Reverse Payments Delay Introduction of Generic Drugs

Ever hear of reverse payments? In the pharmaceutical industry, a reverse payment is money an owner of a brand name drug pays a generic drug company to delay the introduction of a generic version of the brand name drug. It's completely legal.

H.R. 1432 and S. 316, the preserve access to generics acts, propose to make reverse payments illegal. Reverse payments are kind of like the Farm Bill. You get paid for doing nothing. This benefits both the brand name and generic drug manufacturers. The generics get paid for doing nothing while the brand name companies continue to sell their drug at a premium choice.

Unfortunately, those bills are stalled in Congress. Why? Lobbyists.

An Associated Press review of lobbying reports, from July 1, 2006, through June 30, 2007, found that $38.8 million was spent by at least a dozen generic and brand-name companies and their trade associations on issues including the Senate legislation. The lobbying reports do not specify how much of that money was directed at the reverse payment bill, and they are not required by law to do so.

More than half of those expenses were piled up by the Pharmaceutical Research & Manufacturers of America, or PhRMA, which represents brand-name drug companies. PhRMA spent $19.5 million in the 12-month period ending June 30 on in-house lobbying expenses, an increase of about $3 million over the previous 12-month period.

And the Generic Pharmaceutical Association reported lobbying expenses of around $420,000 for the first six months of this year. It did not report lobbying on the bill in its year-ending 2006 report. The remaining $19 million was spent by a variety of drug companies, including Bayer Corp., Schering-Plough, Pfizer and Teva Pharmaceuticals USA.

Thank you drug companies and thank you Congress.

Here is the drug companies slant on things. They, of course, argue that the bill will actually delay brand name drugs being introduced as generics. What a surprise.