[Congressional Record Volume 157, Number 10 (Tuesday, January 25, 2011)]
[Senate]
[Pages S143-S146]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL (for himself, Mr. Grassley, Mr. Durbin, Ms. Collins, 
        Ms. Klobuchar, Mr. Franken, Mr. Brown of Ohio, and Mr. 
        Sanders):
  S. 27. 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. Chairman, I rise today to introduce the Preserve Access 
to Affordable Generics Act. This bipartisan legislation will 
dramatically reduce prescription drug costs by preventing one of the 
most egregious, anti-consumer tactics ever devised to keep generic 
drugs off the market.
  This amendment would combat ``pay-for-delay'' agreements between 
brand name and generic drug companies which delay entry of low-cost 
generic competition. These pay-for-delay agreements are estimated by 
the FTC to cost consumers $3.5 billion each year, and are estimated by 
the CBO estimates to cost the federal government more than $2.8 billion 
over the next decade in higher drug reimbursement payments.
  In 2008, $235 billion were spent on prescription drugs in the United 
States. Generic drugs play a crucial role in containing rising 
prescription drug costs, by offering consumers therapeutically 
identical alternatives to brand-name drugs, at a significantly reduced 
cost. Studies have shown that generic competition to brand name drugs 
can reduce drug prices by as much as 80 percent. However, in recent 
years generic entry has frequently been blocked by anti-competitive, 
anti-consumer agreements between brand-name and generic drug 
manufacturers that limit, delay, or otherwise prevent competition from 
generic drugs.
  In pay-for-delay agreements, a brand-name drug manufacturer settles 
patent litigation by paying off a generic competitor with large amounts 
of cash, or other valuable consideration to stay off the market until 
expiration--or a time close to expiration--of the brand-name patent. 
For example, in 2006, the CEO of Cephalon, which makes the sleep 
disorder pill Provigil, praised the deals his company made with four 
generic drug-makers to keep generic versions of Provigil off the market 
until 2012. ``We were able to get six more years of patent 
protection,'' he said. ``That's $4 billion in sales that no one 
expected.'' Unfortunately, that $4 billion came from the pockets of 
American consumers.
  At their core, pay-for-delay agreements permit brand-name drug 
companies to pay off competitors not to compete. The brand name drug 
company wins because it reaps the profits from eliminating competition. 
The generic drug company wins because they get paid millions of dollars 
to do nothing more than drop their patent challenge. But consumers and 
the American taxpayer loses, to the tune of billions of dollars in 
higher drug costs every year.
  Agreements between competitors, like these, are the most nefarious 
type of antitrust violation. Unfortunately, when the FTC has challenged 
``pay-for-delay'' agreements, courts have favored big industry 
interests over consumers. Courts have wrongly concluded that this type 
of basic antitrust violation is immune from antitrust law because it 
involves the settlement of a patent challenge. In other words, it is 
permissible for competitors to collude to when it involves a patented 
drug and in order to keep lower cost drugs out of consumers' medicine 
cabinets. These misguided court rulings are what make passage of our 
legislation so vital.

[[Page S144]]

  For years, we have seen the use of anticompetitive agreements 
increase. From 2000 to 2004, there were twenty settlements of drug 
patent litigation, but we saw no pay-for-delay agreements because drug 
companies assumed they violated antitrust law. But, these settlements 
became all too prevalent following three courts of appeals decisions in 
2005 which effectively found them to be per se legal and prevented the 
FTC from taking action on behalf of consumers against these 
settlements.
  In the 2 years following these 2005 court decisions, 28 out of 61 
patent settlements had provisions in which the brand name drug company 
made payments to the generic manufacturer in exchange for the generic 
manufacturer agreeing to delay entry of generic competition. Clearly, 
pay-for-delay agreements are not necessary to settle a case because 
during that same time, 33 cases settled without delaying entry to 
consumers in exchange for a payment.
  Last fall, the FTC released a report which found a record 19 pay-for-
delay settlements in fiscal year 2009, the highest ever recorded in a 
single year. This report convincingly demonstrates the danger these 
deals pose to consumers. Each of these deals will lead to higher drug 
costs for millions of consumers. Each of these deals cost the Federal 
Government large sums in taxpayer money in higher drug reimbursement 
costs. Each of these deals deprive consumers of needed drug 
competition. The time for action to stop these anti-consumer, 
anticompetitive back room deals is now.
  Our legislation passed the Judiciary Committee last Congress with a 
strong bipartisan majority. The Judiciary Committee made several 
changes to the legislation as it is was introduced in the 111th 
Congress, and the legislation I am introducing today includes all of 
these changes. I believe the current version of this legislation 
represents a well balanced approach to this problem. Under my bill, 
these settlement agreements will be presumed to be illegal. However, 
the FTC will need to pursue legal action prior to these agreements 
being found illegal, and the drug companies will have an opportunity to 
convince the Judge why these agreement are not in fact anticompetitive. 
If found illegal, the FTC will have the authority to assess civil 
penalties up to three times the profits gained by the drug companies.
  I believe this measure strikes the right balance. By presuming these 
agreements to be illegal, and armed with strong civil penalties, this 
bill will deter drug companies from entering into anti-competitive and 
anti-consumer ``pay-for-delay'' settlements in the first place. By 
giving the drug companies a hearing before a neutral tribunal, the drug 
companies will have their day in court to go forward with those 
agreements which truly do not harm competition.
  The evidence is clear. These ``pay-for-delay'' agreements between 
brand name and generic drug companies deny consumers the benefits of 
generic drug competition and costs consumers and the Federal Government 
billions of dollars. My legislation will give the FTC strong remedies 
to prevent these agreements when it concludes they harm competition. 
Millions and millions of Americans that struggle to pay their 
prescription drug costs and who need low priced generic alternatives 
are awaiting action on this amendment. I urge my colleagues support for 
the Preserve Access to Affordable Generics Act.
  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. 27

     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.--Congress finds the following:
       (1) In 1984, the Drug Price Competition and Patent Term 
     Restoration Act (Public Law 98-417) (referred to in this Act 
     as the ``1984 Act''), was enacted with the intent of 
     facilitating the early entry of generic drugs while 
     preserving incentives for innovation.
       (2) Prescription drugs make up 10 percent of the national 
     health care spending but for the past decade have been one of 
     the fastest growing segments of health care expenditures.
       (3) Until recently, the 1984 Act was successful in 
     facilitating generic competition to the benefit of consumers 
     and health care payers - although 67 percent of all 
     prescriptions dispensed in the United States are generic 
     drugs, they account for only 20 percent of all expenditures.
       (4) Generic drugs cost substantially less than brand name 
     drugs, with discounts off the brand price sometimes exceeding 
     90 percent.
       (5) Federal dollars currently account for an estimated 30 
     percent of the $235,000,000,000 spent on prescription drugs 
     in 2008, and this share is expected to rise to 40 percent by 
     2018.
       (6)(A) In recent years, the intent of the 1984 Act has been 
     subverted by certain settlement agreements between brand 
     companies and their potential generic competitors that make 
     ``reverse payments'' which are payments by the brand company 
     to the generic company.
       (B) These settlement agreements have unduly delayed the 
     marketing of low-cost generic drugs contrary to free 
     competition, the interests of consumers, and the principles 
     underlying antitrust law.
       (C) Because of the price disparity between brand name and 
     generic drugs, such agreements are more profitable for both 
     the brand and generic manufacturers than competition, and 
     will become increasingly common unless prohibited.
       (D) These agreements result in consumers losing the 
     benefits that the 1984 Act was intended to provide.
       (b) Purposes.--The purposes of this Act are--
       (1) to enhance competition in the pharmaceutical market by 
     stopping anticompetitive agreements between brand name and 
     generic drug manufacturers that limit, delay, or otherwise 
     prevent competition from generic drugs; and
       (2) to support the purpose and intent of antitrust law by 
     prohibiting anticompetitive practices in the pharmaceutical 
     industry that harm consumers.

     SEC. 3. UNLAWFUL COMPENSATION FOR DELAY.

       (a) In General.--The Federal Trade Commission Act (15 
     U.S.C. 44 et seq.) is amended by--
       (1) redesignating section 28 as section 29; and
       (2) inserting before section 29, as redesignated, the 
     following:

     ``SEC. 28. PRESERVING ACCESS TO AFFORDABLE GENERICS.

       ``(a) In General.--
       ``(1) Enforcement proceeding.--The Federal Trade Commission 
     may initiate a proceeding to enforce the provisions of this 
     section against the parties to any agreement resolving or 
     settling, on a final or interim basis, a patent infringement 
     claim, in connection with the sale of a drug product.
       ``(2) Presumption.--
       ``(A) In general.--Subject to subparagraph (B), in such a 
     proceeding, an agreement shall be presumed to have 
     anticompetitive effects and be unlawful if--
       ``(i) an ANDA filer receives anything of value; and
       ``(ii) the ANDA filer agrees to limit or forego research, 
     development, manufacturing, marketing, or sales of the ANDA 
     product for any period of time.
       ``(B) Exception.--The presumption in subparagraph (A) shall 
     not apply if the parties to such agreement demonstrate by 
     clear and convincing evidence that the procompetitive 
     benefits of the agreement outweigh the anticompetitive 
     effects of the agreement.
       ``(b) Competitive Factors.--In determining whether the 
     settling parties have met their burden under subsection 
     (a)(2)(B), the fact finder shall consider--
       ``(1) the length of time remaining until the end of the 
     life of the relevant patent, compared with the agreed upon 
     entry date for the ANDA product;
       ``(2) the value to consumers of the competition from the 
     ANDA product allowed under the agreement;
       ``(3) the form and amount of consideration received by the 
     ANDA filer in the agreement resolving or settling the patent 
     infringement claim;
       ``(4) the revenue the ANDA filer would have received by 
     winning the patent litigation;
       ``(5) the reduction in the NDA holder's revenues if it had 
     lost the patent litigation;
       ``(6) the time period between the date of the agreement 
     conveying value to the ANDA filer and the date of the 
     settlement of the patent infringement claim; and
       ``(7) any other factor that the fact finder, in its 
     discretion, deems relevant to its determination of 
     competitive effects under this subsection.
       ``(c) Limitations.--In determining whether the settling 
     parties have met their burden under subsection (a)(2)(B), the 
     fact finder shall not presume--
       ``(1) that entry would not have occurred until the 
     expiration of the relevant patent or statutory exclusivity; 
     or
       ``(2) that the agreement's provision for entry of the ANDA 
     product prior to the expiration of the relevant patent or 
     statutory exclusivity means that the agreement is pro-
     competitive, although such evidence may be relevant to the 
     fact finder's determination under this section.
       ``(d) Exclusions.--Nothing in this section shall prohibit a 
     resolution or settlement of a patent infringement claim in 
     which the consideration granted by the NDA holder to the ANDA 
     filer as part of the resolution or settlement includes only 
     one or more of the following:

[[Page S145]]

       ``(1) The right to market the ANDA product in the United 
     States prior to the expiration of--
       ``(A) any patent that is the basis for the patent 
     infringement claim; or
       ``(B) any patent right or other statutory exclusivity that 
     would prevent the marketing of such drug.
       ``(2) A payment for reasonable litigation expenses not to 
     exceed $7,500,000.
       ``(3) A covenant not to sue on any claim that the ANDA 
     product infringes a United States patent.
       ``(e) Regulations and Enforcement.--
       ``(1) Regulations.--The Federal Trade Commission may issue, 
     in accordance with section 553 of title 5, United States 
     Code, regulations implementing and interpreting this section. 
     These regulations may exempt certain types of agreements 
     described in subsection (a) if the Commission determines such 
     agreements will further market competition and benefit 
     consumers. Judicial review of any such regulation shall be in 
     the United States District Court for the District of Columbia 
     pursuant to section 706 of title 5, United States Code.
       ``(2) Enforcement.--A violation of this section shall be 
     treated as a violation of section 5.
       ``(3) Judicial review.--Any person, partnership or 
     corporation that is subject to a final order of the 
     Commission, issued in an administrative adjudicative 
     proceeding under the authority of subsection (a)(1), may, 
     within 30 days of the issuance of such order, petition for 
     review of such order in the United States Court of Appeals 
     for the District of Columbia Circuit or the United States 
     Court of Appeals for the circuit in which the ultimate parent 
     entity, as defined at 16 C.F.R. 801.1(a)(3), of the NDA 
     holder is incorporated as of the date that the NDA is filed 
     with the Secretary of the Food and Drug Administration, or 
     the United States Court of Appeals for the circuit in which 
     the ultimate parent entity of the ANDA filer is incorporated 
     as of the date that the ANDA is filed with the Secretary of 
     the Food and Drug Administration. In such a review 
     proceeding, the findings of the Commission as to the facts, 
     if supported by evidence, shall be conclusive.
       ``(f) Antitrust Laws.--Nothing in this section shall be 
     construed to modify, impair or supersede the applicability of 
     the antitrust laws as defined in subsection (a) of the 1st 
     section of the Clayton Act (15 U.S.C. 12(a)) and of section 5 
     of this Act to the extent that section 5 applies to unfair 
     methods of competition. Nothing in this section shall modify, 
     impair, limit or supersede the right of an ANDA filer to 
     assert claims or counterclaims against any person, under the 
     antitrust laws or other laws relating to unfair competition.
       ``(g) Penalties.--
       ``(1) Forfeiture.--Each person, partnership or corporation 
     that violates or assists in the violation of this section 
     shall forfeit and pay to the United States a civil penalty 
     sufficient to deter violations of this section, but in no 
     event greater than 3 times the value received by the party 
     that is reasonably attributable to a violation of this 
     section. If no such value has been received by the NDA 
     holder, the penalty to the NDA holder shall be shall be 
     sufficient to deter violations, but in no event greater than 
     3 times the value given to the ANDA filer reasonably 
     attributable to the violation of this section. Such penalty 
     shall accrue to the United States and may be recovered in a 
     civil action brought by the Federal Trade Commission, in its 
     own name by any of its attorneys designated by it for such 
     purpose, in a district court of the United States against any 
     person, partnership or corporation that violates this 
     section. In such actions, the United States district courts 
     are empowered to grant mandatory injunctions and such other 
     and further equitable relief as they deem appropriate.
       ``(2) Cease and desist.--
       ``(A) In general.--If the Commission has issued a cease and 
     desist order with respect to a person, partnership or 
     corporation in an administrative adjudicative proceeding 
     under the authority of subsection (a)(1), an action brought 
     pursuant to paragraph (1) may be commenced against such 
     person, partnership or corporation at any time before the 
     expiration of one year after such order becomes final 
     pursuant to section 5(g).
       ``(B) Exception.--In an action under subparagraph (A), the 
     findings of the Commission as to the material facts in the 
     administrative adjudicative proceeding with respect to such 
     person's, partnership's or corporation's violation of this 
     section shall be conclusive unless--
       ``(i) the terms of such cease and desist order expressly 
     provide that the Commission's findings shall not be 
     conclusive; or
       ``(ii) the order became final by reason of section 5(g)(1), 
     in which case such finding shall be conclusive if supported 
     by evidence.
       ``(3) Civil penalty.--In determining the amount of the 
     civil penalty described in this section, the court shall take 
     into account--
       ``(A) the nature, circumstances, extent, and gravity of the 
     violation;
       ``(B) with respect to the violator, the degree of 
     culpability, any history of violations, the ability to pay, 
     any effect on the ability to continue doing business, profits 
     earned by the NDA holder, compensation received by the ANDA 
     filer, and the amount of commerce affected; and
       ``(C) other matters that justice requires.
       ``(4) Remedies in addition.--Remedies provided in this 
     subsection are in addition to, and not in lieu of, any other 
     remedy provided by Federal law. Nothing in this paragraph 
     shall be construed to affect any authority of the Commission 
     under any other provision of law.
       ``(h) Definitions.--In this section:
       ``(1) Agreement.--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 this Act.
       ``(2) Agreement resolving or settling a patent infringement 
     claim.--The term `agreement resolving or settling a patent 
     infringement claim' includes any agreement that is entered 
     into within 30 days of the resolution or the settlement of 
     the claim, or any other agreement that is contingent upon, 
     provides a contingent condition for, or is otherwise related 
     to the resolution or settlement of the claim.
       ``(3) ANDA.--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) ANDA filer.--The term `ANDA filer' means a party who 
     has filed an ANDA with the Food and Drug Administration.
       ``(5) ANDA product.--The term `ANDA product' means the 
     product to be manufactured under the ANDA that is the subject 
     of the patent infringement claim.
       ``(6) Drug product.--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) NDA.--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) NDA holder.--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 subparagraphs 
     (A) and (B) (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) Patent infringement.--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) Patent infringement claim.--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.
       ``(11) Statutory exclusivity.--The term `statutory 
     exclusivity' means those prohibitions on the approval of drug 
     applications under clauses (ii) through (iv) of section 
     505(c)(3)(E) (5- and 3-year data exclusivity), section 527 
     (orphan drug exclusivity), or section 505A (pediatric 
     exclusivity) of the Federal Food, Drug, and Cosmetic Act .''.
       (b) Effective Date.--Section 28 of the Federal Trade 
     Commission Act, as added by this section, shall apply to all 
     agreements described in section 28(a)(1) of that Act entered 
     into after November 15, 2009. Section 28(g) of the Federal 
     Trade Commission Act, as added by this section, shall not 
     apply to agreements entered into before the date of enactment 
     of this 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. 355 note) is amended by--
       (1) striking ``the Commission the'' and inserting the 
     following: ``the Commission--
       ``(1) the'';
       (2) striking the period and inserting ``; and''; and
       (3) inserting at the end the following:
       ``(2) any other agreement the parties enter into within 30 
     days of 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 that the 
     following is true, correct, and complete to the best of my 
     knowledge: 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

[[Page S146]]

     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(j)(5)(D)(i)(V) of the Federal Food, Drug and 
     Cosmetic Act (21 U.S.C. 355(j)(5)(D)(i)(V)) is amended by 
     inserting ``section 28 of the Federal Trade Commission Act 
     or'' after ``that the agreement has violated''.

     SEC. 6. COMMISSION LITIGATION AUTHORITY.

       Section 16(a)(2) of the Federal Trade Commission Act (15 
     U.S.C. 56(a)(2)) is amended--
       (1) in subparagraph (D), by striking ``or'' after the 
     semicolon;
       (2) in subparagraph (E), by inserting ``or'' after the 
     semicolon; and
       (3) inserting after subparagraph (E) the following:
       ``(F) under section 28;''.

     SEC. 7. STATUTE OF LIMITATIONS.

       The Commission shall commence any enforcement proceeding 
     described in section 28 of the Federal Trade Commission Act, 
     as added by section 3, except for an action described in 
     section 28(g)(2) of the Federal Trade Commission Act, not 
     later than 3 years after the date on which the parties to the 
     agreement file the Notice of Agreement as provided by 
     sections 1112(c)(2) and (d) of the Medicare Prescription Drug 
     Improvement and Modernization Act of 2003 (21 U.S.C. 355 
     note).

     SEC. 8. SEVERABILITY.

       If any provision of this Act, an amendment made by this 
     Act, or the application of such provision or amendment to any 
     person or circumstance is held to be unconstitutional, the 
     remainder of this Act, the amendments made by this Act, and 
     the application of the provisions of such Act or amendments 
     to any person or circumstance shall not be affected thereby.
                                 ______