[Congressional Record Volume 155, Number 21 (Tuesday, February 3, 2009)]
[Senate]
[Pages S1433-S1434]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL (for himself, Mr. Grassley, Mr. Feingold, Mr. Durbin, 
        and Mr. Brown):
  S. 369. 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 the Judiciary.
  Mr. KOHL. Mr. President, I rise today to introduce, with Senators 
Grassley, Feingold, Durbin and Brown, the Preserve Access to Affordable 
Generics Act. Our legislation will prevent one of the most egregious 
tactics used to keep generic competitors off the market, leaving 
consumers with unnecessarily high drug prices. The way it is done is 
simple--a drug company that holds a patent on a brand-name drug pays a 
generic drug maker to not sell a competing product. The brand name 
company profits so much by delaying competition that it can easily 
afford to pay off the generic company. The only losers are the American 
people, who continue to pay unnecessarily high drug prices for years to 
come.
  Our legislation is basically very simple it will make these anti-
competitive, anti-consumer patent payoffs illegal. We will thereby end 
a practice seriously impeding generic drug competition, competition 
that could save consumers literally billions of dollars in health care 
costs. When we first introduced this legislation to ban these pay-off 
settlements in 2007, it had broad support from those concerned with 
rising health care costs, including the AARP. The New York Times 
editorialized in January 2007 in support of legislation to ban the pay-
off settlements, pointing out that the settlements ``are a costly legal 
loophole that needs to be plugged by Congressional legislation.''
  Despite the opposition of the Federal Trade Commission to these anti-
competitive patent settlements, two 2005 appellate court decisions have 
permitted these backroom payoffs. And the effect of these court 
decisions has been stark. In the two years after these two decisions, 
the FTC has found, half of all patent settlements involved payments 
from the brand name from the generic manufacturer in return for an 
agreement by the generic to keep its drug off the market. In the year 
before these decisions, not a single patent settlement reported to the 
FTC contained such an agreement.
  When brand name drugs lose their patent monopoly, this opens the door 
for consumers, employers, third-party payers, and other purchasers to 
save billions--30 percent to 80 percent on average--by using generic 
versions of these drugs. A recent study released by the Pharmaceutical 
Care Management Association showed that health plans and consumers 
could save $26.4 billion over 5 years by using the generic versions of 
14 popular drugs that are scheduled to lose their patent protections 
before 2010.
  The urgency of the need for this legislation was highlighted just 
yesterday, when the FTC filed an antitrust case challenging the latest 
``pay for delay'' settlement. The FTC's Complaint alleges that Solvay, 
the brand name manufacturer of a hormone-boosting drug, entered into an 
agreement with two generic companies to delay the entry of their 
generic version of the drug for nine years. The FTC alleged that Solvay 
agreed in 2006 to share its profits with the generic competitors as 
long as they did not launch their generic versions until 2015. If these 
allegations are true, this is exactly the anti-consumer, anti-
competition agreement that would be rendered illegal by our bill.
  We introduced this bill in the last Congress and it passed out of the 
Judiciary Committee without a dissenting vote. Nonetheless, we heard 
from some in the generic drug industry that on occasion these patent 
settlements may not harm competition. That is why this year's version 
of the legislation includes a new provision not contained in the bill 
introduced in the last Congress. This new provision would permit the 
Federal Trade Commission the guardians of competition in this industry 
to exempt from this amendment's ban certain agreements if the FTC 
determines such agreements would benefit consumers. This provision will 
ensure that our amendment does not prevent any agreements which will 
truly benefit consumers.
  It is also important to note that--contrary to the arguments made by 
some--our amendment will not ban all patent settlements. In fact, our 
bill will not ban any settlement which does not involve an exchange of 
money. This legislation will do nothing to prevent parties from 
settling patent litigation with an agreement that a generic will delay 
entry for some period of time in return for ending its challenge to the 
validity of the patent. Only the egregious pay-off settlements in which 
the brand name company also pays the generic company a sum of money to 
do so will be banned.
  In closing, we cannot profess to care about the high cost of 
prescription drugs while turning a blind eye to anticompetitive 
backroom deals between brand and generic drug companies. It is time to 
stop these drug company pay-offs that only serve the companies involved 
and deny consumers to affordable generic drugs. I urge my colleagues to 
join me in this effort by supporting this legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 369

       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. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) prescription drugs make up 10 percent of the national 
     health care spending but for the past decade have been 1 of 
     the fastest growing segments of health care expenditures.
       (2) 67 percent of all prescriptions dispensed in the United 
     States are generic drugs, yet they account for only 20 
     percent of all expenditures;
       (3) generic drugs, on average, cost 30 to 80 percent less 
     than their brand-name counterparts;
       (4) consumers and the health care system would benefit from 
     free and open competition in the pharmaceutical market and 
     the removal of obstacles to the introduction of generic 
     drugs;
       (5) full and free competition in the pharmaceutical 
     industry, and the full enforcement of antitrust law to 
     prevent anticompetitive practices in this industry, will lead 
     to lower prices, greater innovation, and inure to the general 
     benefit of consumers.
       (6) the Federal Trade Commission has determined that some 
     brand name pharmaceutical manufacturers collude with generic 
     drug manufacturers to delay the marketing of competing, low-
     cost, generic drugs;
       (7) collusion by pharmaceutical manufacturers is contrary 
     to free competition, to the interests of consumers, and to 
     the principles underlying antitrust law;
       (8) in 2005, 2 appellate court decisions reversed the 
     Federal Trade Commission's long-standing position, and upheld 
     settlements that include pay-offs by brand name 
     pharmaceutical manufacturers to generic manufacturers 
     designed to keep generic competition off the market;
       (9) in the 6 months following the March 2005 court 
     decisions, the Federal Trade Commission found there were 
     three settlement agreements in which the generic received 
     compensation and agreed to a restriction on its ability to 
     market the product;

[[Page S1434]]

       (10) the FTC found that \1/2\ of the settlements made in 
     2006 and 2007 between brand name and generic companies, and 
     over \2/3\ of the settlements with generic companies with 
     exclusivity rights that blocked other generic drug 
     applicants, included a pay-off from the brand name 
     manufacturer in exchange for a promise from the generic 
     company to delay entry into the market; and
       (11) settlements which include a payment from a brand name 
     manufacturer to a generic manufacturer to delay entry by 
     generic drugs are anti-competitive and contrary to the 
     interests of consumers.
       (b) Purposes.--The purposes of this Act are--
       (1) to enhance competition in the pharmaceutical market by 
     prohibiting anticompetitive agreements and collusion between 
     brand name and generic drug manufacturers intended to keep 
     generic drugs off the market;
       (2) to support the purpose and intent of antitrust law by 
     prohibiting anticompetitive agreements and collusion in the 
     pharmaceutical industry; and
       (3) to clarify the law to prohibit payments from brand name 
     to generic drug manufacturers with the purpose to prevent or 
     delay the entry of competition from generic drugs.

     SEC. 3. UNLAWFUL COMPENSATION FOR DELAY.

       (a) In General.--The Clayton Act (15 U.S.C. 12 et seq.) is 
     amended by inserting after section 28 the following:

     ``SEC. 29. UNLAWFUL INTERFERENCE WITH GENERIC MARKETING.

       ``(a) It shall be unlawful under this Act for any 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--
       ``(1) an ANDA filer receives anything of value; and
       ``(2) the ANDA filer agrees not to research, develop, 
     manufacture, market, or sell the ANDA product for any period 
     of time.
       ``(b) Nothing in this section 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.
       ``(c) In this section:
       ``(1) The term `agreement' means anything that would 
     constitute an agreement under section 1 of the Sherman Act 
     (15 U.S.C. 1) or section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45).
       ``(2) The term `agreement resolving or settling a patent 
     infringement claim' includes, any agreement that is 
     contingent upon, provides a contingent condition for, or is 
     otherwise related to the resolution or settlement of the 
     claim.
       ``(3) 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)).
       ``(4) The term `ANDA filer' means a party who has filed an 
     ANDA with the Food and Drug Administration.
       ``(5) The term `ANDA product' means the product to be 
     manufactured under the ANDA that is the subject of the patent 
     infringement claim.
       ``(6) 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.
       ``(7) 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)).
       ``(8) The term `NDA holder' means--
       ``(A) the party that received FDA approval to market a drug 
     product pursuant to an NDA;
       ``(B) 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
       ``(C) 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.
       ``(9) 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.
       ``(10) 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.''.
       (b) Regulations.--The Federal Trade Commission may, by rule 
     promulgated under section 553 of title 5, United States Code, 
     exempt certain agreements described in section 29 of the 
     Clayton Act, as added by subsection (a), if the Commission 
     finds such agreements to be in furtherance of market 
     competition and for the benefit of consumers. Consistent with 
     the authority of the Commission, such rules may include 
     interpretive rules and general statements of policy with 
     respect to the practices prohibited under section 29 of the 
     Clayton Act.

     SEC. 4. NOTICE AND CERTIFICATION OF AGREEMENTS.

       (a) Notice of All Agreements.--Section 1112(c)(2) of the 
     Medicare Prescription Drug, Improvement, and Modernization 
     Act of 2003 (21 U.S.C. 3155 note) is amended by--
       (1) striking ``the Commission the'' and inserting ``the 
     Commission (1) the''; and
       (2) inserting before the period at the end the following: 
     ``; and (2) a description of the subject matter of any other 
     agreement the parties enter into within 30 days of an 
     entering into an agreement covered by subsection (a) or 
     (b)''.
       (b) Certification of Agreements.--Section 1112 of such Act 
     is amended by adding at the end the following:
       ``(d) Certification.--The Chief Executive Officer or the 
     company official responsible for negotiating any agreement 
     required to be filed under subsection (a), (b), or (c) shall 
     execute and file with the Assistant Attorney General and the 
     Commission a certification as follows: `I declare under 
     penalty of perjury that the following is true and correct: 
     The materials filed with the Federal Trade Commission and the 
     Department of Justice under section 1112 of subtitle B of 
     title XI of the Medicare Prescription Drug, Improvement, and 
     Modernization Act of 2003, with respect to the agreement 
     referenced in this certification: (1) represent the complete, 
     final, and exclusive agreement between the parties; (2) 
     include any ancillary agreements that are contingent upon, 
     provide a contingent condition for, or are otherwise related 
     to, the referenced agreement; and (3) include written 
     descriptions of any oral agreements, representations, 
     commitments, or promises between the parties that are 
     responsive to subsection (a) or (b) of such section 1112 and 
     have not been reduced to writing.'.''.

     SEC. 5. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

       Section 505 of the Federal Food, Drug and Cosmetic Act (21 
     U.S.C. 355(j)(5)(D)(i)(V)) is amended by inserting ``section 
     29 of the Clayton Act or'' after ``that the agreement has 
     violated''.
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