Life Science Compliance Update

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August 05, 2013

Generic Manufacturers Report Patent Settlements Saved the US Healthcare System Billions

According to an analysis conducted for the Generic Pharmaceutical Association (GPhA), generic pharmaceuticals launched prior to patent expiration due to a patent settlement helped the U.S. health system save $25.5 billion from 2005-2012 and brought generic medicines to market on average 81 months sooner than patent expiry. The IMS Institute for Health Informatics conducted the study for the GPhA. The report finds that an additional $61.7 billion will be saved if the current level of savings continues through to patent expiry for each molecule analyzed, the study projects. A summary of the results can be found here.

We have written extensively about pharmaceutical patent settlements, noting the law's support for settlements over litigation:

"As noted by John Kamp, Executive Director of the Coalition for Healthcare Communication, 'The biopharma industry seems to have the legal advantage. The Federal Trade Commission (FTC) has struggled for over a decade just to get this case to the Supreme Court and has lost more challenges on the way than it has won. The law supports settlements over litigation, even in antitrust cases.'"

Regarding this study's health care cost analysis, Ralph G. Neas, the President and CEO of the GPhA, offered the following comments:

"For years, opponents of pharmaceutical patent settlements with consideration have stated that settlements create a cost for consumers, the government and others. This new analysis provides the most current, complete and transparent estimate of the impact of patent settlements on health costs, and it shows that the opposite is true."

And: "In particular, the new analysis estimates that patent settlements – including those with consideration – have led to billions in savings. For example, the settlement involving Lipitor alone will save $22 billion over the next four years. This is critical for lawmakers to understand, because any further restrictions on settlements will put these savings at risk."

The IMS Institute for Health Informatics analyzed a set of 33 molecules subject to patent settlements between 2005 and 2015. The savings were determined by evaluating the resulting from lower cost generics that entered the market in advance of each molecule's patent expiration date, as recorded in the FDA's Orange Book. In addition, arithmetic modeling was used to estimate the proportion of patent settlements with consideration to derive estimated savings.

The study notes several key findings:

  • Generic pharmaceuticals launched prior to patent expiry as a result of a patent settlement reduced drug costs by $25.5 billion from 2005-2012.
  • The Federal government benefits from almost one-third ($8.3 billion) of these savings.
  • Savings from patent settlements with consideration, those at issue in the Court and legislation would be between $11.8 and $13.6 billion if these settlements are typical of all settlements.
  • The Federal government's share of such savings would be between $3.8 and $4.4 billion.
  • In addition to the $25.5 billion saved by patent settlements from 2005 to 2012, the study projects an additional $61.7 billion saved if the current level of savings continues through to patent expiry for each molecule analyzed. That equates to more than $87 billion in savings from settlements.
  • The study also looked at the savings that would have been negated if patent settlements had not been an available course of action. Applying the success rate of 48%, derived from a separate Royal Bank of Canada analysis of patent challenges from 2000-2009, the IMS Institute found that realized (from 2005-2012) and projected (from 2013 until each molecule's patent expiry) savings of $87 billion would have been reduced by nearly half, to only $45 billion.

Savings from these settlements should be considered by policy makers in future hearings, the amicable transfer of products from patented to generic helps patients and everyone in the healthcare system.

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