The Supreme Court is hearing arguments today on the case of the Federal Trade Commission v. Watson Pharmaceuticals. The case will decide whether it is legal for pharmaceutical drug companies to pay generic manufacturers to delay the release of cheaper generics, deferring potential competition and keeping prices high for consumers. The FTC has called the practice “collusive” and has estimated that the resulting higher prices cost American consumers $3.5 billion per year.

Generic drugs have the same active ingredients as the brand-name drug but typically cost 85 percent less. For example, brand name Plavix (the blood thinner) costs $205.45 for a 30-day supply. The generic costs $13.26.

US PIRG filed a “friend of the court” or amicus curiae brief on the case in conjunction with the American Association of Retired Persons (AARP) and supported the restriction of this anti-consumer  practice.

The great irony of this case is that the law used as the legal basis for the practice — the 1984 Hatch-Waxman Act — was originally intended to increase the availability of generic drugs by allowing generic manufacturers to challenge the patents of name-brand drugs. The patent lawsuits stemming from this law resulted mostly in settlements. What emerged in the aftermath was a practice where patent-holding pharmaceutical companies simply paid generic manufacturers not to challenge their patents, thus delaying the release of generic drugs for years.  

But this is not just a case of dramatic irony, it affects consumers at the cash register, and it’s one of the shameful practices contributing to our rising health care costs.

Henry Waxman, who authored the original bill, has also filed an amicus brief on the case, advising the Supreme Court to allow the FTC to regulate the practice. He reportedly stated that the practice turns his bill “on its head.”If the Supreme Court rules in favor of Watson Pharmaceuticals, we will urge Congress to change existing law to make pay-for-delay illegal.

Senator Amy Klobuchar has introduced S. 214 with bi-partisan support from Sen. Chuck Grassley (R-IA). This bill, "The Preserve Access to Affordable Generics Act," would make the practice illegal and regulated by the FTC under antitrust law.

The high cost of health care is already straining the budgets of families, businesses, and taxpayers. We can’t afford to keep allowing pharmaceutical companies to collude with one another to keep prescription drug prices unnecessarily high. The Supreme Court should rule in favor of the Federal Trade Commission. If they don’t, we’ll be pushing Congress to take action.

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