As Congress focuses on how to drive down drug prices, there is bipartisan support for prohibiting reverse payment agreements, also known as “pay-for-delay” arrangements. These arrangements involve a brand-name pharmaceutical manufacturer paying one or more potential generic competitors to delay bringing a generic to market as part of a resolution to a patent infringement lawsuit. Although lawmakers have talked about the issue for over a decade, the House Energy and Commerce Committee and the House Judiciary reported legislation prohibiting these arrangements as part of a larger drug package considered by the House of Representatives. The legislation passed 234-183, by recorded vote.
What appears evident is that some kind of “pay for delay” legislation is likely to advance through Congress and become law in the near future. Pharma companies, investors, lenders and other interested parties should follow this legislation closely because of its potential impact on the competitive risks associated with new drug development, and pay particular attention to how such legislation treats retroactive application of prior “pay for delay” arrangements. This topic is likely to evolve and elicit much debate for the foreseeable future, including how retroactivity might be applied to existing arrangements among competing branded and generic pharma companies.