Hospital and pharmaceutical experts called on Congress to pass the Creates Act and eliminate pay-for-delay settlements and other tactics that impede generic-drug competition at a U.S. House subcommittee meeting Thursday.
Most of representatives on the House Judiciary Committee's antitrust subcommittee and each of the four industry experts reinforced their support of the bipartisan Creates Act, which would prevent branded pharmaceutical companies from limiting access to their samples, practice that thwarts generic competitors. The act is expected to pass this Congress.
They lamented the time and money that regulators spent challenging pay-for-delay settlements that exchange cash for a drug's extended exclusivity. These cases can span 10 or more years, as evidenced by a recent $1.2 billion settlement the Federal Trade Commission reached with Teva regarding its narcolepsy drug Provigil.
Pay-for-delay agreements are estimated to cost consumers about $3.5 billion a year, according to the FTC.
"That is why I plan to introduce bipartisan legislation this Congress to help end pay-for-delay settlements," Judiciary Committee Chairman Rep. Jerry Nadler (D-N.Y.) said.
Pay-for-delay deals should be banned through formal legislation or at least presumed anticompetitive, which would save regulators' significant time and expense, experts and lawmakers said.
"When you look at both the economic theory in what happens in a pay-for-delay settlement and the empirical evidence that these types of agreements delay entry, then you should start with the proposition that if someone is paying a potential competitor in a settlement, we should presume it's harmful and make them come forward," said Michael Kades, director of markets and competitive policy at the Washington Center for Equitable Growth. "Instead, it's the reverse."
Kades cited one case he worked on where a company paid $60 million to protect additional revenue of close to $1 billion. In another, a company paid off four generic competitors to gain six years of exclusivity and about $4 billion in additional revenue, he said.
"You have to have a real strong penalty provision," Kades said. "The government has to be able to go in and say, 'You don't get to keep the money because you earned it by breaking the law.' "
Lawmakers also were concerned about consolidation's impacts on rural healthcare. Representatives posed a series of questions related to the consequences of mergers that often result in closure of service lines like obstetrics, leaving fewer options for rural residents.
Rep. Joseph Neguse (D-Colo.) advocated for more authority for the FTC to review anticompetitive behavior of not-for-profit hospitals.
As a number of studies and evidence shows, anticompetitive markets lead to higher prices and lower quality, experts said. Regulators aren't well-equipped to challenge these practices, and if they do, the cases are tedious and costly.
"This massive consolidation in healthcare has not delivered for Americans," said Martin Gaynor, professor of economics and health policy at Carnegie Mellon University. "It has not given us better care or enhanced efficiency."
Gaynor's research revealed that healthcare markets with fewer than four hospitals result in about 16% higher prices. He recommended requiring healthcare providers to report small transactions that fall under the reporting threshold that result in many deals falling below the radar.
Over the past seven to 10 years, merger filings have risen by 57% while appropriations for federal regulators have fallen by 12% after adjusting for inflation, Gaynor said. The number of staff at these agencies is constant or declining.