'Sweetheart' Deals Between Big Pharma, Generics Targeted

To protect its patent on Provigil, a medicine that treats sleepiness, drugmaker Cephalon Inc. paid four generic rivals to hold off on selling their own versions of the product several years ago.

The payments were legal and protected Cephalon's bestselling product from generic competition till 2012, the company says. U.S. antitrust regulators aren't so sure. They've sued the company saying the generic makers were illegally persuaded to hold off on competing.

Now the regulators at the Federal Trade Commission and some Congressional Democrats want to end a practice that drugmakers engaged in for years. When a brand-name drug is near the end of its patent life, companies scrap to keep that protection longer because sales fall off a cliff after cheap versions of the same pill are introduced.

FTC Chairman Jon Leibowitz wants lawmakers to include a measure in the health reform bill that will prohibit these deals between big drugmakers and their generic competitors, the New York Times reports.

“These sweetheart deals are being done on the backs of consumers,” Mr. Leibowitz tells the Times. “From the perspective of the Federal Trade Commission, these deals are one of the worst abuses across the board in health care and should be stopped.”

Leibowitz's agency estimates the deals cost patients $3.5 billion a year in added medicine expense.

We'll see how this one plays out. After reaching an early deal with the White House in which they agree to cut the government's Medicare drugs costs over 10 years, big pharmaceutical companies have avoided any major concessions related to health reform. An attempt to legalize the import of prescription drugs from Canada and other countries was beaten back by the industry. The drugmakers could use their political muscle to crush this move as well.