Gee, You Would Have Thought They Could Have Figured This One

When Drug Firms Pay Off Competitors

We hope that the Supreme Court agrees to take up a pivotal drug patent case brought by the Federal Trade Commission against Schering-Plough. Otherwise, the commission may find itself powerless to block one of the more underhanded tactics used by brand-name drug manufacturers to keep generic competitors off the market.

It boogles the mind that this requires SCOTUS to be involved when most of the congress critters are lawyers, with a few doctors scattered among them, should have been able to pass legislation that would have prevented such rip-offs.

The tactic is brutally simple. A company that holds a patent on a brand-name drug, often a blockbuster that rakes in huge profits, pays a generic manufacturer to delay the sale of a competing product that might grab a big slice of the business. The patent holder makes so much money by delaying competition that it can easily afford to buy off the generic company, with the result that both companies share the wealth. The only losers are the consumers who must continue to pay high drug prices.

The tactic basically screws the sick, elderly and poor. The rich and powerful do not have to worry about such tactics. But these tactics are wrong out of principle and human decency. How is it the congress thinks it important to regulate and control who we sleep with and love, but won't protect us from big corporate rip-offs?

The Schering-Plough case involved K-Dur 20, a potassium supplement used to mitigate the side effects of drugs that treat high blood pressure and congestive heart failure. The active ingredient is in common use and not patentable, but Schering holds a patent for a coating material that releases the active ingredient slowly. That patent does not expire until this year. But two generic manufacturers filed applications in 1995 to market competing drugs whose coatings, they said, would not infringe Schering's patent.

Schering disagreed, sued, and then ultimately settled the cases. It paid $60 million to one generic manufacturer in a settlement that delayed market entry until 2001 and $15 million to another generic manufacturer in a deal that delayed entry until 2004.

These generic manufacturers do not care how they make a profit. If the big pharma corproations are willing to pay big bucks to assure a delay in generic production, no big deal. It doesn't matter that someone on a small pension, social security or some other fixed income might have to choose not to buy that medication this week.

After looking at details of the deal, the F.T.C. concluded, quite reasonably, that these settlements were essentially payoffs to delay competition. The $60 million had actually been demanded by one generic company as compensation for revenues it would lose by delaying sales of its product. And at least $10 million of the other settlement would be paid only if the generic company got government approval to market a competitive product and thus posed a threat to Schering-Plough.

Funny, the FTC can see the conflict, but all they lawyers and doctors in congress could not.

Even so, a federal appeals court ruled that the payments did not violate antitrust law and that the facts did not bear out the F.T.C.'s contention that the payments were intended to delay competition.

When the courts are stacked with pro-big business and pro-government activist judges rather than judges that read and understand the Constitution (especially the Preamble), one cannot expect anything but a decision that screws the little guy... and the little guy is always those of us that pay taxes and live under the thumb of these fascists.

That was a disastrous blow to Congressional laws that seek to speed the entry of generic competitors by brushing away spurious patent infringement claims by brand-name manufacturers. Since the appeals court decision, there has been a sharp rise in the number of settlements in which brand-name companies pay off generic competitors to keep their cheaper drugs off the market.

Isn't it fascinating how corporations can scurry like rats on a sinking ship!

The F.T.C. has rightly petitioned the Supreme Court to consider the case. But it has been undercut by the Justice Department, which has urged the court to keep its hands off, arguing that the case does not provide a good vehicle for resolving the complex issues involved. Whether the court acts or not, Congress should try to find a legislative route to block unscrupulous drug companies from buying off the competition.

Gee, I feel like I just joined the thousands that were screwed by Enron.