Dear Chairman Graham and Ranking Member Feinstein:
The U.S. Chamber Institute for Legal Reform (“ILR”) writes to express concerns about S. 64, the “Preserve Access to Affordable Generics and Biosimilars Act.” We are concerned that the legislation’s rebuttable presumption language would effectively codify a “quasi-per se violation” theory of liability for certain types of pharmaceutical-related patent settlements. By doing so, the legislation would have the unintended consequence of creating a barrier to entry for generic pharmaceutical companies, resulting in less competition and higher drug prices for consumers.
Patent dispute settlements are a valuable tool to ensure that affordable generic and biosimilar medicines are quickly introduced to the market. Settlements provide certainty for both generic and name-brand drug manufacturers and allow them to circumvent costly and unpredictable litigation. By limiting the types of settlements that can be used in the types of patent litigation covered by the bill, S. 64 would increase uncertainty in a market that is already experiencing significant price challenges. Uncertainty in this space only serves to increase cost and ultimately limit the ability of both generic and name-brand pharmaceutical manufacturers to resolve their disputes and bring their products to patients in a timely and cost-effective manner.
The legislation would put a thumb on the scale in these types of cases by presuming that all reverse-payment settlements are anti-competitive. Instead, the legislation should focus on fostering earlier access for generics by enshrining a “rule of reason” standard along the lines of what the U.S. Supreme Court articulated in FTC v. Actavis, 570 U.S. 136 (2013). Congress should enunciate a standard that looks at whether the overall facts and circumstances of the settlement agreement amount to having an inappropriate anti-competitive effect. This would allow generic pharmaceutical manufacturers to enter the market earlier, resulting in more competition and lower costs for the consumer, and limit protracted litigation. Furthermore, the legislation should not apply retroactively.
S. 64 is well-intentioned, but we are concerned about the unintended consequences that would follow from its enactment. We share and support the need to address potential barriers to lowering drug costs, re-evaluate potential perverse incentives that may impact the way manufacturers set list prices, and correct distortions in the distribution chain. Employers are committed to improving access to treatment which includes exploring opportunities to lower costs associated with obtaining treatment as well as preserving the investments necessary for businesses to develop, innovate, and bring new therapies to market. We encourage you to work with all parties impacted by this legislation so as to not cause an inappropriate increase in drug pricing as well as prolong litigation.
cc: Members of the Committee on the Judiciary