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CLSA Wire

Assemblymember Jim Wood Introduces Bill Targeting Agreements between Brand and Generic Drug Companies

By Brett Johnson
March 19, 2019

On Wednesday, Feb. 20, California Attorney General Xavier Becerra and Chair of Assembly Health, Assemblymember Jim Wood, held a press conference to announce the introduction of legislation, Assembly Bill (AB) 824 (Wood), aimed at enabling the California Department of Justice (DOJ) to go after so-called “pay-for-delay” agreements.

Becerra stated that, under such agreements, a brand drug company transfers value to a potential generic competitor to “delay [the] competitor’s research, marketing, or sale of a competing version of its drug,” increasing costs to consumers and the healthcare system. He cited an agreement between Bayer and generic competitors around Cipro as an example – after providing the unrelated example of Martin Shkreli and Daraprim.

The target of this legislation is primarily the confidentiality of those agreements as legal settlements, arguing that such agreements outside of the context of a patent dispute would be monopolistic collusion. The bill would create a legal presumption that agreements to delay entry of a generic competitor are illegal, requiring the disclosure of details by the parties to the agreement to rebut the presumption by showing “substantiation of a legitimate public interest.” The bill also contains restrictions on what findings a factfinder (e.g., a judge) can and cannot draw from certain factual circumstances. Becerra later stated that the DOJ could then make the information collected on these agreements public, but the mechanism by which they could publish evidence before a court of law without running afoul of other rules is unclear.

Becerra and Wood asserted that these “pay-for-delay agreements” increase costs to consumers, citing $3.5 billion in higher costs due to these agreements. Becerra further asserted that drugs are expected to grow faster than any other segment in healthcare, though the source for this statistic is unclear. Wood added that generics save the healthcare system $1.67 trillion and that generics are being paid for doing nothing under these agreements other than not introducing generics, which can be priced 90% less than their brand name equivalents. Both repeatedly stressed that the legislation was doing nothing to encumber the business of discovering or developing drugs, but only to stop companies from “gaming the patent system a bit longer.”

The bill has been set to be heard in the Assembly Health Committee on Tuesday, March 26. CLSA will be closely monitoring this legislation going forward and asks any CLSA members who would like to provide input or would like further information to reach out to Oliver Rocroi, CLSA’s Vice President of State Government Relations (orocroi@califesciences.org) or Brett Johnson, CLSA’s Senior Director of Policy & Regulatory Affairs (bjohnson@califesciences.org).