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GPhA Says New Economic Analysis Shows FTC and CBO Erred in Projecting Savings from Patent Settlement Ban

Urges Congress to Reject Bad Public Policy that Would Harm Consumers

WASHINGTON, D.C., AUGUST 12, 2010 – The Generic Pharmaceutical Association (GPhA) today released the following statement in response to a new economic analysis that conclusively demonstrates that the Federal Trade Commission (FTC) and the Congressional Budget Office (CBO) used faulty assumptions to support legislative efforts to limit patent litigation settlements. The analysis was conducted by Jonathan Orszag, former Assistant to the Secretary of Commerce and Director of the Office of Policy and Strategic Planning and member of President Clinton’s National Economic Council; Bret Dickey, Senior Vice President with Compass Lexecon; and Robert Willig, Professor of Economics and Public Affairs at Princeton University.

“This new analysis refutes the flawed assumptions that have been used as the foundation of pending legislation to ban patent settlements. The faulty assumptions include: (1) the conclusion that banning settlements will accelerate generic competition; (2) that banning settlements will save money; and (3) that further restrictions on settlements are needed beyond the authority FTC currently has to police patent settlements and reject those that are anti-competitive.

“Making drug patent litigation settlements presumptively unlawful will cost, not save money for the government and consumers. There are no examples of patent settlements that have delayed generic market entry beyond the date of the patent expiration. But there are many examples of settlements that have proven to be pro-competitive and pro-consumer by making lower-cost generics available months and even years before patents have expired.

“The analysis by leading economists Dickey, Orszag, and Willig concludes that because the CBO methodology ‘relies on the claims of the FTC study, it largely ignores the cost savings that would flow from these pro-competitive benefits’ of patent settlements.

“GPhA calls upon members of Congress to take a closer look at this issue based on the analysis by these experts and reject patent reform legislation that will ultimately harm consumers. It’s time to accept the fact that a ban on patent settlements is bad public policy because it would cost consumers and reduce competition.”

GPhA represents the manufacturers and distributors of finished generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals, and suppliers of other goods and services to the generic industry. Generic pharmaceuticals fill 75 percent of the prescriptions dispensed in the U.S. but consume just 22 percent of the total drug spending. Complete information is available at gphaonline.org.

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