• Lies, Damned Lies, and Statistics: Another Report on Drug Patent Settlement Agreements
  • July 16, 2013 | Author: Kurt R. Karst
  • Law Firm: Hyman, Phelps & McNamara, P.C. - Washington Office
  • You know the drill . . . .  One organization comes out with a report saying one thing supported by various data.  Days later, another organization comes out with a report saying another thing supported by other data.
     
    In what appears to be a hastily drafted counterpoint to a report released earlier this week by the IMS Institute for Healthcare Informatics, titled “Impact of Patent Settlements on Drug Costs: Estimation of Savings”, Community Catalyst and the federation of state Public Interest Research Groups, U.S. PIRG, announced the release of their own report on drug patent settlements, titled “Top Twenty Pay-for-Delay Drugs: How Drug Industry Payoffs Delay Generics, Inflate Prices and Hurt Consumers.”  The analysis concludes, among other things, that drug patent settlement agreements, which are (not surprisingly) characterized as sweetheart “pay-for-delay” deals, have held back generic competition for 5 years on average, and as long as 9 years, resulting in $98 billion in sales for brand-name drug companies, with a resulting loss for U.S. consumers and the government.  Those sales figures are based on drug prices “as available at 14 CVS locations in Boston, MA, for the default dosage and quantity, as advertised at www.GoodRx.com on 6/10/2013 or 6/13/2013” and that are “typical of those available across the country,” according to the report.

    Of course, we knew what the report would conclude even before seeing the title.  After all, Community Catalyst, via its Prescription Access Litigation project, and U.S. PIRG  submitted amicus briefs to the U.S. Supreme Court in Louisiana Wholesale Drug Co., Inc., et al., v. Bayer AG, et al. and Federal Trade Commission v. Actavis, Inc., 570 U.S. --- (2013) vigorously opposing drug patent settlement agreements.  Moreover, both organizations scored the Supreme Court’s June 17th decision in Actavis as a win, even though the Court declined to hold that reverse payment settlement agreements are presumptively unlawful, and that “Courts reviewing such agreements should proceed by applying the ‘rule of reason,’ rather than under a ‘quick look’ approach.”

    The 20 drugs identified in the Community Catalyst/U.S. PIRG report are vastly different from those in the IMS report, which is based on an analysis of patent settlement agreements reached between 2005 and 2012 for 33 molecules.  According to the IMS report, patent settlement agreements for those drugs have resulted in a reduction of $25.5 billion in drug costs from 2005 through December 31, 2012.  Of the six drugs that appear to overlap in both reports - ADDERALL XR, ALTACE, EFFEXOR XR, LIPITOR, WELLBUTRIN XL, and ZANTAC - Community Catalyst/U.S. PIRG say that generic competition was delayed by 3 years (ADDERALL XR), 3 years (ALTACE), 4.7 years (EFFEXOR XR), 1.7 years (LIPITOR), 1 year (WELLBUTRIN XL), and 2 years (ZANTAC).  Based on numbers we have come across, however, the supposed delays for these six drugs have, as a result of early entry before patent expiration, resulted in savings of $87,337,054 (ADDERALL XR), $886,852,636 (ALTACE), $3,762,782,030  (EFFEXOR XR), $3,240,019,077 (LIPITOR), $4,586,004,699 (WELLBUTRIN XL), and $144,697,745 (ZANTAC).

    The problem with the Community Catalyst/U.S. PIRG report, and with the opposition to drug patent settlement agreements in general, seems to be a fundamental misunderstanding of how the drug industry operates and the risks involved.  According to available data, generic drug manufacturers are successful in just 48% of the Paragraph IV patent infringement cases brought against them.  That’s right - it’s just a crap shoot!  If patent infringement litigation is carried through to its natural conclusion without settlement and a generic version of a brand-name drug is unable to go to market until patent expiration, then drug prices will remain high.  If, however, a period of patent protection can be lopped off as a result of a settlement, then a lower-cost version can go to market.