Legislation unlikely to be enacted this year
During the 2008 presidential campaign, Barack Obama promised to "prevent drug companies from blocking generic drugs from consumers." He was referring to curbing alleged anti-competitive practices by branded drug manufacturers in legal settlements they reach with generic drugmakers.
First, some background. Drug companies that develop new medications deemed safe and effective by the Food and Drug Administration are granted a period of market exclusivity, during which cheaper generic alternatives cannot be offered on the market. Once that exclusive period ends, generic copycat drugs may enter the market, and the price of the medications drops dramatically.
When we contacted both the Pharmaceutical Research and Manufacturers of America (the leading association for branded drugmakers) and the Generic Pharmaceutical Association (representing companies that make generics) the two groups agreed that what Obama was referring to was an effort to police patent lawsuit settlements more aggressively.
This has been proposed in each of Obama"s budgets, as recently as February 2012, but it has never advanced beyond that, said David Belian, a spokesman for the Generic Pharmaceutical Association.
It has also been proposed in a Senate bill sponsored by Herb Kohl, D-Wis. The bill would authorize the Federal Trade Commission to initiate a proceeding against 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.” The bill also "establishes a presumption that any such agreement has anti-competitive effects and is unlawful if the filer of an abbreviated new drug (generic) application receives anything of value and agrees to limit or forego research, development, manufacturing, marketing, or sales of the generic drug for any period of time.”
Since the bill was introduced in January 2011, it has been reported favorably by the Judiciary Committee but advanced no further. There is no House companion bill.
While the administration has continued to push this issue, the slim prospect of any bill passing both chambers of Congress in the remaining months of an election year makes us skeptical that it will be enacted during Obama"s first four years. If that changes, we"ll adjust our rating, but after failing to enact this proposal during more than three years in office, we rate this a Promise Broken.
Main index page for the Preserve Access to Affordable Generics Act in THOMAS
Email interview with David Belian, director of media relations with the Generic Pharmaceutical Association, March 9, 2012
Email interview with Kate Connors, director communications for the Pharmaceutical Research and Manufacturers of America, March 9, 2012
Obama's budget plan proposes measures to prevent drug companies from blocking generic drugs
During the campaign, President Obama vowed to rein in efforts by drug companies to lengthen the exclusive period before generic drugs are allowed.
Under existing rules, drug companies that develop new medications deemed safe and effective by the Food and Drug Administration are granted a period of market exclusivity, during which cheaper generic alternatives cannot be offered on the market. Once that exclusive period ends, generic copycat drugs are allowed to flood the market, and the price of the medications drops dramatically.
It's something of a tradeoff. While generic drugs spell significant savings for consumers, they are a profit killer for the companies that develop the new medications. Naturally, pharmaceutical companies try to extend their exclusivity — and the higher profits they can achieve — as long as they can.
An Obama campaign document said that "some drug manufacturers are explicitly paying generic drugmakers not to enter the market so they can preserve their monopolies and keep charging Americans exorbitant prices for brand name products. The Obama-Biden plan will work to ensure that market power does not lead to higher prices for consumers. Their plan will work to increase use of generic drugs in the new public plan, Medicare, Medicaid, FEHBP (Federal Employee Health Benefits Program) and prohibit large drug companies from keeping generics out of markets."
Obama addressed the issue in the outline for his 2010 budget, which was released Feb. 26. It recognizes the need for a period of exclusivity for drug companies, to offset the high cost of research and development and to encourage innovation. But the budget plan offers two measures to prevent drug companies from blocking generic drugs when the original period of exclusivity ends.
First, the administration proposes "prohibiting anticompetitive agreements and collusion between brand name and generic drug manufacturers intended to keep generic drugs off the market." This speaks to the campaign charge that drug manufacturers are paying generic drugmakers not to enter the market.
Additionally, the Obama plan proposes that drug manufacturers be "prohibited from reformulating existing products into new products to restart the exclusivity process, a process known as 'evergreening.' " Essentially, this seeks to prevent drug companies from slightly altering their medication, calling it something new, and then attempting to restart the clock on their exclusivity period.
We note that the budget proposal is just that, a proposal. It's a long process to move a budget through Congress. And it's worth noting that pharmaceutical companies donate gobs of money to politicians, many of whom will vote on all of this. So this promise has a long way to go. Nevertheless, by including these measures in his first budget plan, Obama has set things in motion. And so we move it to In the Works.
Office of Budget and Management, Budget Documents for Fiscal Year 2010 , Feb. 26, 2009