture Appropriations bill for the 
Food and Drug Administration's Office of Generic Drugs, an effort to 
help reduce the growing backlog of generic drug applications. The FDA 
Office of Generic Drugs has reported a backlog of more than 800 generic 
drug applications and more applications for new generics were received 
in December 2005 than ever before and this trend continues to grow.
  But even approval by the FDA doesn't always guarantee that consumers 
will have access to these affordable drugs. Of the six approved first 
generics for popular brand-name drugs taken by seniors over the last 
year, only two have actually reached the market, while the others are 
being kept off of the shelves by patent disputes.
  Mr. President, it is time to stop these drug company payoffs that 
only serve the companies involved and deny consumers to affordable 
generic drugs. I urge my colleagues to join me in this effort. I ask 
unanimous consent that the text of the bill be printed into the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3582

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Preserve Access to 
     Affordable Generics Act''.

     SEC. 2. UNFAIR COMPETITION.

       Section 5 of the Federal Trade Commission Act (15 U.S.C. 
     45) is amended by adding at the end the following:
       ``(o)(1) It shall be considered an unfair method of 
     competition affecting commerce under subsection (a)(1) for a 
     person, in connection with the sale of a drug product, to 
     directly or indirectly be a party to any agreement resolving 
     or settling a patent infringement claim in which--
       ``(A) an ANDA filer receives anything of value; and
       ``(B) the ANDA filer agrees not to research, develop, 
     manufacture, market, or sell the ANDA product for any period 
     of time.
       ``(2) Construction.--Nothing in this subsection shall 
     prohibit a resolution or settlement of patent infringement 
     claim in which the value paid by the NDA holder to the ANDA 
     filer as a part of the resolution or settlement of the patent 
     infringement claim includes no more than the right to market 
     the ANDA product prior to the expiration of the patent that 
     is the basis for the patent infringement claim.
       ``(3) In this subsection:
       ``(A) The term `ANDA' means an abbreviated new drug 
     application, as defined under section 505(j) of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)).
       ``(B) The term `ANDA filer' means a party who has filed an 
     ANDA with the Federal Drug Administration.
       ``(C) The term `ANDA product' means the product to be 
     manufactured under the ANDA that is the subject of the patent 
     infringement claim.
       ``(D) The term `drug product' means a finished dosage form 
     (e.g., tablet, capsule, or solution) that contains a drug 
     substance, generally, but not necessarily, in association 
     with 1 or more other ingredients, as defined in section 
     314.3(b) of title 21, Code of Federal Regulations.
       ``(E) The term `NDA' means a new drug application, as 
     defined under section 505(b) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 355(b)).
       ``(F) The term `NDA holder' means--
       ``(i) the party that received FDA approval to market a drug 
     product pursuant to an NDA;
       ``(ii) a party owning or controlling enforcement of the 
     patent listed in the Approved Drug Products With Therapeutic 
     Equivalence Evaluations (commonly known as the `FDA Orange 
     Book') in connection with the NDA; or
       ``(iii) the predecessors, subsidiaries, divisions, groups, 
     and affiliates controlled by, controlling, or under common 
     control with any of the entities described in subclauses (i) 
     and (ii) (such control to be presumed by direct or indirect 
     share ownership of 50 percent or greater), as well as the 
     licensees, licensors, successors, and assigns of each of the 
     entities.
       ``(G) The term `patent infringement' means infringement of 
     any patent or of any filed patent application, extension, 
     reissue, renewal, division, continuation, continuation in 
     part, reexamination, patent term restoration, patents of 
     addition and extensions thereof.
       ``(H) The term `patent infringement claim' means any 
     allegation made to an ANDA filer, whether or not included in 
     a complaint filed with a court of law, that its ANDA or ANDA 
     product may infringe any patent held by, or exclusively 
     licensed to, the NDA holder of the drug product.''.

  Mr. LEAHY. Mr. President. I am pleased to introduce, with Senators 
Kohl, Grassley, and Schumer, the Preserve Access to Affordable Generics 
Act of 2006, S. 3582. It is no secret that prescription drug prices are 
rapidly increasing and are a source of considerable concern to many 
Americans, especially senior citizens and families. In a marketplace 
free of manipulation, generic drug prices can be as much as 80 percent 
lower than the comparable brand-name version. Unfortunately, there are 
still some companies that may be keeping low-cost, life-saving generic 
drugs off the marketplace, off pharmacy shelves, and out of the hands 
of consumers by carefully crafted anticompetitive agreements between 
drug manufacturers. This bipartisan bill will improve the timely and 
effective introduction of generic pharmaceuticals into the marketplace.
  In 2001, and last Congress, I introduced a related bill, the Drug 
Competition Act. That bill, which is now law, is small in terms of 
length but large in terms of impact. It ensured that law enforcement 
agencies could take quick and decisive action against companies seeking 
to cheat consumers by delaying availability of generic medicines. It 
gave the Federal Trade Commission and the Justice Department access to 
information about secret deals between drug companies that keep generic 
drugs out of the market--a practice that not only hurts American 
families, particularly senior citizens, by denying them access to low-
cost generic drugs but also contributes to rising medical costs.
  The Drug Competition Act, which was incorporated in the Medicare 
Modernization Act, was a bipartisan effort to protect consumers in need 
of patented medicines who were being forced to pay considerably higher 
costs because of collusive secret deals. It is regrettable that we must 
come to the floor again today and take additional action to prevent 
drug companies from continuing to find and exploit loopholes.
  I had faith that we were on the right track. However, two appellate 
court decisions from 2005 overturned the FTC's longstanding role of 
``policing'' these activities and making case-by-case determinations on 
the appropriateness of proposed settlements, especially those that 
involved ``reverse'' payments. That refers to payments from a brand-
name company to a generic company as opposed to payments from a generic 
company to the brand-name company for a license to make a particular 
patented drug.
  The FTC rightfully sought U.S. Supreme Court review of the Schering-
Plough v. FTC Eleventh Circuit decision. Unfortunately, the Supreme 
Court refused to hear that case, leaving in doubt the continuing role 
of the FTC in policing settlements between brand-name drug companies 
and potential generic competitors. Moreover, in an unprecedented move, 
the U.S. Solicitor General opposed the request by the FTC for the 
Supreme Court to hear this case. The inaction of the courts and the 
choice of the administration to side with large drug companies over 
seniors and families has provoked us to take action and introduce this 
important bill.
  This matter arises at the intersection of patent law and antitrust 
law. The drug companies naturally deny that their agreements violate 
the antitrust laws, presenting them as private preliminary settlements 
between companies engaged in patent disputes. The problem is that the 
whole point of the Drug Competition Act is to have an independent body, 
the FTC, review these deals and to advise the companies if terms or 
conditions in the deal need to be changed to comply with existing 
antitrust laws.
  Agreements to delay the production and sale of generic medicines in 
exchange for cash from the brand-name companies need to be carefully 
reviewed by the FTC under standards that give the FTC authority to act 
where necessary to enforce antitrust laws. Companies holding patents on 
medicines should not be permitted to

[[Page S6579]]

pay millions of dollars to potential generic competitors for the 
purpose of delaying the research, development, and sale of competing 
generic versions of medications when those generic companies believe 
they have the legal right to sell such products.
  I remain hopeful that during the process of working on this bill, a 
way can be found to give the FTC some discretion, on a case-by case 
basis, to continue to evaluate these deals. Under this approach, only 
the deals that are consistent with the intent of that law will be 
allowed to stand. There will be some deals that involve the payment of 
money which, on balance, could be good for the companies involved and 
for consumers. The original intent of the Drug Competition Act was to 
provide the FTC and DOJ with an opportunity to provide the companies 
with useful and timely information so the drug companies could conform 
their deals to the law through confidential advice from the law 
enforcement agencies. I want that process to be continued.
  Senators Grassley, Kohl, Schumer, and I are not the only ones who 
share the goal of ensuring effective and timely access to generic 
pharmaceuticals that can lower the cost of prescription drugs for 
seniors, for families, and for all Americans. I sincerely thank my 
colleagues on both sides of the aisle who are working together on that 
goal. We have devoted considerable attention to this matter in recent 
years, and I look forward to passing this important bill.
  In closing, I praise the FTC for spending so much time and energy on 
protecting competition in the pharmaceutical sector. This represents a 
massive workload for the FTC on top of all its other important 
responsibilities to protect consumers and the American enterprise 
system.
  Years ago, the FTC dealt with latter-day robber barons destroying 
smaller companies; now the FTC has to try to restrain corporate drug 
giants from robbing the elderly when these seniors buy prescription 
medicines. I also appreciate the work of the FTC on the authorized 
generics issue and look forward to the report they are preparing for 
the Congress on that matter.
                                 ______