California is first US state to ban pay-for-delay deals

California has become the first US state to ban the pharma industry practice of paying rivals to keep lower-cost generics off the market.

State Governor Gavin Newsom (pictured) signed bill AB 824 yesterday, making it unlawful for drugmakers to settle patent infringement claims filed by generic manufacturers by providing “anything of value” as this will automatically be considered anti-competitive and open to civil litigation.

“California will use our market power and our moral power to take on big drug companies and prevent them from keeping affordable generic drugs out of the hands of people who need them,” said Newsom in a statement.

“Competition in the pharmaceutical industry helps lower prices for Californians who rely on life-saving treatments,” he added.

The bill – which will come into effect on 1 January 2020 – was drawn up by Democrat Assembly member Jim Wood, and sponsored by California Attorney General Xavier Becerra.

A 2010 study by the Federal Trade Commission (FTC) has estimated that so-called ‘pay-for-delay’ increases pharmaceutical costs to US taxpayers by $3.5 billion every year, and the agency has said one of its top priorities has been to clamp down on these tactics in recent years.

This year alone has seen FTC judgments rule against deals between Endo and Impax involving painkiller Opana ER and Teva agreements involving testosterone replacement therapy AndroGel and local anaesthetic Lidoderm.

Pressure group Health Access said that with the passage of AB 824 “it will be that much harder for brand-name and generic drug companies to engage in shady back-room deals that drive up their profit in secret, at the expense of consumers.”

It also expressed the hope that California’s move “will … provide momentum for further action that is desperately needed at the federal level.”

In February, a study by Kaiser Health Networks (KHN) found that while approvals of generic drugs have been rising steadily with around 1,600 given the FDA go-ahead since January 2017, more than 700 (43%) still weren’t on the market two years later.

That also included 36% of generics that would have been the first to compete against a branded drug, raising speculation that deals are still being done routinely to keep generics off the market despite the FTC crackdown.

The head of the California division of the American Association of Retired Persons (AARP) which represents the over-50s, Nancy McPherson, welcomed the new law and pledged to “continue to work at the federal and state level to stop drug companies from price gouging all Americans.”

Newsom also signed another health bill (SB 159) this week, making California the first US state to allow access to pre- and post-exposure prophylaxis (PrEP and PEP) for HIV without a prescription.

It also prohibits insurance companies from requiring prior authorisations for patients to obtain PrEP coverage.

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